Can e-commerce bring about a fundamental change in the way we shop for vehicles in India?
With the accelerated adoption of e-commerce in every sector, the automotive industry is also convinced that e-commerce is the way to go for the future. The online automotive arena that includes AR, VR and 3D capabilities, is quicker to respond to economic issues, brings in more profitability and also attracts more new age customers who are increasingly inclined to use digital media to make their purchases.
Anushruti Singh May 11, 2021
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The e-commerce industry is in a state of expansion and consolidation.
Currently, more consumers are buying online than any industry had ever imagined. Fundamentally it has changed every single major retail market, except one—the automotive market.
Automotive retail has not transformed much since the beginning of the Indian automotive industry in the 1940s. Consumers still follow the same old process—researching, contacting the dealerships, test driving, financing, and closing the deal, and e-commerce has a minuscule part to play in this entire process. However, after seeing the rising acceptance of e-commerce retail and digitization in today’s scenario, we might be led to expect that automotive retail too can be altered to fit into the dynamics of e-commerce.
The question is—is e-commerce in the automotive industry going to become the norm?
According to automotive experts this is possible, and the process is already on the fast track to fruition.
To begin with, online sales channels have altered how manufacturers, dealers and even aftermarket ancillaries market their products online. Most of them are using web tools to drive consumers to showrooms and ratchet up sales. While consumers utilize these mostly for research. Given the present scenario, automotive consumers in India have fewer options to buy cars online and most of them deal in pre-owned or used vehicles anyway. Portals like Droom, Cardekho, Quikr and Olx have put consumers and the user experience in the spotlight, thereby helping the manufacturers to attract more users.
“E-commerce portals like the ones mentioned above are typically used car marketplaces that help car buyers research, do comparative studies and help them in their buying decisions. That is an important function, but in this case, the real transaction happens face to face. It’s a blend of the lead being generated online and the final conversion happening offline because of the nature of the product,”says Vardhan Phadnis, Chief Sales Officer at Shoptimize which helps brands in building their D2C e-commerce websites.
The crisis wrought by the pandemic has impelled trends to change and consumers are more apt to choose e-commerce portals over physical shopping and vehicles too are now falling into the category of goods being purchased online. According to an analysis by the advisory firm, Grant Thornton Bharat, due to Covid-19, along with many other reasons, the automotive industry players are moving fast to adopt digital means to serve consumers and promote online sales.
Rahul Kapur, Partner-Growth at Grant Thornton Bharat says, “The strong emergence and acceptance of the online channel has provided an impetus to seamless solutions, price discovery, transparency, digital real-time payments along with certification on the quality of the vehicle for the consumers in the auto sector.”
A channel now widely invested in by automotive players
Prior to Covid-19, consumers were already rummaging through online platforms, to begin their vehicle purchase journeys. As per Google, 92 per cent of car buyers research online before they buy. The time that they spend on researching and comparing equals to an average of 8.5 hours. By the time these consumers arrive at a dealership, they already have all the details of their preferred vehicle at their fingertips and are more or less committed to the purchase.
This makes it evident that digital media is playing a crucial role in determining the purchase decisions of car buyers. Also, the growing base of internet and smartphone users is further boosting this digital transformation and has led to an expansion in the market size of various e-commerce portals.
This fact makes it necessary for the players in this field to invest more in the e-commerce arena.
As digital has become an increasingly important aspect of our daily lives, every industry and manufacturers are already focused on setting up an e-commerce entity –and that includes automotive players as well.
Meanwhile, Covid-19 has only further fuelled this process, making it more critical, business wise as well as health wise.
A survey titled the Automotive Consumer Canvass by Carwale and CEAT, also substantiates the interest of consumers in buying vehicles online.
After questioning over two lakh potential 2 and 3-wheeler customers, the survey reveals that online platforms have emerged as the preferred marketplace for buying a vehicle with a majority 60 per cent of respondents showing a willingness to buy vehicles digitally. Besides, 54 per cent of the 77 per cent respondents who had deferred their decision to purchase a car were keen to own one in 2021.
“It’s not surprising that 60 per cent of them show a willingness to buy online. For most first-time car or bike buyers, the process can be quite cumbersome. Hence, companies across the board are putting the effort into making the process digital and hence, more convenient,”says Banwari Lal Sharma, CEO of CarWale and BikeWale.
That is why, a majority of Indian automotive players have introduced online sales platforms, to service customers and drive sales. According to a Capgemini survey, consumers who prefer online channels to find information about cars, are up from 39 per cent before the pandemic to 46 per cent and growing as of April 2020.
Digital retail: What India Inc. thinks
The Indian automotive industry is on a progressive growth trajectory.
Even with much obstruction and economic difficulties, as per the market reports, India’s automobile market is estimated to grow more than ‘2.3X’ from $222 billion currently to $512 billion by 2026 with a CAGR of 12.7 per cent.
The industry has been very receptive to major transformations over the years, whether it is in the usage of technology in manufacturing, increasing reforms to curb vehicular pollution, or the entry of international brands into the Indian market.
Going forward, industry experts aver that soon Indian consumers will enjoy the ‘phygital’ buying experience which comes along with e-commerce auto retail.
“As we advance, I feel that it will be impossible for the automotive industry to succeed without focusing on digital and online mediums,” says an expert from the e-commerce field, Vaibhav Lall, founder at Khojdeal.
Adding to that, Shoptimize’s Phadnis says, “Automobile businesses that aspire to digital success should make the user experience seamless by providing enough information on their websites and enabling online bookings for showroom visits or test drives.”
There are some major reasons behind why online media are gaining in popularity. Through these portals, consumers are getting better deals and more convenience during the buying process. These portals are also engendering more trust in vehicle manufacturers in the minds of consumers. Finally, the transparent purchase process coupled with concerns about hygiene at dealerships, is further boosting the success of the online automotive marketplace.
We cannot deny that it is human tendency to educate ourselves and make ourselves more aware before making any buying decisions. As vehicle purchasing in India is quite an investment, people like to know what they are getting into. And online websites with omni-channel strategies and services are just the right solution.
Commenting on this, Phadnis opines that online research has become the most important aspect in influencing the purchase decision, “Today’s consumers are increasingly tapping into technology and accessing real-time information available on official automobile brand websites as well as on online reviews, blogs and Q&A platforms like Quora,” he says.
Online queries are the sparks that are driving sales
Another factor that has contributed to the growth of online automotive retail is an uptick in the number of sales.
The protocols of the new normal—social distancing and online shopping, consumers proclivity to own personal vehicles, health factors, and digital modes of interaction throughout the purchase cycle, have resulted in a spike in online queries and sales. As per a Google survey last year, many OEMs witnessed higher quality leads and a two-to-four-fold increase in their website’s traffic. While, the average number of visits to auto dealerships in India fell by 50 per cent.
For example, car maker Maruti Suzuki saw a five-fold increase in sales through digital means, which now stands at 20 per cent of their total sales. Similarly last year, Nissan witnessed a spike in online bookings for its Magnite range, 40 per cent of which came through their online platform. Also, digital solutions catered close to 30 per cent to Hyundai India’s sales inquiries, stated a Google report.
At the same time, other manufacturers such as Tata Motors, Kia, Audi, Mahindra, and Hero among many others have their own digital channels for consumers. Not only this, adding on to their digital services, these OEMs are also adopting end to end solutions—from launching new vehicles to providing online banking and finance options to their consumers.
“These changes in consumer’s buying and research preferences signal a shift for the auto sector, and Covid-19 played a big part in the online channel gaining traction. Technology-enabled innovations like secure digital payments, hyper-logical logistics, analytics-driven customer engagement, increasing consumer awareness and digital advertisements are likely to support this growth going forward,” says Kapur.
As per a GT Bharat report, other factors such as a rising middle class and a growing population of young people with increasing disposable incomes will further drive growth in this sector.
Furthermore, the ease of owning a vehicle through the availability of multiple financing options as well as reduction in vehicle ownership tenures due to regulatory rules in some states, were cited as the other growth inducing factors by the report.
On this, Lall asserts, “Progressive digitalization can increase sales at a hyper-local level. The opportunities offered by the e-commerce sector are immense. While new players like Tesla have already adopted a digital-only approach to save the costs incurred in setting up physical centres, other OEMs need to seize this opportunity too if they want to stay in the game.”
According to him, online auto classifieds and used car marketplaces are already driving the concept of pre-owned cars in India. Consumer’s research and buying preferences have shifted online, propelled mainly by the pandemic.
Currently, the online penetration of auto retail in India stands at 0.7 per cent and is estimated to reach 6-8 per cent by 2025, if the rate of digital adoption in the form of online sales channels keeps up the accelerated pace, as per the GT Bharat report.
Additionally, tech-savvy millennials, potential cost reduction at all levels of the automotive value chain, better price transparency, and increased consumer awareness driven by targeted advertising will further augment this growth.
The Tyre industry is faring well in the online space
One automotive ancillary that is gaining a lot of prominence by sales through e-commerce portals is the Indian tyre industry.
Tyres as an accessory have been contributing to a great extent towards forming a solid online automotive retail market in India since the past couple of years. E-commerce biggies such as Flipkart and Amazon have been catering to every demand of their Indian consumers and that includes tyres as well. Meanwhile, there are numerous portals that deliver tyres at your doorstep, such as Tyrewale, Tyremarket, Tyrehub, mytyrepoint, tyresnmore and many more.
The pandemic has resulted in exponential sales of tyres online, spurred by consumers who are now more comfortable with the digital buying process.
Initially, sales were down to almost negligible last year, but they picked up pace once the market reopened. Sales were galvanized by a rising preference for personal mobility and replacements of older tyres. Online collaborations also helped tyre brands in bringing down costs and in recovering their losses.
Since last year, e-commerce has become the new normal for the tyre marketers in India.
Besides the traditional walk-in stores and showrooms, the increasing demand for tyres online has opened another channel for retailers to hunt for potential consumers.
Brands like Michelin, Emirate and Ceat have been selling online through these digital marketplaces. However, to really understand what customers want and where to connect with them best, these brands have also set up their own D2C e-commerce websites. The latest member to join this club is Apollo Tyres which launched its e-commerce portal in December of last year.
Through these portals, brands have layed out a complete service pathway, right from placing the order on the website, to connecting the buyer’s requirement with the nearest tyre shop stocking the brand’s products, to an executive coming to the buyer’s home to set up the tyres. For instance, major distributor Bosch has this ecosystem in place.
Phadnis’s platform Shoptimize, which helped setup an e-commerce portal for a leading tyre brand, witnessed a whopping double-digit growth after launching its own D2C website. He tells us that the tyre and auto accessories segment is the most progressive one. “The segment has already moved online and is enjoying a spurt in sales through online channels. We’ve worked with a leading tyre brand in this space, and we’ve seen an increase in online revenue of about 200 per cent after starting out with almost no online sales, “he says.
This is a tremendous success brought about by the online alternative and the B2B or multi seller e-commerce marketplace for automobiles is expected to grow similarly over the next few years.
The next step in digital adoption
If you move from east to west, some automotive firms have already made significant headway in adopting omni-channel customer engagement with digital solutions. A Tesla Model S, for example, can be purchased entirely online, or an in-store associate can walk a consumer through the car features, ownership experience, and even the website itself on a showroom desktop.
This indicates how future Indian vehicle stores are going to be like.
However, taking this one step further, experts think that newer technologies like AR, VR and 3D animations are going to be the ultimate gamechanger in online automotive retail.
“Automobile brands can leverage augmented reality (AR) to bring their product closer to the consumer and capture customer attention. AR has the capability to create virtual showrooms and allow customers to explore products from the comfort of their homes. Similarly artificial intelligence (AI in e-commerce) is the best bet to target consumers with personalised content,” says Phadnis.
Japanese auto giant subsidiary Honda Cars India has already taken a leap in this field. In September last year, the brand launched a virtual showroom to provide the real-life-like experience of checking out a car at a dealership to everyone who does not wish to leave the confines of their homes.
In another example, German automobile manufacturer Volkswagen leveraged AR in a marketing campaign for its popular model Beetle to pull in a younger demographic in Canada. By scanning posters on bus shelters and billboards, users could access fun digital content of cars bursting out from the wall and doing tricks off ramps. In addition to that, there was the interactive interface, with the ability to learn more about the product without having to contact a sales rep or visit a showroom.
Other brands such as Kia and Volvo have also used this technology.
Pushpak Kypuram, Founder-Director at NextMeet, a tech company which enables gamify virtual solutions, is really enthusiastic about it. While speaking to us he says, “These are just some examples of how effective lead generation is no longer constrained to expensive advertising or brick-and-mortar stores. To put it simply, we are witnessing the 4th industrial revolution in action, and 3D technology as well as AR/VR are set to play a huge part in it.”
Generally, data interpretation has long been a point of contention across sectors.
And the information we receive is subject to our perceptions and biases, which makes communicating across technical bandwidths a challenging task. Replacing interpretive tools with visualization significantly reduces the possibility of miscommunication and makes it easier for all parties to operate across domains.
“Within the automotive sector, this disconnect can play out in many ways,” Kypuram says.
According to him, customers may not be able to make informed purchases by looking at rows upon rows of specs, new design and tech teams may struggle to communicate intent across various stages of development, or training modules may fall short of imparting invaluable insight to the product if P2P demos are not possible. “We have relied on face-to-face communication for addressing many of these issues for years, but as globalized operations become the norm, it is unrealistic to assume that every problem can be solved with a quick meeting or a Con-Call, “he points out.
Worse still, the pandemic has taught us that relying on these tools is simply not possible at times, even if we could justify their logistical expenses. And that is where 3D and AR/VR tech comes in.
“Not only can information about an automotive product be conveyed using these technologies, but it can also be visualized in a manner far more effective, interactive and collaborative than your typical instructional video or product catalogue,” he emphasises. As a player in this field, Kypuram’s firm NextMeet has already put this idea to the test by providing users with the ability to hold interactive product demos. Kypuram says, not only has the exercise been met with great enthusiasm, but it has also set a precedent for how virtual ecosystems can replicate physical sampling at a fraction of the cost.
That means 3D models and AR/VR tech can completely overhaul the way in which we design, manufacture, or even buy automotives.
Commenting on this, Cargo EV Maker Altigreen’s Founder and CEO, Dr Amitabh Sharan says, “This is bound to happen. People want the decision for a product that they will interact frequently with, that will stay with them for many years and perhaps one on which their livelihood will depend, to be made from the convenience of their homes, in a well-thought-through, and knowledgeable manner.”
According to Sharan, online channels give consumers the freedom to do that. As more AR/VR experiences are created, traffic will increasingly move online.
However, an important aspect that OEMs should convey to their consumers and buyers is about realism—which should not be lost in the entire user experience.
Today, dealerships as well as automotive brands have the choice of diversifying their sales channels by harnessing new technologies. Other industries have already started to make use of these resources. Notable amongst them are the entertainment and building sectors. In fact, at a global scale, nearly 15 per cent of all VR applications in the automotive industry are attributed to virtual showrooms. It will not be long before the Indian automotive industry catches up with these shifts.
Navigating the future through digital means
Indians are said to be tactile customers.
They want to experience products first-hand, which makes it a key factor in the buying process. The psychology behind this, however, is quite simple- understanding if the expense that they will incur is worth the product and the ROI. In the process of a vehicle purchase, dealer visits are just one way through which buyers ‘test’ the product to determine if it is worth its price.
However, online marketplaces are on the rise, making it very clear that the key element here is trust. If a product’s merits can be effectively conveyed over a digital medium, consumers will buy it.
Altigreen’s Sharan adds, “Online sales/booking channels work primarily due to being hassle-free and the (perceived) price benefits that they offer. For expensive items, the selection of the product is usually done apriori by touch, feel and test drive, but the order placement and booking are done online. Fence-sitters often use online channels to complete their comparative study and make their final choice. I don’t think we have reached a place where everything between 1st time product discovery to order placement happens without physical interaction, for expensive products.”
According to him, for automobiles, once a brand/variant/model is well accepted in the market, online bookings will follow.
Which the market is currently witnessing.
And even if the physical dealership experience returns, once the pandemic subsides, there is mounting evidence to suggest that customers’ preferences have shifted towards all means digital. This requires that automotive players be nimbler and more dedicated to investing in and implementing forward-looking digital solutions.