(Bloomberg) — Tiffani Deems of Boise, Idaho, wanted a new Kia hybrid and did what any shopper for anything would do these days — she went online. However, the cars listed on dealer websites were gone and her query was met with a come-on to visit a showroom and buy something else.
She ended up shopping like it’s 1999 — meeting at dealerships with salespeople who’d sit her down and go through a list of vehicles scheduled to arrive, sometimes printed out on a big sheaf of paper.
“I had to go to five dealerships and call every day,” she said. “That’s not how I want to do it.”
It’s hardly news that the pandemic has messed with the supply chain on a range of goods, especially cars, leading to price gouging. But the shortage has also exposed a dirty secret of the US car industry: online shopping, where consumers are freed of pressure tactics from aggressive salespeople, is unreliable partly because many dealers want to work face-to-face.
Dealer websites with out-of-date inventory typically managed by third party vendors are mostly there to generate sales leads and lure buyers into showrooms. When a car is sold, it remains on the site until the financing clears. When a buyer puts down a deposit, the car is still listed as available. Even after the car is sold, the vendors and dealers don’t update inventory quickly, said Paolo da Silva, vice president of e-commerce at Cox Automotive.
“There is no connectivity between those systems and what the manufacturer is doing in terms of production,” da Silva said. “A human being has to update those cars.”
State franchise laws don’t help. Most states require dealers to handle the final sale transaction and manufacturer websites are designed with that in mind. Even if customers uses the configurator on a site to spec out a car, they have to go to a dealer to order it.
Tesla is the exception, allowing customers to order vehicles directly. Since it has no franchised dealers, cars can be ordered directly.
Before the semiconductor shortage, all of this mattered less because dealers usually had so many cars that if a particular vehicle was sold, a dozen similar ones might be on the lot.
“Under normal real-world circumstances, that car would be here within 12 days,” said Buffalo-area Chevrolet dealer Duane Paddock. “But we had so many others in stock that it didn’t matter. No one cared.”
Carmakers and dealers typically stocked 60 to 90 days worth of vehicles. Currently, they have fewer than 20. When the pandemic crunch eases, they’re shooting for 45 since they’ve seen that they earn more when inventory is tighter. The current average car price of $45,000 is a record high.
But to settle on the right inventory and offer customers the colors and options they want, da Silva said the online experience will have to be updated with automakers linking their websites to production scheduling. That will push dealers to sell more cars to order rather than move inventory, but the pandemic showed that consumers want the change.
Customer survey show that 90% of car shoppers at least start online. In a study Cox released in January, customer satisfaction rose in 2020 when in-person sales fell off because of pandemic-driven health concerns. Many dealers were forced to handle everything online and even delivered the car. A record 72% of buyers were satisfied. That fell to 66% in 2021 as showrooms reopened and choices fell. Consumers who did most of the transaction digitally were more likely to be happy with the experience, the study showed.
“There will be a big push for vendors to connect directly to manufacturers and dealer websites,” da Silva said of what’s ahead. “Dealers are used to the old ways. They want to sell you something else. That’s going to have to change over time.”
Cox, which owns Dealer.com, has developed a web tool called Essential Commerce. It can select a specific vehicle with a vehicle identity number (VIN), value a customer’s trade-in and sign a contract. It’s in early stages of being deployed to dealers, da Silva said.
Car companies are also making changes to improve transparency, although the dealers still largely control what appears on their sites.
Jeremie Papin, chairman of Nissan Americas, said as it reduces inventory for better pricing, it is rolling out a website called Nissan@Home that lets customers shop for an exact model with a VIN. About 700 of Nissan’s 1,100 dealers are enrolled, although dealers are the ones who make sure the inventory is accurate.
General Motors Co. has also given dealers tools to track inventory and vehicles that are in transit, but, there too, dealers and a third party control the website, said a company spokesman.
Ford Motor Co. has taken a different approach, offering customers incentives of up to $1,000 to order vehicles directly in exchange for more time to build it. This is the system in Japan and Europe where dealers have far less space to store vehicles and customers order online and wait for their car to be built.
So where does all of that leave US buyers? Right now, still driving around taking what they can get, not what they want. Deems of Boise bought a Kia Seltos.
“They didn’t even have any new Kias on the lot,” she said. “I’m lucky I found a car.”
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