We live in an age of disruptions, and sometimes those unforeseen interruptions to our regularly scheduled program converge in curious ways.
The biggest disruption in recent memory is, of course, the COVID-19 pandemic. It has been a major public health crisis the world over, and its impact has been felt in just about every area of life, including the way we shop. If the pandemic has taught us anything about the consumer habits of Canadians, it’s that we love to buy things online. This became evident during the early months of the pandemic when many stores were temporarily shuttered and concerns over the coronavirus kept many shoppers at home. Statistics Canada reported that, from February to May 2020, total retail sales fell 17.9% while retail e-commerce sales nearly doubled (+99.3%).
Another disruption whose effects will be felt for a long time to come is the current global semiconductor shortage. It is certainly having a profound impact on the automotive industry. In early February, for example, Ford Motor Company suspended or cut production at eight plants in North America due to the semiconductor shortage. You just can’t make new cars without those microchips. Needless to say, this has given the used-vehicle market a considerable boost with demand for pre-owned cars surging across North America.
The auto industry has already been shaken up in numerous ways over the past decade or two. Consider the rise of hybrid and fully electric vehicles, the popularity of car co-ops and ride-share services, and soon—if Elon Musk has his way—the emergence of reliably self-driving cars. If these were all challenges to the traditional ways of the industry, you can imagine the effects of the chip shortage. When all those remote workers start returning to physical offices, a lot of them will be in the market for vehicles. In the absence of new ones, many drivers will turn to the secondary market for their wheels.
A growing number of them will be doing so the same way they have been working (and ordering meals and groceries and just about everything else) for the past two years—online. According to recent research, 66% of U.S. adults who plan to buy a vehicle in 2022 said they would prefer to gather info online. Moreover, 62% said they would be interested in making their purchase entirely online. That, as Morning Consult noted, is “a massive shift from the traditional brick-and-mortar model”. It’s also a significant increase; before the pandemic, according to one survey, just 35% of respondents said they were open to buying online.
All of the figures cited above are from the U.S., and that’s mostly because the online-auto industry south of the 49th parallel has had a head start with a market size that’s ten times bigger. But Canadian car shoppers aren’t all that different in their habits and mindsets, and the past-due change that’s sweeping the auto industry knows no border. As they navigate this ever-changing landscape, automotive-industry leaders in this country may find they gain an advantage by reimagining their organizational structures and operations and meeting customers where they’re now comfortable transacting—online.
Technology has changed the way that Canada—and the rest of the world—shops, but by and large the auto industry has not adapted to this shift as quickly as many might have expected. It took the twin disruptions of a global pandemic and a supply-chain crisis for the industry’s innovators to adapt to what is missing in the marketplace. These early adopters tapped into what consumers were searching for, giving car purchasers the power to dictate terms and set expectations. They can even offer what a brick-and-mortar dealership may lack, such as transparency, the convenience of to-your-door delivery, and love-it-or-return-it policies.
This new paradigm might just provide a stagnating sector with renewed impetus to create a better consumer experience. To achieve that, the industry must rethink its traditional business models, with a focus on customer involvement, enhanced agility, and ongoing innovation. Customers want convenience, and they want efficiency. By applying its considerable resources to a data-driven and customer-centred approach, there’s no reason for the auto industry to lag behind when it comes to e-commerce.
Disruption isn’t always a bad thing.
Cody Green is the co-CEO & Founder of Canada Drives.