Explore The Four Types of Digital Retail

In April 2020, I reached out to my dealers about the DealerTech area they needed the most support with. As you might expect, many of them asked me to shed some light on Digital Retail vendors and offerings. Since then I have gathered feedback from more than 50 dealers, demoed over 20 solutions, and co-presented one NADA webinar about Online Sales and Vendor Considerations with NADA’s Brad Miller. Here are some of my research findings for you to explore the four types of Digital Retail.

Why is it important to define Digital Retail?

Many dealers have a singular definition of Digital Retail. Simply put, they see it as a marketing channel like an automotive eCommerce solution to compete with Internet sellers like Tesla, Carvana, Vroom, or Shift. However, it is so much more. Not only does it come in different shades as I will explain below. But it also stands for the evolution of automotive vehicle sales. One that affects the entire dealership – not just the variable business. Or can you imagine offering a Digital Retail experience, and an analog Service experience?

When pursuing a Digital Retail approach, dealers should be clear about their objectives and desired customer experience. This internal review process comes with associated questions about the dealership operations and sales processes. If left unanswered, dealers take chances of a rip-and-replace culture that is too common already in other DealerTech areas.

Four Types of Digital Retail:

As you move from type 1 to type 4, the consumer experience changes. While the degree of personal dealership involvement and guidance falls, naturally the degree of customer self-service rises.

For more details about the four types of Digital Retail and solution providers, please download our infographic. We created this resource as a tool for you to use in your vendor reviews. You can identify the providers that are the best fit for your preferred Digital Retail type. Also, you can use the key capabilities and integration points as demo questions to verify your vendor’s capabilities.

Download Infograph Here

Digital Retail Type 1: Digital In-Store Sales Experience

To my surprise, some dealers define Digital Retail as a paperless in-store experience detached from any online sales involvement. For those dealers, it is primarily a modern “Apple” store like experience with electronic needs analysis and vehicle selection, iPad/tablet-PC presentation of payments and aftermarket services, and digital forms management with esign. After all, online retailing for some of these dealers may only stand for the traditional lead capture or trade-in tools without advanced web deal building.

Critical Success Factors Type 1 Digital Retail:

• Sales enablement with smooth funnel management (Single Point of Contact seems popular for this type)
• Tight management control over the road-to-sale (like deal approval from desk manager via in-app communication)
• Strong integrations with DealerTech systems (like CRM, Desking, Trade-in, Credit App, F&I Menu, Digital Contracting, and DMS)
• Electronic forms for esign (or laser print if wet-signature still required)

Digital Retail Type 2: Online-Induced In-Store Sale

While type 1 was focussed on the in-store customer experience, type 2 of Digital Retailing is much more of a hybrid digital online and in-store approach aiming for an in-dealership sale. In fact, without having scientific numbers available, this is probably the most popular form among the dealers I interviewed. The main goal is to create transparency online about inventory and penny-perfect pricing for shoppers. And then ease the handover to the in-dealership engagement either at the trade-in, F&I presentation, credit application, or test drive. Brick and click.

Critical Success Factors Type 2 Digital Retail:

• Easy online navigation from start to purchase intent (through vehicle selection, payment, trade-in, F&I, accessories, and credit)
• Intuitive payment configurator with flexible journey orchestration and lead prompt
• High online price transparency with penny-perfect numbers based on strong desking engine
• Comprehensive in-store access to online deal details ideally with API integration to in-store DealerTech stack to pick up deal or retarget online shoppers (like CRM, DMS)

Digital Retail Type 3: Personal Remote Sales

Similarly to type 2, this third form of Digital Retail also demands personal dealership interaction with the prospect. But in contrast to the previous approach, type 3 of Digital Retail starts online and remains virtual. The personalized car-shopping experience is mainly driven by the dealer’s remote sales activities without the intention to bring the shopper inhouse for closing. Dealers have been operating under this form in some of the states where personal communication and vehicle sales was limited due to the mandated closing of their physical storefronts.

Critical Success Factors Type 3 Digital Retail:

• Personalized “remote” communication and shopper guidance through critical steps of the online journey like F&I Menu (e.g. via video chat, co-browse, chat)
• Secure messaging and virtual presentations in areas where sensitive information is exchanged (like in credit application)
• Strong retargeting and remarketing features to close “in-market” prospects (if no deep integration to CRM offered)
• Dealership process safety net for after-hour communications (like sales team shifts or virtual BDC)

Digital Retail Type 4: Pure Online Sales

This last form of Digital Retail is one that is most challenging to achieve. A pure end-to-end online car-buying journey with a digital deal jacket only exists with imperfections today. The challenges span from offering true electronic signature for all lenders and forms, over econtracting for lending and aftermarket, to remote ID verification/theft prevention and two-way authentication. The vehicle in-dealership pickup or delivery can offer a remedy but come at a cost. However, the dealership personnel would have to follow strict procedures for a compliant drop-off. The dealer potentially misses out on outsourcing the vehicle transport to a third party if shoppers prefer home delivery.

Critical Success Factors Type 4 Digital Retail:

• Flexible (re-)entry points into Digital Retail journey (e.g. VDP, SRP, Tier 1, social channels, online marketplace, text messaging)
• Customizable online journey ideally with AB testing to adjust for highest throughput
• Comprehensive APIs to integrate with dealers’ preferred partners (e.g. credit, trade-in, F&I)
• Digital contracting with esign and end-to-end econtracting capabilities
• Convenient vehicle test drive/delivery options and transport logistics
• Cybersecurity shield with remote ID verification and ID theft prevention

Overall, I hope this classification adds value to your dealership decisions. Moreover, my goal was to simplify your DealerTech quest and offer you a better platform to explore dealership technology. Hence, please see my other resources if you want to learn more. I provide insights into Digital Retail providers, vendor capabilities, typical online processes, and operational and sales-related dealership questions.