“Online becomes a portal to a showroom,” as one industry expert insightfully noted, and this rings especially true for the evolving Canadian automotive market.
The dawn of the internet age initially cast a shadow over the traditional car dealership, with many predicting its imminent demise. However, these forecasts proved premature as consumers continued to value the in-person experience. Dealerships adapted, and for a long time, maintained their central role in car buying. Then, the unprecedented COVID-19 pandemic struck, forcing showroom doors to close, sales teams to work remotely, and compelling Canadian car buyers to explore online avenues for vehicle purchases.
Once again, voices within the industry questioned the resilience of dealerships. Yet, mirroring trends observed in the US, Canadian dealerships demonstrated remarkable adaptability. In fact, the pandemic period has proven surprisingly beneficial for many, highlighting the accelerating shift towards digital retail in the automotive sector.
The Digital Acceleration in Canadian Car Buying
Even amidst economic uncertainty, dealerships in North America reported robust profits in 2020, a testament to their evolving business models. Notably, a significant portion of these sales originated online. While precise Canadian figures may vary, the trend mirrors the US, where nearly 30% of new car sales were completed digitally last year, according to automotive retail consultant Alan Haig of Haig Partners. This represents a dramatic surge from pre-pandemic levels, where digital sales accounted for less than 2% of transactions.
Alt text: Canadian consumers increasingly initiate car buying process online, reflecting a major shift in automotive retail.
“Embracing digital retail is no longer optional; it’s essential for dealerships aiming to thrive,” Haig emphasized. “Those who resist this evolution risk losing customers and market share in this increasingly digital landscape.” This sentiment resonates strongly within the Canadian automotive industry as it navigates this transformative period.
Dealerships Rise to the Challenge: Adapting to Online Demands
Recognizing the growing influence of online platforms and facing competition from purely digital automotive retailers, dealerships have proactively enhanced their online presence and customer service models. In Canada, a substantial network of franchised new vehicle dealerships forms the backbone of the automotive retail sector, providing significant employment opportunities.
Michelle Krebs, an executive analyst at Cox Automotive, points out that the traditional retail experience was “ripe for change.” However, she also underscores the enduring role of dealerships, stating, “Dealerships possess considerable political influence, underpinned by franchise laws designed to protect their interests.” These regulations, prevalent in both the US and Canada, ensure that auto manufacturers primarily distribute new vehicles through franchised dealerships, maintaining a structured retail ecosystem.
A recent study by Cox Automotive further supports the positive evolution of the car buying experience, revealing heightened buyer satisfaction in 2020. Customers reported a more streamlined and efficient process, with reduced time spent at dealerships and fewer dealership visits required. This improved satisfaction is likely linked to the integration of online tools and processes into the car buying journey.
E-commerce: The Future Core of Canadian Dealership Sales
Looking ahead, industry experts like Alan Haig predict that e-commerce will become the central pillar of dealership sales within the next decade, a trend accelerated by the pandemic. This shift is particularly driven by younger demographics who are increasingly comfortable and prefer conducting significant transactions, like vehicle purchases or leases, via their mobile devices.
“For many Canadian car buyers, the online platform is now the gateway to the showroom,” Haig explains. “When customers physically visit dealerships today, they are often well-informed and prepared to finalize their purchase. Anything that enhances this customer experience, both online and offline, is a significant advantage.”
Alt text: Canadian Ford dealership showcasing customer interaction, highlighting the evolving role of dealerships in the online era.
Bryan DeBoer, CEO of Lithia Motors & Driveway, a prominent dealership group with a significant North American presence, including Canadian locations, has observed a “surge in online traffic” across their dealerships. He notes that customers arriving at dealerships are “active, educated consumers ready to buy,” indicating the effectiveness of online shopping tools in pre-qualifying and engaging potential buyers.
Disruptors and Direct-to-Consumer Models Enter the Canadian Market
The traditional dealership model is facing increasing challenges from emerging automotive brands adopting direct-to-consumer sales strategies. Companies like Tesla and Polestar, the Swedish electric vehicle manufacturer expanding its presence in Canada, are bypassing the conventional dealership network by selling directly through company-owned stores and online platforms.
Polestar emphasizes a departure from the conventional car buying experience. Jonathan Goodman, COO of Polestar, highlights their “digital-first retail model” supported by physical “Spaces” in key urban centers across the US and Canada. These Spaces are staffed by non-commissioned specialists focused on customer education and support for the digital platform, facilitating test drives and purchase coordination.
Alt text: Polestar showroom in a Canadian city, illustrating the brand’s digital-first retail approach appealing to Canadian online car buyers.
Volvo, partially owning Polestar, is also considering a shift towards online sales. The Volvo C40 Recharge, their new electric compact SUV, will be exclusively available for online purchase. Volvo aims to conduct half of its global car sales online by 2025, signaling a significant strategic shift.
Anders Gustafsson, CEO of Volvo Car USA, clarifies that this strategic change is not intended to negatively impact their network of Canadian dealers. “Our dealers will not earn less than they do today,” he assures, suggesting a revised compensation model that integrates online sales.
Alt text: Volvo C40 Recharge, an electric SUV available online, representing the online car buying trend favored by Canadian consumers.
Gustafsson emphasizes that streamlining processes, reducing inventory costs, and automating the buying process will ultimately benefit the company and its dealer network in the long run. A Volvo spokesperson reiterated that “retail partners will remain integral” to their sales and customer service process, with no plans to reduce their retailer network in Canada.
Traditional Automakers Embrace Digital Sales Tools in Canada
Luxury brands like Lincoln have proactively adapted to the evolving landscape by collaborating with their dealer partners to expedite the rollout of digital sales solutions. Lincoln’s Effortless Sales Experience, featuring a fully remote sales platform and virtual vehicle walkthrough tools, was accelerated to meet customer needs during the pandemic and beyond. These tools cater directly to Canadian car buyers increasingly comfortable with online interactions.
Mary Barra, CEO of General Motors, highlighted the widespread adoption of Shop-Click-Drive, a digital tool enabling customers to browse GM vehicles at local dealerships, secure financing, estimate trade-in values, and complete portions of the transaction online. GM’s early adoption of this tool in 2013 positioned them well to capitalize on the shift to online car buying.
Online car retailers like Carvana and Vroom have witnessed substantial sales growth, reflecting the broader trend. Carvana’s significant sales increase and investments in expansion demonstrate the escalating demand for purely online car buying experiences, which also resonates with a segment of Canadian consumers.
Alt text: Porsche dealership in North America, symbolizing the adaptation of luxury brands to online car shopping trends among Canadian buyers.
The Evolving Dealership and Customer Experience in Canada
The increasing prominence of online car shopping is likely to drive further evolution within the automotive industry. Dealerships may consolidate, and sales roles are expected to transition towards product specialists and consultants. Efficiency will be paramount, requiring dealerships to operate with leaner staffing models and leverage digital platforms to generate customer traffic.
However, despite the convenience of online tools, a significant portion of Canadian car buyers still value the tactile and sensory aspects of car buying. “Do you fit in the seat? Do you like the technology interface? It remains a very tangible, ‘touch and feel’ business,” Michelle Krebs emphasizes, highlighting the limitations of a purely digital experience for some consumers.
Alex Vetter, CEO of Cars.com, acknowledges the improved reputation of dealerships in recent years. “The local dealership is evolving at an unprecedented pace,” he states. Many dealerships are innovating with enhanced services, including concierge offerings, on-demand car washes, and even employing AI to enhance customer communication. This proactive adaptation aims to bridge the gap between online convenience and the personalized experience traditionally associated with dealerships.
Vetter concludes, “While manufacturers have explored direct-to-consumer models, they recognize the critical role dealerships play in the overall vehicle ownership lifecycle, encompassing sales, service, and customer relationships.” For Canadian car buyers, this evolving landscape presents a wider array of options and a more customer-centric approach to car purchasing, blending the convenience of online tools with the enduring value of local dealerships.
