Gone are the days when consumers used to drive around from car dealership to car dealership looking for the best deal money can buy. Now car buying consumers do all of that at the click of a button via the internet. We need to acknowledge that car buying consumer behaviour has changed. Car buying is not as linear as it used to be in the physical world.

Car buyers were subject to doing research offline as well as you had to purchase offline which was cumbersome. But what has disrupted all of this is the internet!

The internet has caused transparency and anonymity

The internet has caused transparency and anonymity and if we fixate on transparency for a second, what is becoming transparent? Let’s start by distinguishing three things:

  1. internet users in South Africa that have little experience
  2. internet users in South Africa that have more than three to five years experience.

We know that there are about 31 million people online. In South Africa, maybe 12 million people have jobs – there are more than two times the number of people online versus those that have jobs. Users that have jobs are the ones that can potentially buy cars, the rest is pent-up demand for when the economy turns.

Anonymity plays a massive part in the change in their car buying journey. Imagine going online today, trusting the internet, then you get spammed. Now you think to yourself. I don’t want to let people know who I am.

That kind of personal anonymity of the car buying consumer, coupled with data transparency as a result of the internet, is the world we are living in.

Demand, supply & pricing data will become even more transparent

Demand, supply & pricing data is becoming transparent, however there are two forms of this kind of transparent data. The first kind I call dumb data. Example: Dumb data is being able to see every price of every car on marketplaces like AutoTrader SA, but it’s very, very difficult to get pricing trends and any kind of intelligence from the data. Like inflation trends, price history, etc.

Whilst the used car market dwarfs the new car market, by at least 2.5 times. We live in a world where the dominant force in used car buying behaviour occurs in used cars, not new cars. And I think it’s one thing that Original Equipment Manufacturer’s (OEM’s) realize, but maybe don’t want to admit. Used car buying patterns and consumer buying behaviour play a role in the pricing and product of new cars.

A third of all visitors to AutoTrader are in the market for either used or a new car. So when market pricing becomes intelligent and moves from being dumb to being intelligent, we will see an even bigger shift in buying behaviour.

At the moment, if you go onto marketplaces like AutoTrader, you don’t see what the demand for a particular new or used car is for that matter.

Intelligent demand data is currently available to car dealerships. Once consumers have access to more intelligent data, we will begin to see them become more and more sophisticated as this transparency occurs and anonymity continues; something they won’t see with dumb data.

We’re heading to a data transparent world

You can imagine what will happen – car buying consumers will research online, arrive at the car dealership to collect their car. We are already beginning to see the number of car dealerships that consumers physically visit reducing from 5 to 1.5 before they purchase a car. Millennials visit only one dealer. They’ll choose the car online and go there to buy it, but they’re still using dumb data. Imagine how showroom feet may reduce once all demand, supply and price data is more intelligent for the car buyer.

At the moment they are researching cars, making shortlists and only then making themselves known, then going back to do research online, shortening that list even more and then going back to buy the car. Businesses need to provide intelligent data to car buyers that is easy to navigate.

Used car retail trading is like a stock market

I’ve always said that the used car market is like a stock market. It changes every single day. A personal example: at the end of 2018, I was in the market for an SUV, looking to buy a 2017 Hyundai Tucson Premium for about R290 000.

I thought, like many car buyers, to rather buy in January as prices may be a little lower as we would have crossed over into another year, the car will be “older”. When we looked again in January, the prices for that Variant had gone up!

I went to have a look why. Demand had steadily risen toward the end of 2018 into 2019. Suddenly car dealerships were selling these cars faster than usual. So most car dealers started slowly pricing the car up within four to six weeks. The 2017 Hyundai Tucson prices had gone up from R290 000 to over R310,000.

Car dealerships that keep their finger on the demand, supply and price pulse in the market, stand a better chance of making changes that get them the sale, which could very well mean, in this case anyway, more profit on the front end.