Think back to the most important retail moments of the last 50 years. What would be on your list? Surely automotive veterans would add the Great Recession of 2007, along with the introduction of imports, SUVs, and Crossovers. The emergence of the internet would also make everyone’s top 10, as would most of the major technological advances (mobile, Wi-Fi, etc.) over the past two decades. No matter what’s on your list, however, one thing is certain: The retail landscape has utterly and permanently changed, thanks mostly to the industry’s drive to innovate.
You could add millennials to that list, as well. They are change agents, this first true “digital native generation,” and as such are influencing everything from how cars are made, marketed, and sold.
What Shaped Millennials?
Well, for starters millennials are the biggest group to come around since baby boomers. The Pew Research Center estimates that there are 75.4 million people identified as millennials — those born between the early 1980s and the late 1990s. That’s a bunch of people going to college, getting jobs, buying cars … you get the picture. As they continue to come into their own and reach their prime earning years, they also account for a huge chunk of our economy. Today, that share equals around $600 million a year — but it’s expected to grow to $1.4 trillion annually by 2020, or 30% of total retail sales, according to Accenture. And when it comes to buying new cars, their emerging influence is increasing: millennials purchased nearly 1 out of 3 new cars in 2016, and in California, millennials outpaced baby boomers for the first time, Automotive News reported.
Now consider the formative years of this generation, and how key events shaped their consumer habits. Think of them as “skeptical optimists,” in that they came of age under the shadow of terrorism. For many, the scars of the Great Recession mark their entry into the adult world. As a result, it’s fair to claim that normal landmark moments in life, such as getting married, buying a home, or starting a family, are delayed; again, according to the Pew Research Institute, millennials show historically low rates of homeownership when compared to their parents. Still and all, they’re more inclined to dream big because they’ve grown up alongside amazing technological innovations, such as the smartphone, and more. They see the possibilities, and are driven to succeed — on their terms.
After all, the digital native generation knows how to use the power of technology, and as such their consumer behavior is tied to technology. It’s not an optional thing; they use mobile devices and the internet for everything and anything. Millennials simply don’t understand why all transactions can’t be handled completely online.
Purchase Power is Growing Up
Those buyer stats aren’t empty rhetoric. With millennial spending power growing, they’ve helped to change the way we shop and buy — including the vehicle sales process. These are forward-thinking buyers who care about their monthly payment because their lives are expanding: 83% say that monthly payment is critical when selecting a lender to finance a vehicle. And while millennials are a force in the subprime market, Dealertrack Credit Data shows they are increasing their share of the super-prime and prime segments, based on unique credit apps submitted on the Dealertrack Credit Application Network in 2016. It’s the kind of movement that arguably comes with getting more established in careers and credit scores. Add this fact of life to increasing interest in leasing, longer loan terms, flat down payment amounts, and steady trade-in equity, and this generation of car buyers are wielding their considerable purchase power with a careful eye to the future. These are young people who are building wealth to go with lives that are expanding beyond cars and into home and families.
Making the Online and In-Store Connection a Reality
Their digital bias translates into key habits dealerships and automakers should have adjusted to by now, such as their broad consideration sets, and the extended time they shop for just the right car (127 days, on average), according to Cox Automotive’s 2017 Car Buyer Journey. Especially when 64% of that time is spent online, and just 17% is at a dealership. So if you’re reading this and you’re a sales manager or GM, it would be very wise to make sure your digital showroom (aka your website) is as optimized and engaging as your physical showroom.
It makes sense, then, that millennials want to use mobile and digital technology to make car shopping fast and simple. And while the concept of online shopping and in-store deal making may predate millennials, they are among the first to insist on it as the default process — and demand that the process be efficient and seamless. They have low tolerance for idle time and being asked to repeat steps they might have already done online. In fact, Cox Automotive’s 2017 Car Buyer Journey found that they’re the first generation to break the three-hour time barrier — and have an almost overwhelming desire to shorten the time spent doing the deal. For example, 51% cite negotiations and F&I as their top pain point, primarily because the process takes around an hour, on average, to complete. It’s not rocket science to figure out that the dealership team that creates a fast and seamless experience will reap the sales benefits.
Selling Millennials on the Experience
There’s a generation of digitally savvy people getting ready to buy cars. While that sounds like a pleasure cruise of sales opportunities, there’s a catch: they’re a demanding bunch with specific ideas about how the transaction should unfold. So what’s a sales person to do? How does a dealership adjust their business to take advantage of this watershed opportunity in automotive retail?
They sell them on the experience of buying a car.
It’s more than an online order. More than buying a washing machine, or a book. Clearly, millennials appreciate the significance of what amounts to a significant financial commitment, and as such they take their time researching — four months, give or take. They want more information about F&I products before going to the dealership, a clear sign that they see value in the additional purchase but want to be more educated. According to Cox Automotive’s research, 63% of all shoppers — including millennials — are more likely to purchase F&I products if they can learn about them on their own time, according to 2014 MakeMyDeal F&I Research. Yet, here’s the catch: they are absolutely, positively frustrated with the in-dealership F&I process.
Among millennials, 25% of their pain is felt during the paperwork and F&I part of the deal, according to the 2016 Cox Automotive Emotional Connections Study. That’s from the moment they step into the dealership. Perhaps the most important thing to remember is that they have a very low tolerance for idle time, delays, and inefficiencies — and they aren’t afraid to throw up their hands and walk out of the dealership. It’s a combination of being smart, fast, and efficient:
- Leverage technology at the right points in the process, so key sales moments get the luxury of quality time with an engaged and interested buyer.
- Empower self-directed research through the use of mobile technology, before and during the sale.
- Remember that the current trend in financial technology is at least in part driven by millennial preference. They expect rates and terms that reflect their unique credit story.
- Create a personalized experience that meet their needs and builds a comfortable and engaging environment. For example, many are more at home with a tablet versus a printed contract. To that end, use technology to make the final steps simple, easy and user-friendly.
Here’s the most important point to remember: What millennials want today is what everyone will demand tomorrow. The digital habits of this “digital native generation” are changing how all consumers go through the car buying experience. They want the dealership experience. It’s up to you to deliver the kind of experience that sells them a car.
Do that by changing your approach into a more flexible and consultative experience, one that leverages mobile technology, is personalized, and welcomes up-front research. Position the deal as more of a conversation, one that’s built around the monthly payment, with an eye to the future. After all, the future is bright for businesses that learn how to sell the experience to millennials.
Jason Barrie is the associate vice president of market performance for VinSolutions and Dealertrack F&I at Cox Automotive.