Volvo Wants to Change the Way Americans Buy New Vehicles

Test focuses on V60 wagon; could expand to more models.

by on Aug.24, 2017

Volvo has two different buying processes for its two different V90 options. Buyers can order a V90 the way they want it.

While most American motorists now use the Internet to do their initial research, it has done little to change the rest of the new car buying process. Shoppers still go to the showroom to negotiate their best price for whatever is on the lot.

But Volvo is hoping to shift that process. But while the Internet will play even more of a role in the process of ordering the Swedish maker’s new 2018 V90 model, it will actually take shoppers longer to drive home in the new wagon.

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That’s because Volvo is using the V90 to try to shift to a more European-style shopping process. Where American motorists typically seek instant gratification, taking delivery the same day they go out shopping, buyers in Europe are far more likely to customize their vehicles, even if that means waiting weeks to take delivery, notes Lex Keemakers, CEO of Volvo Cars of North America.

Once known for its boxy station wagons, Volvo is in the midst of radically redesigning its product line-up. As with the industry as a whole, it is migrating from passenger cars to utility vehicles, such as the big XC90 and the redesigned XC60 coming for 2018.

(Volvo, Geely create joint venture aimed at EV market. To see why they’re all charged up, Click Here.)

Even its more wagon-like models are getting a crossover-style makeover. There will be two versions of the redesigned V90 for 2018. One sits higher and features the sort of exterior cladding that looks more like an SUV. And shoppers will be able to walk into a Volvo showroom and drive off the same day with the V90 Cross Country.

If U.S. buyers want a V90 Cross Country, they'll be able to walk off the Volvo lot with one that day.

If they want a more classic Volvo V90 wagon, however, they’ll have to place a special order that could take two months for delivery. And the maker – which is now owned by China’s Zhejiang Geely – is hoping shoppers handle most of that process online.

“We know there are still hardcore loyalists who want a traditional wagon,” said Keemakers, during a recent conversation in Denver, where we had a chance to driver the classic version of the V90. But Volvo expects demand to be measured in the hundreds, perhaps 10% of the volume of the V90 Cross Country, and that makes it ideal to try out the idea of custom ordering online.

Custom ordering is not a new process by any stretch of the imagination. A small percentage of American buyers long have chosen to wait in order to get precisely the color and option combinations they prefer. That’s especially true for ultra-luxury brands like Rolls-Royce and Bentley. But, for the industry overall, at least nine in 10 shoppers will settle for whatever they can find on the lot as long as they get to drive home immediately. If they get picky they might just go to another showroom.

In Europe, anywhere from 40 to 60% of buyers will place an order for a specific vehicle and wait, a process that can take weeks to complete. It reflects, in part, the fact that European dealer lots are smaller, allowing them to carry far fewer vehicles in inventory. The exact number varies by brand, and from country to country.

Ironically, Internet shopping has become a particularly American experience – for just about everything but car buying, anyway. Amazon and other online services have taken a heavy toll on the country’s retailers. But dealers have been largely immune.

(Click Here for more about Volvo’s electrification plans.)

That’s because state franchise laws largely restrict manufacturers such as Volvo from directly selling to customers. So, while J.D. Power and Associates data show that more than three-quarters of American motorists do their basic research online, they still have to walk into a showroom to complete the process, much as they have for over a century.

“We want to try online ordering to see how it works,” said Keemakers, taking it as far as possible while still obeying U.S. franchise laws. “We know there are many people who simply don’t like to go to a dealer, and we want to give them an alternative experience.”

So, Volvo says it will have no classic V90s available at dealer showrooms. To buy one, a customer will have to begin the order process online. They will have access to trained specialists by e-mail, through chat or by phone to help answer any questions. And they will be able to follow a more European style process to specify exterior and interior colors and accessories.

“In the end, the final details will still need to be done by the dealer,” the Dutch-born executive explained, including making delivery, but the process will come as close to ordering from Amazon as possible and still comply with franchise laws.

Asked if Volvo might expand that to other product lines, Keemakers said, “Absolutely.” And he said the carmaker sees the potential to make the approach to retailing its launching on the V90 appealing to a sizable share of its shoppers.

Currently, more than half of all luxury car buyers lease their vehicles, and Volvo fits into that mold. When one leases a car, truck or crossover there’s a fixed time for the contract to expire, so Volvo knows almost precisely to the day when a motorist will be back in the market looking for a new vehicle. So, the company can begin pitching those customers months ahead of time, encouraging them to place an online order that will be ready and waiting for them at the dealership when the lease come to an end.

(To see more about Volvo’s relaunch of Polestar as a high-performance EV brand, Click Here.)

How many buyers will eventually order Volvos online isn’t clear, Keemakers told TheDetroitBureau.com, but “I don’t see why we couldn’t reach the same level of customization as we see in Europe.”

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2 Responses to “Volvo Wants to Change the Way Americans Buy New Vehicles”

  1. Jim says:

    Will the online “dealer” be able to throw in floor mats or undercoating?

  2. Kjell Bergh says:

    It is a safe bet that most enlightened manufacturers would like to join Volvo’s effort to change the habits of American auto buyers; in fact, many have tried unsuccessfully.

    The current system is badly outdated and results in much higher costs for OEMs and dealers alike. In the end, the buyer bears those extra costs.

    It makes little sense to have acres and acres of unsold inventory sitting around just to a need for instant gratification. Since a large part of automotive customers lease their vehicles, they know precisely when they will need a new car, so that is a good place to start.

    European buyers figured this out a long time ago: if the lease is up at the end of October, they will order a replacement in June. As a result, floor plan costs are nearly eliminated and dealers only need to carry a representative mix of models and colors for display purposes. This sharp reduction in overhead expenses allows for more favorable prices to buyers. To help spur a badly overdue change in buyer attitudes, Volvo and other OEMs need to aggressively incentivize preordering.
    Kjell Bergh
    Borton Volvo
    Minneapolis