Why there’s a case for 100% online vehicle retailing in Canada.
Cody Green is the founder and co-CEO of Canada Drives, a financial technology company established in Vancouver, B.C. in 2010.
Created around the concept of simplifying the auto purchase experience for Canadians, no matter their financial circumstances, the company has seen significant growth in its online retailing model. To date, more than 1 million Canadians have used the platform to finance and purchase vehicles.
Recently, Canada Drives announced that its 100% online auto retailing model had expanded nationally. Autosphere.ca decided to chat with Cody to ask him about the significance of this and how it could forever change the auto retailing landscape in Canada.
Shift in automotive retailing
Autosphere: How have you seen the concept of automotive retailing shift over the last decade as it relates to both consumer needs and expectations?
Cody Green: I think that the shopping behaviours of Canadians have shifted over time, but I think this last year has really seen an acceleration of those expectations. When we looked at shopping habits, people were doing everything online.
They were doing all their research; they were doing all their comparisons and even the number of dealerships they were visiting when they found a vehicle had shrunk over the years. It used to be three or four dealerships now it’s maybe 1.5.
Therefore, people were armed with the information and knew what they wanted to buy. So, when we look at the last year and the COVID-19 pandemic—as it relates to buying online, the shift wasn’t as dramatic as it might have been three or four years ago.
Canada Drives original concept
Can you tell us about how the original concept of Canada Drives and some of the fundamental things that you wanted to address with this platform?
CG: Canada Drives has been in the Canadian automotive industry for 11 years and our original service centred on helping Canadians get approved for auto financing online.
We were able to do that by partnering with dealers and lenders across the country. A customer would come to us; apply for financing and we’d then match them with a local dealership and a lending partner, that would be able to service them. We’ve been in the automotive space for a long time and had our ear to what consumers were asking for and our roadmap always contained the idea of going after a completely online vehicle sales model.
And, over the last year, this has really accelerated. So, for us, it was a very intentional decision to move into it. Also, there was an opportunity to really take advantage of the opportunity to sell cars to both prime and cash buyers that our existing model wasn’t really servicing.
What did you discover?
CG: We heard a few things from customers and concluded that for the fundamentals to make online car shopping work, you need to have a single ‘best price’ strategy.
Therefore, a customer needs to know the price they’re seeing on the website is the price they’re actually going to buy a vehicle for, and that goes down to every ancillary product you’re going to be selling, such as a warranty, protection, or financing. With this strategy, there’s no negotiation and we are putting our best foot forward, so one thing that we made sure of when we launched the product was having that transparency element.
The other thing is buying a car online is a leap for a lot of people and they want assurances such as, ‘is the car we’re getting, the car we want? But then, what if we change our mind?’ To help with this, we put the full vehicle inspection report online and gave access to a history report for every one of our vehicles—all the details you’d need, plus over 30 high-resolution photos.
With this, a customer can see what’s great about this vehicle and where the blemishes actually are on it, so they are not surprised when it’s dropped off. It also helps them decide if they are okay with the condition, because not every vehicle will be reconditioned to brand-new.
Plus, if they change their mind, we have a seven-day love it or return it policy. If a customer doesn’t like their car for any reason, we’re going to come to pick it up, even if they don’t like the exterior colour or the seats. And we’ve seen customers taking advantage of that.
COVID-19 impact on automotive retailing
How has the COVID pandemic changed the concept of automotive retailing and how do think it will continue to influence it as we move forward?
CG: I think, the expectations of consumers are going to continue to shift and there’s going to be that pressure on all sorts of retailers.
There were people prior to the pandemic that was buying almost everything online and many who previously hadn’t considered it but were pushed into doing it as a result of the lockdowns.
With that in mind, adding extra features and extra services that customers are asking for, is, I think important, and the delivery aspect was one of those things, as a lot of customers don’t want to come into a dealership to buy a vehicle. Therefore, giving them an option to have their vehicle delivered, I think is important.
Canada Drives sales process
Is there anything else you’d like to mention regarding the actual sales process itself?
CG: When designing Canada Drives, we had to be very thoughtful and from the beginning of the process—the first click from the customer, to when the vehicle is dropped off for the final delivery, every step is very intentional, so for a consumer, it’s a pretty seamless experience.
As a consumer, you’re going to go on the website, not unlike you’d be going on dealership websites in the past, and you’re going to get all that information you need to make a decision.
From there, you’re going to be doing everything online—so you’re going to be reviewing your finance documents, or, if you decide to pay for the vehicle in cash you can do that on your credit card—you’re then going to be signing those documents online and then, you’re going to be booking your delivery appointment.
From a consumer perspective, the process has been extremely well received, and we’re really excited about the growth we’ve seen.
Best-price-first pricing strategy
Can you tell us a little about the best-price-first pricing strategy and its significance?
CG: This really wasn’t an option in order to benefit from the scale of upselling online. There really can’t be a back and forth negotiation on the price of the vehicle and it really is an education process for consumers because that’s not what they’re used to.
They’ll see a price on the website, they have some expectations that there may be some fees when they get down to the dealership, but there’s also an expectation of, ‘well, it says $18,000, but what can I really get this vehicle for?’ And that sort of flows through with everything on the vehicle, from the one they’re buying to, the one they’re trading in.
Clearly, if you’re buying your car online that negotiation can’t be happening. Therefore, it’s really up to us to put our best foot forward, and to say this is the price we stand behind—we think it’s an excellent price, and that’s what you’re going to be paying for the vehicle. And this applies not only to the vehicle you’re buying but the trade-in as well. Doing it this way allows the consumer to buy a car without ever needing to talk to a salesperson.
That being said the Q&A support is still there, and it’s important for a lot of people to be able to call in, ask questions, but enabling someone to do the whole process without salesperson intervention, really relies on having that best price first strategy.
If applicable, how is inventory sourced?
CG: We use a lot of the traditional channels that dealerships have in the past, obviously the auctions are a big source of vehicles. The other thing we do as well is because we have those relationships with dealerships across Canada from our previous financing business, and that business is still extremely important to us.
And what’s nice, is that not only do we partner that with them on the finance business, but they’re also a source for vehicles. A good example of that would be, if you’re a BMW dealership and you get a Toyota Camry in on trade, that may not fit the SKUs that you want for your dealership, so we’re a great outlet for that car, and it goes both ways with those dealerships too.
Let’s say you’re a Mazda store, and you just sold your last used Mazda3 but you see CANADA DRIVES has 10 of them, so you can buy a vehicle from us and we can have it dropped off for you, and you’re able to supplement your existing inventory.
From that perspective, moving into online car sales has been a benefit for our existing relationships as well, but getting back to the original question, another big channel for us and a big priority for us this year has been buying more cars from individual owners. Our mission is to be the easiest place to buy and sell your car in Canada.
And right now, we think we’re really delivering on the buying part of that, but we’re also starting to procure more and more vehicles directly from consumers, and some of those same challenges that are being solved for the buying of a car, are present for people wanting to sell a vehicle, such as, ‘I don’t want to want to put it on Craigslist, I don’t want to negotiate the price of my trade-in and if you give me a fair price for my car, then I’m more than willing to sell it to you.’
Essentially, it’s our process in reverse and so we’ll come to the customer’s house and pick up their vehicle—they’re going to get that money and the process is going to be done for them.
Feedback on Canada Drives platform
Can you tell us a little about consumer and industry feedback since the platform was launched?
CG: It’s been extremely well received and that’s why we’ve been pretty aggressive in our growth strategy. We did a soft launch in October  and have been ramping up the amount of inventory and some of the marketing to support that in British Columbia.
We just launched in Ontario, in May  and our plan is to serve 80% of Canadians by the end of this year, and it’s really going to be just getting all of the logistics nailed down, getting the right inventory at the right price and opening up those new markets.
Future objectives of Canada Drives
Anything else you’d like to mention regarding future plans and objectives?
CG: I think it’s an exciting time to be a retailer of vehicles in Canada and we see a lot of dealerships making strides in their processing systems. I think a lot of the things that we’ve had to adjust to this past year are going to stick and as I said, consumers’ demands of retailers are going to continue to rise as they have among retailers across all segments, so I think it’s a really exciting time to be both selling and buying vehicles in Canada.