Ford Motor Company is one of the largest automakers in the world and a pillar of American manufacturing. However, the auto industry is rapidly changing with the rise of electric vehicles, self-driving cars, and shifting consumer preferences. This has led some analysts to speculate whether Ford will transition to an online-only sales model in the coming years.
What is an online-only sales model?
An online-only sales model refers to selling vehicles directly to consumers through the internet, without any physical dealerships. Customers can browse inventory, customize options, secure financing, and complete the entire transaction online. The vehicles are then delivered directly to the buyer’s home.
Tesla pioneered this sales model and has found success by cutting out the dealership middleman. Several other automakers are now experimenting with online sales including Polestar, Rivian, Lucid Motors, and NIO. However, no major established automaker like Ford, GM, or Toyota has fully switched to online-only sales yet.
Why would automakers want to switch to online sales?
There are a few potential advantages to the online-only sales model:
- Lower costs by eliminating expensive dealership infrastructure
- Better control of the customer experience and brand messaging
- Higher profit margins by cutting out the dealer middleman
- Appeal to tech-savvy younger buyers who prefer online shopping
- Flexibility to adjust pricing and vehicle specs in real-time
An online-only approach essentially allows automakers to directly control the transaction from start to finish. This removes friction points and improves transparency.
Will Ford transition to online-only sales?
Ford has not announced definitive plans to abandon dealerships and switch exclusively to online sales. However, there are some signs that Ford is exploring an online-first strategy:
Launch of dedicated online shopping tools
In 2020, Ford launched a new platform called Ford Blue Advantage that allows customers to search inventory, get price estimates, apply for financing, and schedule test drives online. Though buyers still complete the transaction at the dealership, this streamlines a significant portion of the shopping process online.
Introduction of remote delivery program
During the COVID-19 pandemic, Ford piloted a remote vehicle delivery program that brought new vehicles straight to buyers’ homes. This allowed no-contact deliveries and let customers avoid the dealership.
Partnership with online used car retailer Carvana
In 2021, Ford announced a partnership with Carvana to allow online buying of Ford vehicles through Carvana’s website. Customers can purchase and finance a Ford vehicle entirely online and get home delivery. This suggests Ford is open to alternative online sales models.
Launch of Ford eCommerce division
Most tellingly, in 2022 Ford established a dedicated eCommerce division specifically focused on accelerating its online sales capabilities. The team is tasked with enhancing the digital shopping experience and reducing purchase friction. While not yet a full transition away from dealers, this division signals that online sales are a high strategic priority.
Are dealerships going away?
Despite Ford’s moves toward online sales, traditional dealerships are not going away anytime soon:
Existing franchise laws
In many states, franchise laws prohibit automakers from selling directly to consumers and mandate sales through independent dealers. These laws exist to protect dealers from manufacturer competition. Tesla has fought these laws, but Ford and other established automakers could face legal challenges transitioning to direct online sales.
Logistical challenges
Dealerships handle important logistics like storing inventory, facilitating test drives, and serving as service centers. Moving all these functions online or in-house could be extremely complex for a company like Ford with thousands of dealerships.
Invested dealer network
Independent Ford dealers have deep investments in their dealership infrastructure and employ over 150,000 people nationwide. Ford relies on this network and may alienate dealers by cutting them out.
| Year | Number of Ford Dealerships |
|---|---|
| 2017 | 3,000 |
| 2020 | 2,640 |
| 2022 | 2,300 |
This table shows Ford has reduced its dealership count but still has thousands of invested business partners to consider.
Customer familiarity with dealers
Many car buyers prefer the in-person dealership experience for important purchases. Younger buyers may be more digitally savvy, but the dealer model remains familiar for most consumers.
So while Ford is expanding online capabilities, full elimination of its dealership network remains unlikely in the near term. A hybrid online/in-store model is more realistic.
How could Ford transition to online sales?
If Ford were to eventually transition to online-only sales, it would likely be a gradual process:
Start with a direct-sales brand
Ford could spin off a new direct-sales sub-brand focused on electric and autonomous vehicles. This avoids disrupting the main Ford brand at first.
Roll out market-by-market
Ford may slowly introduce online sales in certain markets before expanding nationwide. This allows testing and learning at smaller scale.
Partner with existing online retailers
Expanding partnerships with Carvana, Vroom and other online used retailers offers low-risk experience.
Offer buyouts for exiting dealers
To reduce friction, Ford can offer financial incentives for dealers who want to exit during the transition.
Invest in centralized fulfillment centers
Ford will need to build out delivery and service infrastructure to replace dealership capabilities.
Gradually reduce dealer product allocation
Ford can shift more vehicle inventory and marketing support to online channels over time rather than abruptly cutting off dealers.
This gradual approach can soften the impact on dealers, customers, and Ford’s business. But the transition would likely still take many years to complete.
Will customers embrace online car buying?
For Ford’s online sales to succeed, customers must embrace purchasing vehicles online:
Online sales still a small percentage of the market
Though growing, online sales still represented less than 10% of all used car sales in 2021 according to J.D. Power. Most purchases still happen at dealerships.
| Year | Online Sales Penetration |
|---|---|
| 2017 | 2% |
| 2019 | 4% |
| 2021 | 9% |
This table illustrates the steady but still small growth in online auto sales over the last 5 years.
Younger buyers more willing to go online
Surveys show Gen Z and Millenial car shoppers are more open to purchasing online compared to older generations. As these younger demographics grow as a share of the market, online sales may rise.
Dealers still valued for service
Even if buyers purchase online, local dealers provide important post-sale service. Fully removing this dealership role may frustrate some customers.
Some segments still like in-person experience
Buying a car is an emotional high-involvement purchase for many. Some customers will still prefer physically experiencing vehicles before purchasing and may not trust buying purely online.
Overall, Ford will need to strike the right balance between online convenience and personal service to successfully appeal to mainstream car buyers. A hybrid model may prove wise.
Conclusion
Ford is ramping up e-commerce capabilities and pilot programs to enhance the online shopping experience, but a full transition away from its dealership network remains unlikely in the short term. Certain markets and vehicle segments are better suited for online sales, while many customers still appreciate the traditional dealer model for important purchases.
In the long run, Ford is likely to evolve towards an omnichannel retail strategy that combines the efficiency of online sales with the personalization of dealerships. This balancing act will require careful implementation over many years to manage disruption. But expanding online options offers potential benefits to customers and to Ford’s business if executed thoughtfully. The future of auto sales will be a blend of online convenience and offline personal service.
