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Dan Park, CEO of Clutch and Steve Seibel, Founder and COO of Clutch are seen at the Clutch warehouse in Toronto on October 8, 2021. JENNIFER ROBERTS/THE GLOBE AND MAILJENNIFER ROBERTS/The Globe and Mail

With online-only used-car retailers gaining traction during the pandemic, some manufacturers are weighing their digital approach.

COVID-19 didn’t give rise to online automobile shopping, but it certainly accelerated the trend for buyers looking to avoid crowded indoor dealerships or public transit.

Online-only auto retailers allow customers to browse from a local or national selection of various makes and models, often with set, “no-haggle” pricing, all while sitting on the sofa.

At Clutch – a startup established in 2016 after founder Stephen Seibel and his wife had a frustrating experience trying to buy a vehicle at a dealership – each car undergoes a comprehensive inspection conducted by in-house mechanics at facilities in Vancouver, Calgary, Toronto and Halifax. Cars are delivered to the customer’s door and come with a money-back guarantee. Buyers get 10 days or 750 kilometres to test drive the car.

Clutch isn’t the only player in Canada. It competes against entrants like Canada Drives Ltd., which started out providing automotive financing before pivoting to retail in 2020, and Autozen, a consumer-to-business service acting as a broker between private used auto sellers and dealerships.

Autotrader, a massive and well-established web-based marketplace for car buyers and sellers that aggregates new and used product from dealers and private sellers, but doesn’t own the cars, has the largest inventory in Canada with more than 240,000 vehicle listings. Currently, about 16,000 vehicles on its site can be purchased entirely online.

Compared to a traditional brick-and-mortar store, online retailers can potentially offer a larger selection across multiple brands, all on the same site. The sites aim to reduce “buyer’s remorse” by offering a week or so to change your mind and a warranty period.

Clutch has added more than 2,200 cars to its inventory since the beginning of 2021 and hired 250 employees last year, filling full-time roles from customer service to technicians.

In November, the company said it had raised $100-million in equity financing, helping the firm to rank No. 47 on The Globe and Mail’s Top Growing Companies list in 2021.

While dealers have ramped up their online presence in the past few years, adding virtual tours of vehicles, online chat functions and at-home test drives, many sales are still closed in person, with financing, warranty and other details hammered out at the dealership. But the market is changing.

The big automakers aren’t just sitting back. With used car prices spiking by 36 per cent in Canada and 40 per cent in the United States over the past year, the two biggest Detroit brands are getting into the game, at least in the United States.

Last year, Ford introduced Blue Advantage, in collaboration with participating stores inside its U.S. national dealer network, to sell pre-owned, certified models of all makes on a centralized platform. The set-up is powered by Autotrader.

Providing two levels of certification, a warranty and roadside assistance, Blue Advantage allows shoppers to select a vehicle online and have it delivered for a 14-day, 1,600-kilometre trial period without needing to step foot in a physical dealership.

General Motors announced a similar program in January called CarBravo, which the website says is launching in the United States this spring. It will operate on the brand’s new digital retail platform featuring clear pricing and detailed history reports of all vehicles listed, including non-GM cars. We reached out to both companies asking whether they plan to expand the service to Canada. GM said it’s currently evaluating opportunities, while Ford said Blue Advantage remains an American service at this time.

James Hancock is the director of business development at Canadian Black Book, which collects and reports sales data from the automotive industry. He suspects manufacturers will join the fray once it’s evident Canadians feel comfortable with the security and privacy around purchasing a car virtually, sight unseen, and there’s clear support from the dealers.

“A very key component to this is having the dealer network for each of the brands buy into the digital retailing experience,” said Hancock, adding some dealers may worry about the negative financial impact of selling entirely online.

Once the details are ironed out, one of the largest benefits to consumers is potential access to former demo models as well as lease and fleet returns.

CarGurus Inc. knows a thing or two about moving metal, though its approach is a bit different as the company does not carry its own inventory. Headquartered in Cambridge, Mass., with websites in Canada and the U.K., the company allows users to research fair used-car values based on an analysis of dealership listings in a given region, and customer reviews of the actual businesses. Transactions take place at the dealership.

Chief operating officer Sam Zales says he welcomes additional entrants into the online used car space, and that increasing the number of options is never a bad thing for shoppers.

“It would be great if there are more opportunities for consumers to look online and search, Zales said. “We have 200,000 vehicles in the Canadian market to choose from, which is a lot more than any of the OEMs [original equipment manufacturers] are going to establish with their own retail network.”

Tim Reuss, chief executive officer of the Canadian Automobile Dealers Association, says manufacturers launching online used-vehicle platforms in Canada could benefit CADA members, if done well. CADA represents the interests of more than 3,000 individual franchises across the country. Reuss says for this to work, the manufacturer would have to invest in IT infrastructure and create a central database.

He emphasized that the Ford and GM digital sales projects in the U.S. are not direct-to-consumer models as sometimes believed. The end sale still goes through the dealer.

“If changes are done in conjunction and discussion with dealers, then it would seem that this is a path toward the further digitalization of the sales process.”

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