I was rereading Professor Rogers’ book and I had this brainstorm that somebody should develop an aggregator site to sit on top of digitally-enabled car dealers, the way Kayak does for airlines. It could scrape all the listings into one vehicle-search page, aided perhaps by a standardized listing API.
It turns out I am not the first one to have this idea, but the research was interesting.
First, we have to make a distinction between providing a lead and selling the car. This is not always easy, because few customers require full digital retail, and most lead providers have some limited DR capability. Still, this distinction is important to an aggregator:
To make said distinction, imagine the dealer in this diagram has a DR system and also uses a third-party classified site. If you are a DR skeptic, imagine this is Carvana (or CarMax) with their own integrated car-selling site.
I am using a thin line for leads and a thick line for deals. This notation helps to show that the Kayak site should only connect to DR-capable dealers. Otherwise, it’s lead provider on top of lead provider, with no added value.
Once a platform is widely established in its category, it is extremely hard to launch a direct challenger with a similar service – David Rogers
Here, I am just doing what any good futurist does – working backward from the goal state. What the market wants is a single place to shop, like Amazon. Rogers would call this a “platform,” and network effects says it’s a winner-take-all business. There can be only one.
Once you recognize this three-layer model, you can infer all sorts of fun things. Like, suppose Carvana (or CarMax) decided to open up their DR capability to other dealers. These would be certified and operationally compatible dealers, whose inventory Carvana could sell for a commission. I’ll leave it to you to negotiate who earns the F&I gross:
I have been writing about digital retail for a few years now, speculating on how the goal state would be achieved. Note that “DR aggregation” on the left side of the diagram, and “platform aggregation” on the right, correspond to the two vectors I described here.
I have long advocated platform sites adding DR capability, as some are doing now. This brings us to an interesting piece of history. Airline booking sites Orbitz and Kayak were founded by the same guy, Steve Hafner, in that order:
Initially, Hafner undertook what we would call the DR piece, while Kayak opted to be simply an aggregated lead provider. I still think it’s a good idea for listing sites to develop DR features, but history suggests the TrueCar approach – linking up with Roadster – is the correct one.
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