AutoNation is going to have another try at no-haggle pricing. This time, I think they will succeed. I think the market is ready for it. By coincidence, I had just read Zag’s white paper when Mike Jackson made the announcement. He was talking about no-haggle in the showroom, but this has important implications for my field, e-commerce.
Zag’s argument is that if you’re the only dealer in town not giving a price on the internet, then you’ll be left behind. The flip side is that if you’re the only dealer who is doing it, then your competitors can easily undercut you. The trick is to create a movement in the industry – and AutoNation has the scale to do that. The article also cites Sonic, Asbury and Lithia.
Mr. Jackson says pricing is the last frontier in auto retail, and this is doubly true on the internet. It’s the one thing preventing true, business-to-consumer, online F&I.
In the software business, we often blame the customer for not embracing our latest innovation. This has certainly been the case with e-contracting. We solved a host of technical problems, from data standards to digital signatures, only to discover – dealers won’t use it.
They have some good reasons. Laser forms require multiple copies and multiple signatures. Signature pads cost money and customers don’t trust them. Laser printers are expensive. Inkjet printers are cheap enough, but you need one in each office. Blank paper is $9.00 a ream, compared with contract stock brought in free by agents and field reps. All things considered, the impact printer works just fine.
This reminds me of when we first put credit applications online. Dealers already had the perfect solution. “I go have a smoke while they fill out the app, and then I blast fax five lenders.” How do you compete with that?
We showed that online credit, combined with automatic approval, closed more deals. We showed that the internet was cheaper than the fax, and that the system would share data with your DMS. We also kicked in a $20.00 spiff, as I recall, which we recovered in data entry costs.
Today’s challenge is no different. Dealers are shrewd enough to know that the benefits of automation accrue mainly to the finance sources and the product providers. As innovators, it is our job to show what’s in it for them.
Automotive News reports that Group 1 has suffered a nine-percent drop in F&I gross, and is hiring regional directors to bring it back up. I certainly agree with this approach. It worked for us, when I was at AutoNation. We called them “district finance directors” back then.
Group 1 CEO Hesterberg says tighter lending limits do not allow much for F&I product sales. Since Group 1 is a MenuVantage user, they can address this problem using the system’s goal-seeking feature, as shown here:
This helps the F&I Manager to sell products up to the full amount authorized.
Dealer Track CEO Mark O’Neil gave an insightful keynote, ending with the topic of Internet car shopping. He described several features of a business-to-consumer (B2C) buying process, including online F&I. Since Dealer Track offers all of these features today, I wonder if Mark is planning a move into the B2C space.