Claiming Space on Consumer Sites

In my last article, I described a technique for extending traditional dealer functions into the consumer space. I used the metaphor of a land rush, with the extension feature claiming territory on one or more consumer web sites. This is part of a generic strategy, to update any dealer system and make it more relevant to the evolving world of online auto retail.

In this post, we will survey the consumer space, looking for opportunities to insert the various dealer system extensions. My plan is not to predict the future of online retail, but to show where these “plug-ins” may be placed today. Prediction only comes into play because we want to know how durable the relationship will be.

Sunnyvale Toyota is one of many individual dealer sites featuring the eLEND credit plug in. If you’re not clear on the plugin concept, take a look. Technically, this is an Iframe that passes control to the extranet formerly known as Dealer Centric. The site itself is by, and the dealer has chosen to delegate the credit process to eLEND.

B2C Diagram

I really like this technique, but that’s not the question. Credit systems are well represented on dealer sites, using a variety of techniques. The question is – where are the protection products? Pricing and presenting products on a dealer site is technically easier than doing a credit app. This is an obvious place to extend menu systems and provider networks.

A dealer site is not a good place to start desking, because the site is too far down funnel, and the process depends too much on pricing. A key advantage for the dealer’s desking system is the ability to include local taxes, fees, and incentives. We’ll talk later about how and why desking should be part of the customer’s online shopping experience.

A dealer site is also not a good place for opt-in CRM or, at least – as I wrote last week – not as good as an OEM site. People move around too much. Another thing to consider with dealer sites is that they will increasingly be dominated by shopping sites and consolidators.

You would think that specialist car shopping sites would offer the most functionality to their customers – and you would be wrong. That’s because they don’t own the inventory, and they don’t control the process at the dealership. It’s hard to initiate a credit app or sell a service contract on behalf of a heterogeneous dealer population. Auto Trader offers a link to a direct lender.

Even consolidator sites, like Sonic and AutoNation, leave the heavy lifting to their stores. They are better able to standardize process and systems than the other shopping sites, but they still have to work with different franchises and different captives. There is opportunity here for dealer systems to differentiate themselves by offering consumer-site features.

You would think that specialist car shopping sites would offer the most functionality to their customers – and you would be wrong.

Used car consolidators, like CarMax and Vroom, have much more flexibility. It is theoretically possible for these sites to offer a complete buying experience online. To me, that includes credit, desking, and products. Vroom wants to be “the Zappos of online car buying.” This brings me to that futurism topic I promised to avoid, and our next category … car buying sites.

I like to make a distinction between shopping sites and buying sites. Shopping is a nonlinear process, with rough ideas and estimates. Just look at all those asterisks on the shopping sites. Buying requires things to be done in a certain sequence, with exact values.

A shopping site is all about selecting and pricing a vehicle from inventory, and then turning over the lead. This means a variety of dealers with a variety of systems, and little opportunity to extend functionality toward the customer.

They may say “buy a car online,” but very few actually attempt a complete buying process. Vroom and ShopClickDrive are exceptions. Both use Route One for credit processing – and nothing for protection products. Buying sites, as they evolve, will be the Promised Land for dealer system extensions.

I was going to make a separate category for research sites, like Edmunds and TrueCar. For our purposes, these are the same as shopping sites, above.

Calculators and credit apps abound on the auto finance sites, and some of them are quite good. This is where you can “roll to amount financed,” for example, with current loan rates. I see untapped potential here, for desking, CRM, and product links. Plus, here’s an out-of-the-box idea – an inventory search plugin for the banks. It would look something like this, below. Bank of America already has the window. It’s just missing the car!


I include OEM sites even though they’re poor candidates for dealer system extension. The challenge with OEM sites is that they already have proprietary relationships with F&I partners. The Buick site takes you right to Santander, and the products on the Hyundai site are from Safe-Guard. Also, an OEM must consider all their dealers, so they can’t favor one system over another.

Your best bet here is to develop a generic interface, and then compete on the depth and breadth of your OEM integration. Dealer Track does this in the service department. If you know of anybody doing it in the front office, please let me know.

The table below summarizes the opportunity for extending dealer systems into the consumer space. There is no “official” taxonomy of auto retail sites. I chose these categories because they work well with the generic strategy.

Sites Table

Whether you are planning a strategic move into the consumer space, or just a new feature, I hope you find my analysis useful. You can’t beat the land rush if you don’t have a map.

Dealer Systems in the Consumer Space

I was writing an article about how I look at tech strategy, and it was getting a little long, so I thought I would just stop and give an example. I have had the good fortune, over the years, to develop early versions of online credit, menu systems, and e-contracts. These are primarily dealer-facing systems, with the attendant limitations.

If you have been reading my blog, or McKinsey, or pretty much anything, you are aware that the next challenge will be to put these tools into the hands of online customers. The table below lists the capabilities these customers have today.

Gadgets Table

You can gauge how much room there is to improve the customer experience by comparing your favorite dealer systems to the gadgets available online. Dealers operate at a distinct advantage and, through competition, we can expect that advantage to diminish.

I am not saying that an online customer is going to run, say, a credit aggregation system. Dealer systems are feature rich, and designed for trained professionals. What I am saying is that there will be a component of your favorite dealer system designed to run in the consumer space, and that it will be a competitive differentiator.

If you are in the dealer system business, this insight is not new to you. You are already working on ways to engage customers before they come into the dealership. My point is that this strategic imperative applies equally to all the functions listed above (plus some I didn’t want to get into, like pricing).

This means that you can take strategy tips from systems outside your functional area, and outside the dealer space. There are some common themes, leading to a generic strategy. Schematically, the strategy looks like this:

B2C Diagram

I included “partner system” as a placeholder for, say, a DMS if you are upstream of one, or a finance source or product provider network. You and your partners are facing the same strategic imperative. You will want to make sure that your responses to this imperative are in alignment.

By “plugin,” I mean any webpart, Iframe, or redirect that exposes your core system’s functionality to the online customer. A web service might do the job, but you lose control of your distinctive customer experience. Plus, they’re harder for the host site to adopt.

As with any software, success in the consumer space requires good functionality balanced with ease of use, but the decisive factors are:

  • Which web sites you’re on
  • Which dealer systems you plug into

As I like to say, the interfaces are the strategy. If you are an independent, like eLEND, plugging into every system fore and aft (see diagram) is an option. If you’re Route One, you have a special relationship with the captives and their dealers. If you’re Dealer Track, this is why you bought Among credit systems, the battle for consumer space is already underway. I will survey the space in a later post. For now, let’s consider the other dealer systems.

The interfaces are the strategy

I listed menu systems as “TBD.” I know something about menu systems, and I don’t think anybody has a good way to present a menu on a consumer web site – much less an iPhone. I have seen a four column menu attempted, and I have seen “click here to run video.” Remember that the goal is to present products, and a menu may not work in this space. Instead, I would recommend using an expert system.

Ironically, the customer end of Customer Relationship Management is basically passive. I listed “personalization,” above, as one possibility for opt-in marketing. My profile on the BMW web site tells them about my vehicles, where I bought them, and how they were financed. The site offers some useful features in exchange, which unfortunately most sites do not. Because it’s an infrequent purchase, customers are unlikely to create profiles on automotive sites. Portable profiles like “log in with Facebook” are a partial solution.

Payment calculators are a disgrace, and blatant fronts for lead collection. They have more contact fields than they have numbers. Those on dealer sites ask you to configure the vehicle first. Finance sources do a better job, for obvious reasons. You may think it’s clever not to give a payment until the customer has chosen paint and rims, but – she is one click away from her credit union’s web site.

This recaps a key point from the generic strategy – dealer advantages will be arbitraged away. It also touches on an interface question. What is the appropriate recipient of customer payment data? Is it just a lead, or should it dovetail with your credit system? My purpose here is not to answer all the questions, but to demonstrate the principle.

Your web plugin is like a survey marker, with which to stake out territory in the consumer space. Some sites are more valuable than others and, of course, the host site must also find value in the relationship. In my next post, we’ll explore this space and discuss the opportunities for specific dealer systems.

Trade Valuation and Online F&I

What Dale Pollak says about trade valuation is spot on, and it also applies to upfront pricing.  Dale says that having an efficient process is worth more than wringing every last dollar out of every car.  Brian Benstock says the same thing about his new-car business, “making less per transaction, but doing more transactions.”

Readers of this blog already know my thoughts on upfront pricing.  Trade valuation is another objection to online F&I.  How can the customer desk his own deal if he doesn’t know what his trade is worth?  Well, the pieces are falling into place.  In addition to choosing a car online, the customer will soon be able to do his own F&I.  The challenge to us, as innovators, is to present software tools that encourage customer involvement.

Update:  Six years later, Brian Benstock is still at it.  Read here about his vision for a digital “store without walls.”

Upfront Pricing

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.