Tag: DR

Car Search Aggregation

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.

Caution: Learning Curve Ahead

In last week’s episode, I warned that dealer groups proceeding aggressively into Digital Retail may suffer for it.  This has gotten some pushback.  Regular readers know that I have been a staunch proponent of Online F&I for many years.  Indeed, my work at PEN and F&I Express has done much to advance the cause. 

I gave this warning in the spirit of full disclosure, and to manage expectations.  Now I am in the awkward position of having to press my charge against a technology which I actually support.  If that sounds complicated, consider this:

Luddites – Veteran F&I Director Justin Gasman, quoted recently in Wards, says that F&I will never be totally digital.  “People who say that are from tech companies,” he quipped.  I call this the Luddite position but, in fairness, I am one of the tech guys he’s referring to.

Boosters – Cox Automotive regularly produces surveys with findings like: 63% of customers would be “more likely” to buy F&I products if they could learn about them online.  Coming from an opinion poll, this is mere boosterism. 

Realists – My position is somewhere between these extremes, hence the warning.  I was addressing the Big Six dealer groups, who are regularly ranked on F&I performance.  I do not want to be the consultant telling Mike Jackson to go all in, and then have to explain why he has slipped out of first place.

If you go to a dealer and say, “Hey, look, we’ve got this great solution, but the profitability is only half of what you had before,” that’s really going to slow down adoption.

Automotive News interviewed some realists last year, and they all share my cautious optimism.  The quote above is from Safe-Guard’s David Pryor.  The consensus goes something like this:

  1. Present F&I products online, early in the process, and include pricing.
  2. Use an API to select the right coverage, and AI to make recommendations.
  3. Experiment with (A/B test) various digital media.
  4. Integrate DR with your instore process, training, and metrics.

Roadster’s COVID-19 Dealer Impact Study found that dealers who already had Digital Retail saw improved gross, while the COVID adopters did not.  “Not a magic bullet,” it says, instead emphasizing the improved efficiency.  Other realists, as here, had the same experience.

Digital Retail is like any other new process.  There is risk, reward, and a learning curve.  That’s not too complicated.

DR and Public Dealer Groups

In today’s post, subtitled, “the good, the bad, and the ugly,” we look at where the Big Six public dealer groups stand on Digital Retail.  Some of them get it, some of them don’t, and others have missed the point.

“Once they start the process online, customers tend to buy a car at a much higher rate than … walking into our showroom” – Daryl Kenningham, Group 1

It’s not essential to spin up a distinct site, though many have taken this approach.  It’s a clever way to get in the same space as Carvana.  Thus, we have new brands Driveway, Clicklane, and Acceleride.  For example, you can enter Group 1’s DR process from either Acceleride or the Group 1 site. 

  • Penske – Penske started experimenting with DR way back in 2015 and something called Preferred Purchase.  Today, it’s still called Preferred Purchase, but it’s the DDC Accelerate system.
  • Group 1 – GP1 recently (2019) launched a Roadster implementation called Acceleride.  It is now selling more than 1,000 units per month, including new cars.  This is the top initiative in their investor deck, clearly showing management attention.
  • Asbury – Asbury was also an early adopter, starting with Drive (2016) and now their own Clicklane offering.  By my count, this is their third experiment – exactly what you want to see with digital transformation.
  • Lithia – Lithia has a branded DR site called Driveway which, unfortunately, requires users to create an account before entering the process.  As I wrote in Design Concepts for Online Car Buying, you don’t create an account until the customer is ready to save a deal.
  • AutoNation – AutoNation has made strategic investments in DR vendors like Vroom, and launched its own AutoNation Express in 2014.  As with Driveway, step one is a lead form.
  • Sonic – Sonic announced a plan to use Darwin but, alas, there is still no sign of DR on either the Sonic or EchoPark site.  Maybe the new eCommerce team will fix that. 

I can understand why new-car dealers might want to start with a lead form.  New cars are commodities, and vulnerable to price shopping.  This is where used-car dealers CarMax and Carvana have an advantage.  Otherwise, DR requires a strong commitment to price transparency.

Digital Retail is synergistic with modern sales practices, like one-touch and hybrid teams.  Sonic is the leader here, and has the highest used-car ratio, so you would expect them to have an edge.

Finally, it’s hard to sell protection products online.  Groups with growing DR penetration are likely to see reduced PVR.  This has long been a knock against Carvana.  Experts agree that the solution here is an AI-based “recommender.” 

DR and Dealer Websites

I was chatting with my pal Kiran Karunakaran about his new role at Fox Dealer.  You may recall that Kiran’s DR solution, TagRail, was acquired by Fox earlier this year.  At that time, I figured DR would be an absolute requirement for dealer websites, and I expected to see CDK bid for, say, CarNow.  Here are the pairings:

  • Fox Dealer, TagRail
  • Dealer Inspire, Online Shopper
  • Dealer Fire, Precise Price
  • Dealer eProcess, SARA
  • Dealer.com, Accelerate

Note that, with the exception of TagRail, these DR solutions were all developed by their website partners.  Missing are the pure DR startups I usually write about: Roadster, Modal, and Moto.  Maybe they’re better off uncommitted.  I decided to test this theory with a little research.

I went through Wards’ Top 100 Internet Dealers, identifying the website provider for each one, and their DR solution.  The Wards sample skews strongly toward DDC, at 60%.  The Datanyze survey (chart above) has DDC at 18%.  Remember, I am not looking for market share so much as patterns in DR adoption.

For example, 20% of “top internet dealers” had no DR solution.  That was a surprise.  A few of these had cobbled together the Dealertrack frame with Trade Pending and a homebrew payment calculator – not DR as it is usually defined.

Same-vendor pairings for DR and website were rare

Some dealers use the same website and DR solution across all their stores, and some skip around.  Herb Chambers uses DDC and Darwin faithfully except in his Chevy store, which uses CDK and Shop Click Drive.  Paul Rusnak and Fred Anderson are faithful to Roadster and Gubagoo, respectively, but vary their choice of website providers.  Of course, these choices are often mandated by the manufacturer.

Of manufacturer DR preferences, the best known is probably Shop Click Drive, followed by AutoFi.  AutoFi is historically associated with Ford, and still used mainly by Ford dealers.  I did find one Kia dealer in Peoria using AutoFi.  Chrysler’s DriveFCA is powered by Carzato.

Same-vendor pairings for DR and website were rare, at 12%.  These were almost exclusively DDC with Accelerate.  I found one instance of Dealer Inspire with its mate, Online Shopper.  Free-agent DR solutions did much better than those associated with website providers.  Roadster, Darwin, and CarNow together accounted for 59% of DR in the sample dealerships.

As it happens, CDK did not acquire a DR solution.  Instead, they sold their website business to Sincro, a digital marketing company.  The Sincro announcement reminds us that what I am calling the “website business” may also include digital content, advertising, SEO, social, reputation, CRM, and lead-gen.

The right framework is not DR plus website, or even DR plus website and marketing, but a continuum across the customer journey.  The journey begins with the various marketing services required to land the customer on the website, and ends with point-of-sale (POS) systems like menu and desking.

Recall that Roadster, Darwin, and Moto also play in the POS space.  At the other end, there are pure-play marketing agencies that don’t do websites.  You can evaluate strategy for these companies in terms of where they are concentrated along the journey, and where they are extending.

Dealer Fire moved up funnel, through their partnership with Stream, and Fox extended down a notch with TagRail.  Darwin is unique in having moved to DR from point of sale. (I am using the linear model for simplicity. To account for CRM and reputation, you need the loop model.)

My goal here was to explore the synergy between DR and dealer websites, and the answer is that they’re not as compatible as they appear.  Research showed much less crossover than I had expected, between marketing agencies on one side of the BUY NOW button, and DR specialists on the other.

Digital Retail Taxonomy

The tech buzz at NADA this year was Digital Retail.  Tagrail has a new partnership, with dealer site provider Fox, and Moto showcased some of their OEM projects.  Roadster has an aggregation marketplace, which I’ll get to in a minute, and Modal (Drive) was conspicuously absent.  I hope they’re okay.

All dealer site providers are now claiming the hip acronym DR, including some that are way off the mark.  This week I want to cut through the clutter and taxonomize a bit.  We’ll see how well my predictions from five years ago have held up.

Dealers will migrate onto the most capable of the platform sites, and … the winning platforms will not be mere lead providers.

I am going to skip the consolidators and the used-car sites, to focus on DR solutions for franchised new car dealers.  That was the context for the earlier article (and the pull quote).  The grid above divides the DR space into four segments: True DR, Pivoters, TPC, and Marketplaces.

True Digital Retail

A true DR solution must handle the six canonical functions, do the paperwork online, and save the deal (not a lead) for use in the dealership.  True, not many customers will do the full process online, but you have to offer the capability.  Qualifying questions here are along the lines of “can you sell a service contract and book it online with the administrator?”

I don’t want to be pilloried for omitting someone, but my short list (when asked) goes: Roadster, Moto, Modal, Tagrail, AutoFi, and CarNow.  I can find CarNow dealers pretty easily online, paired with a variety of site providers.  Here in Atlanta, Ed Voyles is an example.

Pivoters

Anybody with a foothold in the dealer’s website is using it to pivot into DR.  The first group of pivoters are what I call “finance first” sites.  AutoGravity, DriveTime, and AutoFi are sites customers use to check their buying power before going into the dealership.  Based on intel from Ricart Ford, I would say that AutoFi has successfully pivoted into the DR segment.

Gubagoo is using their foothold in chat to pivot as “conversational commerce.”  SpinCar is adding protection products to their VDP real estate, which is right where they belong.  Even popular F&I menu Darwin is moving online with Darwin Direct.

Third Party Classifieds

My model for a marketplace is Autotrader plus its DR feature, Accelerate.  However, the other incumbents have not followed suit.  In fact, Cars.com “does not sell vehicles directly and is never a party to any transaction between buyers and sellers.”  This space is inhabited only by brave new entrants like Joydrive, GoGoCar, and Deliver My Ride.

As I wrote here, this model has plenty of challenges, like finding UX and services that will appeal to all dealers – not to mention the customers.  Dealers may prefer a simple clickthrough to their own DR solution.  This is the backdrop for Roadster’s Express Marketplace.

Roadster Marketplace

Roadster’s marketplace operates just like a TPC site.  It has the familiar VSP/VDP with faceted search, but then it segues into a full digital storefront.  The reference site I looked at, Cochran group in suburban Pittsburgh, lists 3,500 new vehicles in 18 makes, from 26 rooftops – with transparent pricing!

My first reaction, I have to say, was “Holy crap, they’ve actually done it!”  They have made their own private Autotrader.  Of course, the same market area lists ten times as many new cars on Autotrader but – funny thing – they all use Accelerate.  Competition is wonderful that way.

The arrows on my grid suggest some strategic directions:

  • Single-function solutions will pivot to become storefronts. AutoFi is an example.
  • Third-party sites will add DR functionality. Accelerate is an example.
  • As storefronts grow to serve dealer groups, they will tend toward marketplaces.

I guess the only remaining frontier would be for two unaffiliated groups to cooperate on a single platform, as I wrote in Toward a Digital Auto Marketplace, maybe in contiguous nonoverlapping markets.  The eCommerce term is “coopetition.”  Or, maybe Accelerate will gain some traction.