Tag: Roadster

Digitally Disrupting Dealer Systems

I hesitated to use the D word here.  So much of digital is normal, healthy evolution, that saying “disruption” is like crying wolf.  So, I will digress briefly into that discussion before presenting my thesis, which is: traditional dealer-system providers are about to be whipsawed bigly by digital retail.

According to Gartner, digital disruption is “an effect that changes the fundamental expectations and behaviors … through digital capabilities.”  This idea of changing expectations is echoed by Aaron Levie, to the effect that businesses “evolve based on assumptions that eventually become outdated.”

If your UI even vaguely resembles an airline cockpit, you’re doing it wrong – John Gruber

Another common theme in studies of digital disruption is that people will come from outside the industry, bringing new attitudes and techniques that incumbents can’t match – something I like to call “advanced alien technology.”

Modal’s Aaron Krane came from online sports betting, and famously wondered why there is no “buy now” button on the Mercedes-Benz web site.  Andy Moss of Roadster came from online fashion retail.  I think I am on solid ground arguing that DR pioneers bring something fundamentally different.

In fact, I can identify the baseline assumption which is now outdated.  In olden times, the user of auto retail software was an auto retail employee.  These were experts, executing an esoteric process, and they could be trained to deal with crappy user experience and disjointed workflow.

Today’s user is, of course, the car buyer.  A few years ago, I wrote that each of the six canonical tasks in DR would need a “buddy” on the dealer side, with which to share information.  For example, the website may disclose prices for protection products, and it would be nice to pull retail markup from the menu system.

It’s hard to believe how quickly DR has evolved.  Roadster had just launched Express Storefront when I wrote that article, and already the buddy system is dead.  If a car buyer can desk her own deal, at home in her pajamas, why use a different system in the dealership?

The advantages to using the same system in store and at home include trust, transparency, cost savings, and reduced demands on the salespeople.  The new generation of in-store DR means that salespeople can be experts in customer service (and cars) instead of complicated software.

This marks the culmination of important trends in auto retail, from “one experience” at Sonic to “single point of contact” at Schomp, and it should serve as a wakeup call to old-school software vendors. Digital retail will drive a gradual shift in dealer process, but a rapid one in software.

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.

Tier One Digital Storefront

Today, we continue our discussion of digital retail, this time from an OEM perspective.  Suppose you work for Morris Motor Finance and you want to get in on the fun.  The most straightforward way is to subsidize your dealers’ use of a storefront.  Simply negotiate a discount with one of the leading vendors and supply it to dealers who meet their penetration goals.  You may already have programs like this, encouraging dealers’ use of a credit system or a menu.

In addition, you may want to add digital retail capabilities to your tier one website.  This is a bit of a balancing act.  The customer is here to see the full range of vehicles and accessories, along with your financing options and Morris branded protection products.  Once you make the turnover to a specific dealer, the selection will be limited.

So, either you drop downfunnel straightaway, like ShopClickDrive, and the customer is only looking at one dealer’s inventory, or you run the risk of promoting something that a specific dealer doesn’t have.

Another conundrum involves the display of pricing online.  Dealers have gotten used to the idea of disclosing MSRP for vehicles, and maybe finance rates, but there is still resistance to online MSRP for products.

I don’t need to tell you how to handle the Morris Motors dealer council, but you might want to assert a division of labor.  Your site is higher in the purchase funnel, where 22% of new car buyers will start their journey, and serving a different purpose.  Now let’s consider the six canonical tasks:

  • Choose a vehicle – The customer is not choosing a specific vehicle from inventory, but a generic new vehicle by model and trim, or a build vehicle. This is also the time to upsell accessories.
  • Price the vehicle – Using MSRP simplifies the design, but it also impairs accuracy. If the price changes, the dealer may recalculate the deal with his own desking system.
  • Price protection products – Show products before structuring the deal, because they will be financed, and you don’t want the customer fixed on a payment that doesn’t include products.
  • Value the trade – In this scenario, I would recommend a simple KBB lookup with the customer choosing “good” condition from a list, assuming that it will be revised in the dealership anyway.
  • Structure the deal – The goal here is basically to choose lease or retail and promote your offerings, plus any incentives. Unlike the dealer’s desking system, you don’t need to be penny perfect.
  • Organize financing – Obviously, you want first crack at the credit apps, and then you need an interface so you can feed the result into your dealer’s credit system. Send your declines, too.

Lastly, the customer will save the deal and transmit it to their chosen dealer.  It is really more of a “lead” than a deal, at this point, and you have a “lite” version of the digital storefronts we have been discussing.  I toss out the interface thing lightly, because this is my specialty, but you will have to choose whether to work with Route One, VinSolutions, Dealer Socket, etc.  Back to the dealer council…

What is a Digital Storefront?

A digital storefront is a complete car buying experience that can be bolted onto the dealer’s existing web site, and integrated with the dealer’s instore process.  It must support all six of the canonical car-buying tasks:

  1. Choose a vehicle
  2. Price the vehicle
  3. Price protection products
  4. Value the trade
  5. Structure the deal
  6. Organize financing

This is not always a linear process, as I explained in Workflow for Online Car Buying, and not all customers will use the full process, as Andrew Tai explains in this video, but the storefront must support whichever tasks the customer chooses.  Details about the six tasks are given here and here.

… delivering an omnichannel experience that is unmatched and, we believe, will be the future of car buying – Bill Nash

When you think of a good online process, like the CarMax omnichannel sales experience, these tasks are a native part of the web site.  Dealers that don’t happen to be CarMax can offer an online process by bolting a storefront onto their existing web site.

As far as I can tell, this innovation is due to Roadster, but they are no longer alone.  Roadster’s Express Storefront went up at Longo Toyota two years ago.  TagRail, Modal, and Moto also compete in this space.  TagRail and Modal both brand their offerings as “digital checkout.”

By “bolted on,” I mean to include the various techniques used to move the customer from the dealer’s web site into the online buying process.  Modal is actually named for a programming technique, the modal window, and Roadster uses a link.

The transition, however, must not look like it’s bolted on.  Roadster shows a good example, here, of preserving the dealer’s original site design.  I can tell it’s Roadster by looking at it, and programmers will notice the “express” subdomain, but this is a seamless transition for the customer.

Also seamless should be the transition across platforms and into the dealership, an experience known as “omnichannel.”  Think of a credit plugin like Auto-Fi.  It allows the customer to apply for credit on the dealer’s web site, and also updates Route One in the dealership.  You never want to redo a task the customer has already done online.

For a storefront there are multiple potential integration points – inventory, CRM, desking, menu, and credit.  The customer may start a deal on the web and then walk in to finish it, or vice-versa.  They may engage the storefront on a tablet or kiosk in the dealership, and finish it at home.  The goal is to support all six tasks wherever the customer chooses to do them.

Asbury Drive in the House

Photo Credit: Nyisha MorrisKelly and I were sipping coffee at Digital Dealer, greeting participants, and speculating on how the ultimate online buying experience would come to pass.  Presenters had talked about Amazon, obviously, and the recent opening of a Hyundai digital showroom on Amazon Autos.

A while back, I organized the various offerings into categories like: online platforms where multiple dealers may list their inventory (basically lead providers) versus eCommerce plug-ins to be placed on individual dealer web sites.

One key variable was whether the site actually holds inventory, i.e., is a dealer, not just a technology play.  Carvana, for example, or Shift.  Increasingly, what I notice is that the good technology either evolved from a dealership, or – I found this intriguing – they will buy a dealership to serve as a test bed.

Your rapper name is a top twenty dealer group plus a digital retail system.

Roadster came from a concierge buying service which, as far as I know, they still operate.  A2Z Sync came out of Denver-based Schomp group.  The Gogocar people operate a Kia dealership.  This brings me to the next level of dealer technology tie-ups, those where big dealer groups choose an online retail solution and commit to it.

Roadster is working with AutoNation, Lithia just bought a big stake in Shift, and Drive is in all Asbury stores.  The Lithia deal is pure genius, because it allows Shift to handle more inventory and slashes their floorplan costs.  The many links in this post show support for my prediction using publicly available information.

We philosophically do not believe that software development is our expertise. Instead, we’d prefer to partner with third parties – Craig Monaghan

That prediction is … continuing the consolidation megatrend, we will see dominant groups taking the lead in online retail, but unable to master the technology on their own.  This is what I call the “Kodak syndrome.”  Incumbent leaders are not agile enough to ride a paradigm shift.  This means not only the dealer groups, but the traditional software vendors.

I expect to see the Sonics and Asburys of the world buying up the digital retail people, absorbing their talent, and denying access to their competitors.  I characterized this as a “land rush” in the earlier piece.  Direct to consumer is the final frontier.

Dealer Megatrends Part 2 – Fintech

Car dealers today face a growing array of new systems and capabilities.  These are primarily in F&I, thanks to disruptive new entrants in financial technology – fintech, for short.  Mark Rappaport has a nice roundup here, from a lender’s perspective, and I maintain a list on Twitter.

  • AutoFi – Auto finance plug-in for dealer web sites. See Ricart Ford for an example.
  • AutoGravity – Customer obtains financing (via smart phone) before visiting the dealership.
  • Drive – Online car selling, with delivery, from the Drive web site.
  • Honcker – Customer obtains financing (via smart phone) and they deliver the car.
  • Roadster – E-commerce platform for dealers, with full sales capability (as I anticipated here).
  • TrueCar – Customer sets transaction price (via smart phone) before visiting the dealership.

The new entrants blur familiar boundaries in the retail process.  They’re basically lead providers, but all aim to claim a piece of the F&I process.  AutoGravity, for instance, provides a lead already committed to a finance source.  TrueCar provides a lead already committed to a transaction price.  If you’re unfamiliar with the canonical process, see my schematics here and here.

In my previous Megatrends installment, Consolidation, I cited the influence of PE money.  It’s the same with fintech.  AutoGravity, to name one, is backed by $50 million.

The new F&I space is also home to “predictive analytics.”  Automotive Mastermind examines thousands of data points, to produce a single likely-to-buy score.  Similarly, Darwin Automotive can tell you which protection products to pitch.

The technology’s proprietary algorithm crunches thousands of data points, combining DMS information with … social media, financial, product and customer lifecycle information

My specialty is F&I, but it seems pretty clear that predictive analytics has a place in fixed ops as well.  In terms of the earlier article, you can see that consolidators have an edge in evaluating new technology.  Speaking of fixed ops, they’re also better positioned to obtain telematics data.

McKinsey says fintech can help incumbents, not just disrupt them.  That’s why I have focused on technologies a dealer could employ, versus apps like Blinker that are straight threats.  Of course, you have to adopt the technology.  Marguerite Watanabe draws a parallel with the development of credit aggregation systems.

Fintech will induce dealers to adopt an online, customer-driven process.  I see this as an opportunity. On the other hand, those that fail to adapt will be left behind.  This article is aimed at dealers, but the challenge applies equally to lenders, product providers, and software vendors.