I’ve been pondering a quote from English author, philosopher and scientist Francis Bacon: “He that will not apply new remedies must expect new evils; for time is the greatest innovator.”
I found Bacon’s quote while looking for a concise, simple statement that describes two new market realities for car dealers:
- It’s an “adapt-or-die” retail environment. The old ways of doing business are gone, and the new ways are ripe for reinvention. I’m not talking about the kind of operational adjustments (fewer staff, smaller budgets, a sharper emphasis on used vehicles, etc.) dealers made to survive the economic downturn. I’m looking down the road — when margin compression and increased competition will require the “new remedies” Bacon mentions. These remedies will blend technology and process, and provide improved efficiencies and profitability for the dealers willing to embrace them.
- Constant change is the new norm. A 33-year-old Texas dealer recently told me, “More has changed in the past five years I’ve been in the car business than the prior 50 years when my grandfather and father ran the family dealership. Your processes have to be flexible and fluid.” If Bacon were alive, I think he’d conclude that one of the risky “new evils” for dealers would be a stubborn resistance to innovate as market change requires it. I know this: The 33-year-old Texas dealer isn’t waiting for other dealers to show him a pathway to success.
I also like Bacon’s quote because it captures what I consider an imperative for all dealers: Future success will depend on continually adopting and updating “new remedies” that allow you to meet the challenges today’s Internet-driven marketplace creates for auto retailers. As I see it, these “new remedies” will require dealers to craft a careful blend technology, people and process to drive greater efficiencies and profitability across their entire dealership operations.
A Look at “New Remedies” For Used Vehicle Departments
Last year, I created the vAuto Genius Labs division to supplement the technological innovation we already had underway. The reasons behind the new division follow recognition that automotive retailing in general, and dealers in particular, are squarely in the middle of a transition to a much more data- and technology-driven business. Our goal is to drive innovation of “new remedies” that help dealers as this transition occurs. Our initial focus plays to our background and expertise in used vehicles. I see four distinct areas where “new remedies” can make a big difference for dealers in their used vehicle operations:
Acquisition Precision. Simply put, there really isn’t any reason for dealers to get burned on a used car anymore. Today’s technology and tools fully detail the opportunities and risks inherent in every vehicle. Dealers can know right up front whether a vehicle is a potential winner or loser. They have crystal-clear insights into each car’s unique opportunities and risks.
These insights flow from a better understanding of retail and wholesale data (one of the blessings that flows from deeper integration among technology providers, such as vAuto’s alliance with AutoTrader.com and Manheim) and how to apply it at the dealership level to guide vehicle acquisition decisions.
Now, I’m not suggesting dealers don’t sometimes take occasional hits in their used car departments because they got the “wrong” car. In my experience, however, such losses often boil down to decisions that either ignore, misread or overlook the technology-provided clues that indicate a potential problem with a vehicle.
- Auction Efficiency. Talk about a time-drain. It wasn’t long ago that used vehicle buyers and managers needed to spend hours to prepare for tomorrow’s wholesale auction. Now, data- and technology-rich innovations like vAuto Genius Labs’ AuctionGenius tool shrink the preparation time to mere minutes, depending on a dealership’s used vehicle scale and volume. In the lane, buyers now have instant, hand-held access to the information they need to make market-smart decisions. I don’t think these buyers will ever be as efficient and lithe as the click-savvy dealers who use online auctions to acquire used vehicles, but new technology brings them a whole lot closer.
Online Merchandising Effectiveness. Most dealers now recognize that, unless today’s Internet-savvy buyers don’t see their used vehicles online, the cars won’t sell. This is why the conversion rate from search results pages (SRPs) to vehicle details pages (VDPs) represents the “money metric” for their used cars. The problem: There’s a host of factors that drive this conversion and, until recently, the precise reasons why one car earns more VDPs than another have been murky. We’ve been working hard to probe these dynamics, thanks in part to our relationship with AutoTrader.com. We now have the ability to frisk the data and determine the factors beyond price — e.g., vehicle color, specific equipment, a dealer’s ad package, etc. — that make some cars more appealing than others.
I’m confident this advanced, more detailed level of VDP insight will make a significant difference for dealers as they decide how to align and allocate their merchandising investments in the most efficient and profitable manner across their used vehicle inventories.
Sales Transparency. We’ve all seen the studies — the current and next generation of buyers wants convenience, ease and fairness as they purchase used vehicles. They don’t want to play traditional deal-making and pricing games. Once they land on a car, they want affirmation and validation that they’ve found the right vehicle, the right price and the right dealership for their business.
Given this backdrop, dealers, like all retailers, should strive to give customers what they want, and do so in the most efficient and profitable manner possible. This may sound like a tall order, but the advance of data and technology eases the difficulty of this sales process challenge.
For example, vAuto Genius Labs’ new AutoVisor tool gives dealers a way to effectively meet these customer expectations with a single click. It’s like an automated “evidence folder” or “story book” on every car; a single click generates a report that shows the information a customer wants to see about a specific vehicle in a convenient, one-screen display — including details on the vehicle’s condition and history, its equipment configuration and safety ratings; real-time price comparisons with the same/ similar vehicles and reviews from other owners and past dealership customers.
Such transparency-focused sales tools are an important part of the technology transition underway for dealers. Customers, who have just spent nearly 20 hours scouting vehicle options online, will increasingly want an instore shopping experience that matches and mirrors their online research. For dealers, the transition to such technology-aided sales tools will improve their ability to “hold gross” as their sales teams are empowered to satisfy customer expectations and validate each vehicle’s unique value proposition.
Innovative “New Remedies” Beyond Used Vehicles
Of course, the transition toward a more data- and technology-driven business for dealers is not limited to their used vehicle departments — largely because today’s customers are today’s customers. They all use the Internet as their preferred mode of shopping, whether they want a used vehicle, a new vehicle, maintenance or service work or a hard-to-find part.
This dynamic explains the dizzying array of technology-driven “new remedies” available for dealers at all of the major industry events — from automated service schedulers to CRM systems that help dealers connect with, track and serve any customer need in a more e-enabled manner.
Among these “new remedies” beyond the used vehicle department, I’m especially excited about the innovative work underway to bring more clarity and transparency to new vehicle deals.
Currently, dealers are loathe to offer “real” prices on new vehicles. The reason: The complexity of factory incentives makes it impossible to post a price for a new vehicle online that represents the best deal for a buyer and the dealership.
In the not too distant future, dealers will see a fix for this problem, thanks to the relationship between AutoTrader.com, Automotive Information Systems and vAuto to develop a new vehicle pricing tool that correctly calibrates available incentives to match the eligibility of buyers and maximize profitability for dealers.
As dealers evaluate these “new remedies,” I offer the following advice: Prepare your teams for today’s “adapt or die” retail imperative, and choose the technologies that best complement the people and processes you believe best suited to achieve your goals for dealership profitability and prosperity.
It’s also useful for dealers to remember Bacon’s warning: The more you resist the adoption and application of “new remedies,” the greater the likelihood that you’ll face “new evils” that hurt your business.