With apologies to Shakespeare, the road to retail automotive — like the road to true love — has never run smoothly, nor is it expected to anytime soon.
That’s why key players in the auto industry are lining up to help straighten curves and fill in potholes, so dealers can operate more efficiently and profitably, said industry experts who participated in the panel discussion: “Executive Suite: The View from the Top” during Used Car Week held Nov. 12-16 in Scottsdale, Ariz.
Panelists outlined how data, technology and being nimble, can help dealers adapt to mobility, use data to buy and sell used vehicles more profitably and satisfy the growing number of consumers who want to conduct at least some portion of their auto purchases, digitally.
Becca Polak, president of TradeRev and chief legal officer and secretary of KAR Auction Services, TradeRev’s parent, said there is a lot happening in retail automotive, and dealership profit margins are being squeezed.
“They can’t just be about new cars anymore; it has to be about used cars and service and being a lean organization,” she said. “With things happening so quickly in all those areas — mobility and data and digital — they need to be proactive.”
Panelist Rick Ricart, president of the family-owned Ricart Automotive Group in Columbus, Ohio, agreed.
He said his new-vehicle sales are strong but conceded that much of that business is dictated by manufacturers, and there is virtually “no margin left” in those vehicles.
So his dealership built a warehouse specifically to service fleet vehicles, a move that positions it for a future when ride-sharing, car-sharing and self-driving vehicles could result in fewer consumer-owned vehicles and more owned by fleet operators, Ricart said.
“There’s opportunity there,” he said. “If we’re not there to fix it, then who will it be?”
A slower mobility ramp-up?
Mike Stanton, the National Automobile Dealers Association’s senior vice president and chief operating officer, said the mobility evolution “is definitely coming”, but its arrival will be “a lot slower” than some people are predicting.
The dealer trade group commissioned a survey of 1,200 people in 2018 and found that 90 percent preferred to own their vehicles, Stanton said.
Additionally, consumers have needs that call for owning their own vehicles, such as taking their kids to school and making multiple trips to big- box stores to pick up supplies for home do-it-yourself projects, he said.
The “hype is from technology providers, some of the folks who have a vested interest in seeing the technology succeed more quickly,” Stanton said. “But our point is that dealers will be ready. If their customers want whatever, dealers are going to sell it to them.”
Ricart said his dealership group found considerable demand among its customers for used cars and trucks and turned much of its attention to its used-vehicle operation.
Dealers that don’t take their used-vehicle departments seriously are making a big mistake, he added.
“If you’re not sourcing cars yourself, if you’re not scaling and growing your used car operation, you’re going to be left in the dust,” he said.
Ricart also said his company uses data, such as vehicle make and model and ZIP codes of the vehicles’ owners, to determine which vehicles are most likely to be brought back to his dealerships for service and to help it make decisions about sourcing vehicles.
This gives his dealership group a handle on the lifetime value of the vehicle, from a service standpoint, “instead of ‘this is a quick-turning car, you can make a little profit and you never see them again’,” he said.
Questions about data
Speaking of data, Ricart noted there are still a lot of unanswered questions about data in general, around such topics as who owns it, where it comes from, how it is transferred and its accuracy.
“If you try to put your arms around the whole thing it’s way too much for the dealer to handle,” he said.
“We don’t have massive IT departments that can code, develop and write software and figure out what to do with it. We have to rely on vendors to provide us with what we need.”
Cox Automotive and KAR Auction Services are among the companies that say they can help dealers with data.
TradeRev’s Pollak said KAR Auction Services has over 40 billion data points.
“One of things we’re talking to dealers about, and it seems basic, but it’s looking at how to optimize their lots,” she said.
“Using our data, based on retail data, wholesale data, (the company can advise dealers) what kinds of cars should they be sourcing and what kinds of cars should they be cutting their losses on. That seems simple, but it can help a dealer, especially when profit margins are skinny, make better decisions.”
When it comes to data, Manheim, owned by Cox Automotive, “is on the cusp of some great opportunities,” said Fredrick Standfield, Manheim senior vice president, assurance and reconditioning group.
From search to personalization
Among the ways Manheim uses data is to offer dealers relevant inventory based on their previous choices and search histories similar to how companies such as Amazon and Netflix, offer their products to consumers that visit their sites.
Standfield calls it “moving from search to personalization.” He said a pilot program conducted in 2018 shows that personalization is effective.
“In that email that was sent to 15,000 dealers, we found that people who opened the emails and saw those relevant search results that were personalized to what they buy, were three times more likely to engage and buy that recommended inventory,” Standfield said.
“As we moved forward, we saw that increased their activity online because the inventory was relevant based on the data we’ve been using. It increased their buying activity 10 percent as well. So data has been huge for us.”
Standfield also said consumers increasingly want to start the car buying process earlier online and pointed to Cox Automotive’s Accelerate, a digital retail platform that allows consumers to calculate monthly payments, get trade-in values, browse finance and insurance products and more, all online.
Don’t count dealers out
But Standfield cautioned that though consumers want to conduct more of the buying process online, dealers are critical to that process.
Consumers still want to go to the dealership to conduct test drives, finalize documents, learn more about the vehicle they are purchasing as well as take delivery, he said.
“We’re building tools like Accelerate that cuts across multiple platforms. That helps the dealer make the transaction go easier, faster with greater simplicity and hopefully more (enjoyable because consumers) are not spending so much time in the dealership,” Standfield said.