How Auto Dealers Created TrueCar, Carvanna and Vroom...

“Nature abhors a vacuum.” There would be no reason for “disrupters” like TrueCar, Carvana, and Vroom to exist if dealers provided customers with what the majority of them want. This includes

Eliminating negotiations and move to a simple, transparent sales process
Eliminating wasted time in the sales process
Money-back guarantees
Market-based pricing
The convenience of having a car brought directly to the consumer

In are era of margin compression, how can dealers afford to pay TrueCar? Typically at least seven people get paid for selling a new car:

Dealer Principal
GM
GSM
Sales manager
Salesperson
Porter
BDC Manager

If you apply your costs correctly, it is almost impossible to make money in your new car department with the high transaction expense and low salesperson productivity (around 9-10 average).

There is a crying need to attract a younger, less expensive sales force - salespeople who can sell a minimum of 16-17 units a month. But you’re not going to attract this type of salesperson to a traditional negotiating dealership. If you don’t make a change to a One Price Selling sales process (like TrueCar), you’ll be inviting more unwanted competition into the new car arena.

The pre-owned market is where outsiders are really setting their sights. CarMax has already proven that if you give customers a simple, fast, transparent sales model you can sell a ton of pre-owned cars. If you don’t change your sales process you’ll be selling less pre-owned cars. Have you noticed your trade-in ratio is dropping? Take a look…Consumers now have so many outlets to choose from they are no longer highly reliant on trading in their cars to dealers. Think AutoTrader, CarMax, Beepie, and CraigsList… Less trade-ins will be the norm unless real change takes place with your pre-owned strategy.

Why is it so hard for dealers to get this? Why don’t they understand the need to become modern auto retailers?

Most dealers recognize that the market and consumers have significantly changed. Yet, they stay married to an archaic process that invites Silicon Valley startups to capture more and more of their traditional market.

Again, why don’t the majority of dealers address consumer demand and change their sales model??

I think the primary “anti-change” culprit is the longevity of the sales management teams found in most stores. In general, the older one gets the more “change resistant” they become. Yes, radical change is scary; but necessary.

Progressive dealers should address the necessity of recruiting a younger management team that they can train in the right skills to manage in today’s environment.

To attract a younger sales force you need sales managers who look more like they are one of their peers. Then train the new management team in the necessary skills to develop a great sales staff - coaching, training, giving recognition and more. The best way to make this transition is to have a store leader, Dealer Principal or GM who is a “change agent” committed to the process.

Frankly, when the new car market takes its inevitable downturn, interest rates rise, and margins continue to compress, it will be too late to make the necessary changes to adapt and cope with new market realities. It is easier to keep market share than steal it back after you’ve lost it. The best time to create change is when you’re on top!

It is time to reinvent the sales process and sales management structure. Those who have already done it are reaping the rewards. Join the 21^st Century. If you’d like to schedule a webinar with me to review what changes are necessary to thrive over the next few years please either email me (markrikess@gmail.com or give me a buzz – 916-715-8129).

4 members like this

Comment

You need to be a member of DealerELITE.net to add comments!

Join DealerELITE.net

Comment by Steve Stauning on February 26, 2016 at 11:59am: All great points, Mark, and definitely the way dealers should be structuring their operations today.

That said, let's not kid ourselves into thinking the "disrupters" would have been held at bay had dealers adopted these traits 20-30 years ago. Disruption happens.

The fact is that people LOVED the bookstore experience. Nobody ever complained about bookstores; and people used to spend hours in bookstores just looking around. Technology brought us Amazon and now we have darn few bookstores.

Dealership disruption is happening not because of bad experiences, but because disruption happens when you have the technological breakthroughs we've experienced over the last 20+ years. The fact that it's happened to so many beloved industries well before dealerships is proof that the technology wasn't in place to shutter dealerships (the way it shuttered bookstores).

The greatest threat to dealerships is not the experience or even the TrueCar's of the world, it's technology. Specifically, the technology that brings us services like Uber and autonomous vehicles. When those two get married folks will begin to abandon vehicle ownership. That's the disruption that will really hurt...

Comment by Mark Dubis on February 25, 2016 at 10:16pm: Mark, can you share with us the names of a few dealers using your advice, and who are leveraging this new philosophy? Would certainly want to see how they are faring using these strategies. Thank you.

Comment by Tom Wiegand on February 25, 2016 at 7:23pm: Our new website will be up in a few days. Our apologies to everyone!

A Personal Brand is one who makes first a personal promise to exceed expectations of customers, team and business, then does so, and repeats these new selfless servant habits over and over again. An employee does what they are told.

You are very welcome Mark Rikess. Well deserved!

Comment by mark rikess on February 25, 2016 at 6:28pm: Thanks for the kind comments and insight Tom Wiegand!!

Comment by Brian Bennington on February 25, 2016 at 5:50pm: Well, Coach Weigand, your comments below left me somewhat confused. I understand and agree that buyers and sellers are motivated in different ways, but when you started with the 80% stats and especially "Personal Brands," my "wondering" (what you're talking about) began. I went to your bio here and tried to link to your "1 Team Synergy" website, but nothing was there. I then tried to google it, but nothing came up. Thinking I'd missed an important revelation about "Personal Branding," I googled it and found it is what I always thought it was. By the way, a big proponent of "branding" was Jacques Nassar and it was one of the reasons Ford blew him out. But, I do agree if a rep can actually create a strong identifiable image ("brand"), it can be a selling advantage.

I'm a West Coast boy with local clients, but I do know of Paragon's success. However, the thing I remember most recently about them was their multi-million $ settlement last year for supposedly unlawful sales of credit repair and identity theft prevention services. By the way, can you name who the "we" are in the "we all do" statement about Mr. Benstock. Comments like that definitely make your readers feel like they're on the "outside, looking in." Please know I did review Mr. Rikees' link you put up, and read his DE bio here, too. One suggestion, though. What someone of Mr, Rikees' and your caliber thinks is important. I only wish you both would proof what you write just to make sure it's cogent. It would sure make reading you easier.

Comment by Tom Wiegand on February 25, 2016 at 2:22pm: It is important to re-read Mark's first paragraph and 5 "WANTS." Needs are rational behavior and Wants are emotional behavior. A dichotomy exists when one understands that a business devotes better than 80% of marketing and sales processes triggering consumer rational need behavior, while consumers devote better than 80% of their buying decisions triggering emotional want behavior. Buyers operate in the complete opposite of business! Consumers top 3 wants today are transparency, validation of them and facts, and prefer video over every other form of communication. It is why we recommend Personal Brands of business make your customers your brand, and for business to make their Personal Brands of business their brand. Mark's 5 Wants are all true!

Mark Rikess may be too humble to share what must be shared here. This is a direct link to Mr. Rikess' LinkedIn Profile page: https://www.linkedin.com/in/mark-rikess-0b82565 Scroll down and read Mr. Brian Benstock, GM/VP Paragon Honda and Paragon Acura RECOMMENDATION of The Rikess Group and Mark Rikess. Anyone who knows and values Brian Benstock as we all do, will read his recommendation and phone and recommend The Rikess Group without question. This is one of those no-brainers! Do this!

Comment by Brian Bennington on February 24, 2016 at 9:30pm: Finally, a minute to respond to your response to me. Haven't worked at a dealership in over 20 years, but I do work for dealerships. I don't know if CarMax has it right or wrong. And anyway, "There's more than one way to skin a cat." Recruit sales reps in their early to mid 20s? Maybe women because they can multi-task better than most, but reps should be hired not by age, but by qualifications and experience. And honestly, in this "millennial" age, how many of these often liberally-inclined youngsters can actually handle "How the sausage is made"? (Selling isn't for everyone.)

As to "a 10 year book," how many reps would take time to effectively follow-up if they had one? Very few. Most don't know how primarily because they don't like to do it. Believe me, I know. And finally, who cares if selling cars "doesn't appeal" to Gen Yers. They've already been coddled enough. (A while back, a manager told me of a young new hire who, in extreme seriousness, ask why everyone doesn't pay the same for the same car?) I visited your website and I'm not disrespecting "Your bag." It's just not "My bag." (I appreciated your response, but it was missing a couple of words that made it hard to understand, But that's coming from someone who definitely "isn't the sharpest pencil in the box!")

Comment by David Ruggles on February 24, 2016 at 8:20am: All you have to do is to send the difficult customers down the road to your competitors and structure your own operation to be able to survive without the gross profit you will "avoid." It works a lot better in good times than in bad times.

If you want to be transparent, just divulge your triple net cost and post your margin. Transparency is when buyer and seller have the same information and equal facility to unpack that info. This is selling the illusion of transparency.

Just curious, have any of the companies mentioned, "created" by auto retail, made their first nickel yet, or do they exist because they were able to sell stock to speculators.

BTW, I grew up in the business in a One Price store. We called ourselves Moral Motors. It was 1970. The idea that there is an "old way" and a "new way" is a hoax. Its always been about satisfying customers. The consumer's mindset hasn't changed. AND the business is LESS transparent now than it ever has been. Just because you provide more information doesn't make you transparent. The industry has done a masterful job of making things so complex out own people don't even know our costs.

Comment by David Ruggles on February 24, 2016 at 8:13am: http://www.autodealermonthly.com/article/story/2014/05/no-haggle-no...

Comment by Steve Richards on February 23, 2016 at 7:36pm: Bang. Nail on the head.