Has Retail Automotive Failed The People It Serves?

Most dealers would disagree, but numerous studies have shown that consumers are dissatisfied with the traditional sales process and would avoid it if they had viable alternatives.

Customer Centric

In order for car dealerships to compete in an era where digital disruption is continually reshaping the playing field, they must evolve from a transactional, dealer centric process to a streamlined, customer-centric experience.

We’ve Always Done It This Way

Since the majority of dealers aren’t willing to deviate from the proven, highly profitable, but often-confrontational sales model, the Digital Disruptors and OEMs will lead the way.

Technology Companies That Happen To Sell Cars

Carvana, Beepi and Vroom are disrupting the used car industry by allowing people to buy cars online and have them delivered to their door without visiting a dealership or dealing with a salesperson.

They developed proprietary technologies that offer complete transparency and upfront online pricing. By doing so, they have eliminated the pain points often associated with buying a used car.

Dramatically lower operating costs and unprecedented return polices allow them to undercut conventional used car dealerships while mitigating the perceived risk of buying a car online.

Zoom

Zoom.ca just launched the first online certified used car dealership in Toronto. They offer free delivery and a 5 day, 500 km test drive, with a 100 percent money back guarantee. Their slogan is:

Browse. Buy. Drive. The Online Car-Buying Revolution Has Begun!

This should be a wake up call for ultra conservative Canadian car dealers who are traditionally 3 to 5 years behind Americans when it comes to implementing new technology or innovative processes.

Enter the Ivey League

If you look at the credentials of many of the disruptor’s executives and you won’t find “car guys”. You’ll find Millennials with Ivey League educations. They entered the used car space because it’s a trillion dollar industry; with a bad reputation that has seen virtually no innovation for over 75 years.

Through The Lens Of Consumers

Ryan Keeton co-founder and Chief Brand Officer of Carvana said it best “We looked at the sales process through the lens of consumers and responded by breaking the used car industries paradigms and eliminating negative stereotypes.” Carvana sells 1000 cars a month.

Meanwhile, as the buy online platforms gain market share, traditional used car dealers sit back and say “People aren’t ready to buy cars online yet.”

GM Disrupts Their Own

In February 2016 GM launched the Factory Pre-Owned Collection. It’s a buy online platform that offers a “Nationwide inventory of former General Motors company cars, lease or rental vehicles” each of which has less than 37,000 miles on it. Benefits include an extended factory warranty, a scheduled maintenance plan, OnStar and SiriusXM radio.

Shop.Click Drive

Cars are purchased online via GM’s Shop.Click Drive technology and shipped to a participating dealership of the purchasers’ choice.

Unhappy GM Dealers

The reception from dealers was lukewarm as only 1 in 4 signed up for the program. The California Dealer Association challenged the portals legality claiming that it’s unfair competition and questioning GMs desire to become a used car broker. They also claim that the Kelly Blue Book price that accompanies each vehicle is unrealistic.

Direct To Consumers?

If the platform is successful one can’t help but wonder if GM will cut out the disgruntled middlemen and deliver direct to consumers.

Lexus Plus

Lexus USA recently introduced Lexus Plus, “a refreshingly new approach to the dealership experience”. They offer transparent, upfront pricing and a dedicated consultant to assist customers with every aspect of the Lexus Plus experience. “From product and pricing information to trade-in offers and final paperwork, your consultant can handle it all. And all with no pressure.”

Easier, Faster, Better

Lexus Plus claims to be an easier, faster, and better way to buy a car. They’ve achieved this by eliminating two of the most complained about aspects of the traditional sales process “awkward hand-offs and confusing finance formulas.”

Not Here To Sell You A Lexus

The Lexus Plus website highlights the fact that that their consultants aren’t there to sell you a Lexus; they’re there to “help you buy the one that’s right for you.”

Excellent Results

The early results have been excellent as many of the Lexus Plus dealers are out performing traditional Lexus stores. With more and more Lexus dealers opting into Lexus Plus it’s only a matter of time until Toyota offers a similar initiative.

Hyundai Genesis

Hyundai Canada is launching the Genesis line without a dedicated dealer network. This means Canadian buyers won’t be able to buy Genesis cars in Hyundai dealerships like Americans’ do. Canadians will buy the cars online and have them delivered to their homes.

Genesis At Home

Michael Ricciuto, director of the Genesis brand and corporate strategy said, “We will focus solely on Genesis at Home, which is concierge sales. We bring the car to you. We’ll have Genesis at Home online purchase and Genesis at Home service.”

Genesis Motors Canada will own the inventory and their dealers will be compensated for facilitating the transactions on their behalf.

Genesis Boutiques

Genesis at Home will be complimented by Genesis boutiques located in upscale malls and select metropolitan locations, “It’s like a hybrid between leveraging our current dealer body and having a program where the OEM sells direct,” Ricciuto says.

No-Haggle Pricing

Genesis like Lexus Plus will offer fixed, no-haggle pricing that’s refreshingly all-inclusive: Ricciuto, “We’re taking the whole negotiation out of the equation and allowing the dealer to focus on selling the brand and the car.”

“One transparent price eliminates all the extra charges and fees found at the dealer level, including destination and delivery charges and admin fees”, says Ricciuto.

Extra Fees

One can’t help but wonder how the existing Hyundai dealer network will justify all of the extra fees they’re charging consumers once Genesis starts promoting their all-inclusive pricing model?

The Beginning Of The End

Is this the beginning of the end for the Canadian Hyundai retail network or just an “enlightened and human-centric” way for Genesis to carve a niche in the highly competitive luxury automotive space?

Walser Disrupts Minneapolis

The Walser Automotive Group is one of the most progressive and innovative dealer groups in the US. They were amongst the first to implement a one person, one price, no negotiation sales model.

Special Teams

Their sales departments are divided into teams that are managed by Team Leaders. Team Leaders work the sales floor to guide the sales consultants and interact with customers. This allows the sales consultants to remain with their customers while in the dealership.

This process saves times, builds rapport and helps to eliminate showrooming (customers using smartphones to fact check or compare prices when salespeople leave to ask managers questions).

Process Driven

The sales team follows a process that includes a dealership tour, an introduction to service and brief stops at F&I display stations where they build value in their F&I products before they present them.

No Offices, No Desks

Neither the sales consultants nor the Team Leaders have offices or desks. They complete their transactions in an open room while sitting at round tables that have four chairs around them. The Walsers believe that this is more comfortable than being in a cramped office and sitting at a desk that function as no mans land during confrontational negotiations at traditional dealerships.

A Clear Path For Promotion

The Team Leaders report to Supervisors that ensure every step of the process is adhered to. The Supervisors also manage inventory, handle dealer trades and report to the GM. This type of structure provides a clear path for growth within their dealerships, which improves moral and reduces employee turnover.   

21^st Century F&I

Financing, F&I menu creation and paperwork for all of their dealerships are managed at a centralized off site finance centre. Hourly finance administrators that are overseen by Team Leaders and Finance Directors (former F&I managers) staff it.

Simotainiously Sales And Financing

The vehicle sale and the financing are handled simotainiously using proprietary technology that allows the finance administrators and the salespeople to communicate with one another. By handling both aspects of the transaction at the same time, they are able deliver vehicles within 45 minutes of a customer agreeing to purchase.

Profitable

The Walser one-price dealerships are amongst the most successful in their state. It appears that being forward thinking and customer centric can actually benefit those that choose to disrupt themselves as opposed to being disrupted by technology or a competitor.

The Bottom Line

The companies featured in this article have done what many consider impossible or unnecessary, they built disruptive sales models in order to provide a better experience for their customers. They accepted the risk, invested the time, energy and money and are now reaping the rewards while the rest of the industry conducts business as usual in a very unusual market place.

Jim De Luca

Vice President

Digital Road to a Sale Inc.

905 865 8734

jim@digitalroadtoasale.com

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