I’m Tired of Hearing That Car Dealers are ‘So Behind the Rest of the World!’
It seems everywhere you turn in automotive you hear how behind dealers are compared to every other industry when it comes to technology, marketing and the customer experience. Frankly, I’m growing tired of this constant drumbeat; and not just because it’s been going on for well over a decade.
Go to an automotive industry conference and you’ll hear how dealers are still in the ‘stone age’ when it comes to adapting new technology. Peruse an industry forum and you’ll be told that dealers are foolish to rely on silly old sales leads. Read one of my blogs and you’ll (incorrectly) walk away with the impression that traditional dealers just don’t understand the customer experience.
Interestingly, the bulk of this negative chatter is coming from those inside automotive; those with almost zero knowledge of other industries; though, with just enough knowledge of Google, Facebook and Amazon to be dangerous. Moreover, the dealership naysayers seem to have little understanding about the real threats facing automotive retail.
But, Dealers are Way Behind with Technology, Right?
Walk onto a dealership lot in Fayetteville, Arkansas and you’ll see salespeople using the CRM application on their smartphones to connect with customers while they’re getting a vehicle ready for an appointment. Visit a dealer near Los Angeles and you’ll see a product specialist speaking with an online prospect, while the prospect watches live video of the vehicle they’re looking to buy. Hop on the website of a dealer in Groveport, Ohio and you can purchase any new or used car in their inventory from your couch… in your underwear.
Where exactly are dealerships lagging in adapting new technology? More importantly, where is the evidence that they’re behind other industries?
When I review technology in other industries, I see fast food restaurants struggling to incorporate kiosks en masse. I see chain grocery stores where they still employ humans to pick up and manually scan every item you’re buying. I see hotels where the clerk types onto an antiquated keyboard (for what feels like twenty minutes) while looking up a reservation.
Let’s be clear: there’s a lot more to purchasing a car than ordering a pizza, buying groceries or renting a room for the night. Dealers are not behind other industries when it comes to adapting new technology; though there are certainly some dealers who are (as is the case in any industry) ahead of the curve.
Okay, But Dealers are Way Behind with Digital Marketing, Right?
This one boggles my mind; I mean truly boggles my mind. If you’re among the many in our industry who believe that dealers are lagging when it comes to employing digital marketing, please give me an example. (A relevant example of a retail establishment showing success with some other form of digital marketing that has so far eluded America’s car dealers.)
Dealers were among the first to successfully market via Google and Facebook. Moreover, they’ve been way ahead of most other industries when it comes to using the Internet as a source for conquesting new business. (The automotive third-party sales lead, after all, was invented over twenty years ago and it’s still going strong today.)
“Yeah, but dealers took forever to accept that the Internet was a real thing and to actually get a working website up and running!”
Really? Who had a ‘working website’ first: Your local bar or your local dealership? Your local grocery store or your local dealership? Your local (fill in the blank) or your local dealership?
You get my point. Dealers haven’t been behind and aren’t behind other industries today when it comes to adapting to digital marketing. If anything, too many dealers fall prey to the next shiny object when it comes to their digital marketing.
Instead of carefully tracking and measuring, some dealers will throw money at the latest and greatest and find themselves on the bleeding edge. (I would argue in many cases dealers are too far ahead of most industries when it comes to digital marketing.)
Fine, But Dealers are Way Behind when it comes to the Customer Experience, Right?
No doubt, consumers overwhelmingly do not like buying cars from dealers. Guess what? 30 years ago, consumers overwhelmingly did not like buying cars from dealers. Guess what else? Dealers that routinely provide a substandard consumer experience are still in business and still making money.
Unfortunately (or fortunately – depending on how you look at it), automotive retail benefits from the ability to be average and still make money. Of course, this is why we see things like increased discounting or lower employee retention during good times.
There’s simply no built-in dissatisfaction with the average dealer. Why? Because they’re doing okay without having to change much about their processes or how they treat people. This is not to say this is the right way to manage a business. It’s just a fact that necessity drives improvement; and there’s just no need (in the minds of some dealers) to improve the customer experience right now.
Dealers understand the customer experience; many just don’t believe improving it will make enough of a difference to their bottom line to take on that perceived headache today.
My argument, therefore, is that dealers are no more behind other industries when it comes to the customer experience than they were thirty years ago. Additionally, it wasn’t a bad customer experience that killed the local bookstore or Mom & Pop grocery or video outlet. It was pricing and convenience. Amazon and Walmart and Netflix simply provided greater convenience and much cheaper ways for you to obtain what these local outlets provided.
“But, Carvana has a vending machine!”
That they do; and traditional dealers could learn much from the Do-It-Yourself model that appeals to Carvana’s (NYSE: CVNA) customers. The good news for the industry is that many dealers already are. Maybe not most dealers, but there are plenty of dealers working hard to improve the customer experience. Additionally, when their improved buying experience starts to dent the sales of their neighboring dealers, changes will begin to occur on a wider scale.
The Car Biz is Doing Just Fine, Thank You
Make no mistake, the industry is coming off record years. Record years, by the way, while upstarts like Beepi were burning through $150 million watching their customer-centric model implode.
“Shouldn’t traditional dealers at least be concerned about the upstarts?”
When it comes to upstarts, I think vendors should be the most concerned. For example, I would be more concerned if I ran a traditional classifieds site like Cars.com than if I ran an equally-sized dealership group.
While they still provide value to many dealers, Cars.com is getting lapped by upstart CarGurus both in terms of market share and market capitalization. [As of this writing, CarGurus (NASDAQ: CARG) is worth $3.35B, while Cars.com (NYSE: CARS) is worth $1.94B.] Sad, given the head start enjoyed by Cars.com.
Whether it’s social media or CRM or online buying or creating a great customer experience, the top dealers are continually dissatisfied and this dissatisfaction allows them to grow share and maintain a great, overall company culture that fosters improvements. And, while there will be some disruption to the used car model based on the venture capital being thrown at it, the fact is that franchised dealers are still the only place where you can buy a new (non-Tesla) vehicle in America.
More importantly, being behind other industries with technology, digital marketing, and the customer experience – if it were true – wouldn’t pose a tremendous threat to dealers’ long-term survival the same way price and convenience doomed virtually all other independent retail models.
It’s Price and Convenience
Dealerships are simply not behind, but their long-term survival is certainly in question precisely because of the same factors that killed your local bookstore: price and convenience.
When, not if, autonomous taxis become ubiquitous, consumers will begin to abandon traditional vehicle ownership at a very rapid pace. When the cost of these services drops to 10% of the current ownership model and you can hail one of these autonomous taxis on demand, there will be little reason for most people to own their own vehicle. Consumers simply will not pay more for something that, in the end, is less convenient than the alternative. (They’ll never have to look for parking, pump gas or take their vehicle in for repairs if they use an autonomous taxi.)
Additionally, in an effort to hold market share, retailers (think coffee shops, restaurants and grocery stores) will likely send an autonomous taxi to consumers’ homes to bring them to their establishment and take them back home for free.
Of course, this disruption is many years in the future; and dealers aren’t faced with the need to deal with it just yet. When it does happen, the surviving dealers will be those that already leverage technology to reduce costs, spend their digital marketing dollars wisely, and provide the best customer experience.
Dealers, you see, aren’t behind other industries, but there’s no reason they shouldn’t try to stay ahead of their competition.