Connected Retailing Is What The Automotive Industry Needs Now

Today I'm writing to connect my observations from the just completed 2022 Digital Marketing Strategies Conference (DMSC) with the many conversations which have transpired since I penned my Open Letter to Jim Farley. To date, this letter has been read by over 15,000 automotive professionals on LinkedIn alone.

I believe that we need to shift our extreme focus on digital retailing and move to a realistic middle ground:

Connected Retailing.

Consumer Desire For Pure Online Retailing: 15% not 100%

The automotive distribution and retailing channel is going through a historic evolutionary cycle due to internal and external forces. Many franchise automotive dealers are leading the change management process with innovation to improve the customer buying experience. Positive change in the automotive industry is not getting much press.

One example of modern retailing leadership was shared yesterday by Brian Benstock on a Jim Ziegler livestream event. Consumers contacting Paragon Acura can complete a new car purchase in under 45 minutes with their modern sales process powered by A2Z Sync. Not only can Paragon's customers can complete their purchase online, they can have their vehicle delivered to their home without visiting the dealership. All prices, payments, and products shown to consumers remotely or inside the store are the same because they are powered by the same platform. They are providing a Connected Retailing experience.

Despite Paragon's obsession with the consumer shopping experience, advanced retailing software, integrated technology, and Paragon's unique one-person sales process, less than 15% of Paragon consumers want a buying experience that skips a dealership visit. The gap between Paragon's real-world data and Jim Farley's vision for 100% online sales is wide, so how can we reconcile these different perspectives?

We Need A Balanced Narrative

Who is getting the attention of the news media and is included in OEM executive narratives?

Answer: Automotive dealers who are stuck in the past, smiling in a profit comma, or who confirm the negative stereotypes of the car dealership sales process.

I have sat in the room with dealership leaders who proudly push back at any suggestion that their sales process needs a refresh. I have witnessed defensive postures by Sales and F&I Managers when I suggested that everyone benefits when there is greater online transparency regarding the dealer's transactional price on a vehicle, including F&I products.

As automotive industry leaders, we have to own the fact that it is easy for consumers to throw stones at the historic retail ecosystem.

Despite a normal resistance to change, many dealership leaders realize that they need to do something to lower operating costs if an agency model is on the horizon for EV models. Others want to change but they have no experience changing a sales process that they have been using for 30+ years. Others are frightened by words uttered by Jim Farley which implies consumers want a 100% online sales process, bypassing local dealers which would devastate their sales staff and hurt morale.

The River of Fears

The term "digital retailing" can imply to dealers that consumers will buy a vehicle completely online, which in scale, can generate fear. In fact, General Motors created a new platform to sell used cars direct to consumers (CarBravo), build on the Tekion Digital Retailing Platform (DRP). We need to sunset this term.

Thankfully, dealers have come to discover that consumers will start the sales process online IF given user-friendly tools to explore the affordability of a vehicle, not a dumb payment calculator. Of those consumers who use online retailing tools to compute accurate lease/loan payments (based on their credit score) or to find the value of their trade, over 85% choose to finish the process in the dealership.

Associated with digital retailing is also the implication that dealers must be a "one price" store. The base case is that without a firm selling price, a vehicle can't be purchased online. This has some truth IF you believe a consumer will execute a binding purchase order for a vehicle without calling the dealership for help or to negotiate on the price.

One-price operating models can be a scary step for dealers who have an established culture of price negotiation on new cars formed by decades of OEM oversupply. It's not easy to forget the past even though supply/demand economics are allowing dealers to firmly sell at MSRP.

Dealers are wondering how fast their peers will restart the race to the bottom when supplies of new ICE cars increase.

Lastly, some dealers have moved to a one-person sales process which eliminates the bottleneck and negative perceptions of the F&I office. While the data shows that this model produces equal or greater PVR while dramatically improving operating costs and the customer sales experience, this single concept scares dealers the most.

The current sales process in the majority of franchise dealers includes real pressures associated with putting consumers "in the box". This sales strategy is one of the driving forces behind OEM efforts to sell direct to consumers. Eventually, OEMs will find the right technology and customer support to properly handle F&I properly online.

As an industry we must be aware of our shortcomings and find a path forward to improve our sales process.

Connected Retailing Creates A Bridge Over The River of Fear

Instead of allowing fear to stifle change, there is a middle ground. Instead of believing a false narrative that 100% of consumers want to purchase their next vehicle completely online, why not acknowledge what consumers are really seeking? Consumers want a faster and more transparent sales process with local dealers.

The key to satisfying the desires of consumers is to connect the online sales process to the in-store experience to save time. This is not a new concept, yet the majority of dealerships in the United States use one set of retailing tools on their website and a completely different set in the showroom. From a consumer perspective, the look and feel of the dealership's online desking experience looks dramatically different than the desking tools shown to consumers in the showroom.

I am confident that a Connected Retailing vision is at the heart of why CDK Global purchased Roadster and Reynolds purchased Gubagoo. These two companies also have large field training teams to help dealers transform their sales processes.

Auto dealers should be investing as much energy and money into reinventing their sales process as they plan to invest to defend the franchise model in the U.S.

Instead of looking at "digital retailing" software as the magic bullet to satisfy the needs of consumers, why not focus on using software and a new sales process to create a true connected retailing experience? When consumers use the same tools online as they use in the showroom, trust is enhanced because vehicles and F&I packages discovered online have the same price and payment calculations.

To create a true Connected Retailing experience, more time needs to be budgeted for planning and training when new retailing software is installed online. More efforts have to be made to comfort all members of the current sales team that the change management process will be critical for the long-term success and viability to the franchise dealer model. While it will take years for EV sales to become a majority of monthly dealer sales volume, it is clear that OEMs want to accelerate change.

We Focused On Technology, Not Culture

The problem, as I see it now, is that OEMs have been pushing technology platforms (digital retailing) via co-op programs and have NOT offered co-op dollars for the training required to help a dealer transform their sales process. For example, Stellantis has forced dealers to add E-SHOP software to their website and has discouraged their utilization of more flexible and effective digital retailing software.

E-SHOP is not transforming the retail experience for Stellantis shoppers, nor would any product, if it's seen as a modern "lead generation" tool.

Connected Retailing is not 100% online selling, one-price, or single point of contact. It can contain elements of each (dealer choice), but this framework allows consumers to shop and engage in a manner that suits their personality, without surprises. It's a realistic movement towards the future which allows consumers MULTIPLE paths to purchase, in a time-efficient and transparent manner.

Many dealers are doing offering Connected Retailing right now, but their success stories are often hidden. I'm working with a number of dealers to remove lead forms on their websites in order to serve consumers versus chasing them in the BDC after they leave the dealer's website.

My vision for formless websites is a perfect example of how digital retailing tools can offer a "real-time" retailing experience, but its more than the technology. For one dealer, their real-time retailing strategy is a combination of software from CarNow, the creation of new communication and sales processes, website redesign, implementation planning, and on-site training. For other dealers, it could be a combination of other digital retailing tools but success will be dependent of a new sales framework and not technology alone.

A Word of Caution

Connected Retailing has implications. If a dealership believes the market allows them to add addendums to all new vehicles for glass etching, paint protection, and nitro-fill, then they should be proud of that decision and show that information online. If a dealer decides, based on supply/demand factors, to charge $5,000 over MSRP, then they should be proud to show that price online and in the store.

We have to move away from bait and switch sales practices that are being highlighted in the news every week and that drive OEMs crazy with Tesla envy.

To accelerate change in automotive retailing, it will not come from OEM dictates alone. Automotive franchise owners and members of the vendor community need to focus more on identifying what a modern sales process looks like and build training programs for sales associates on how to use tools and reform processes to improve consumer perception of franchise dealers.

Influencers Should Be Showcasing Modern Sales Processes

As an industry, we need to be highlighting the dealers and dealer groups who are winning with consumers because they offer a modern sales process that one could say achieves what Mr. Farley might imagine Ford customers want. And these successful experiences are being delivered through the entrepreneurs in the franchise dealer network.

To that end, I will be inviting dealership executives to present their retail sales processes at the 2022 Modern Retailing Conference this November in Palm Beach. I also am inviting OEM leaders who are working with their dealer networks to transform automotive retailing to lower distribution costs and improve customer satisfaction. Visit the conference website and apply to be a speaker.

I will be working on creating dynamic panels of OEM and dealership leaders to discuss the future of modern retailing.

Final Thoughts

After five years of selling pure digital retailing tools to dealers through OEM-managed programs, most showroom sales processes are disconnected/different from the online experience. That is why I believe OEMs have concluded that when given a choice, all dealers will not change the historical sales process despite research telling dealers that a change is needed.

Let's flip the script! Let's innovate faster than any OEM mandate by committing, as a first step, to delivering a Connected Retail shopping experience like consumers have on Best Buy or Walmart. Let's share more case studies on what a modern sales process looks like because there will be many variations on the theme. I'm working on at least three frameworks that I will be sharing with dealers this fall.

If you have a retail framework that is working, come on my podcast or speak at MRC this fall. We need to support each other or economic forces will determine the future of automotive franchises more than we would like. If you would like to discuss your ideas offline, send me an email: [email protected].

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