Technology has the opportunity to make general dealership functions more efficient. That s what AutoTrader.com is trying to do.
(Chip Perry is the CEO of AutoTrader.com.)
In the past year, AutoTrader has expanded considerably. How is that going?
We are even more excited now about the potential to create new value in the industry through the acquisitions we've made than we were when the deals were done.
It's because the opportunities we saw looking at the companies, from the outside in, have all been confirmed. There's only so much you can learn through the due
diligence process. But you always hope there won't be negative surprises. In our case, we haven't had any negative surprises and we've been delighted with some of the positive surprises we see for future opportunities.
We're very upbeat about how the online side of the automotive industry is going to evolve in ways that will be both useful for consumers and also (help dealers) go to market with technology more efficiently than they can today.
The future looks very bright from our perspective. We think it's probably still in only the second or third inning in the evolution of where it ultimately will get in the next decade.
We also have what we call the trade-in marketplace. We're the first company in America to offer consumers an instant offer, sight unseen, subject to an inspection of the vehicle. This enables dealers to capture trade-ins that they would not otherwise seek.
How are these acquitions helping dealers?
Picking the right car pricing it properly used to be done by dealers gathering information in the auction lanes and watching their own lot traffic to see what people wanted to buy. Today, there are very sophisticated stocking, appraisal and pricing tools that allow dealers to be much more scientific about their business. It enable dealers to surgically pick what car to buy and how to price it so thay can have maximum turnover and maximum profits. By acquiring vAuto, we have injected into an already strong company a new source of information which is allowing them to improve their stocking tool.
We grew organically at AutoTrader.com for the first decade. Now we've started to make acquisitions. The guiding force behind those has been and will continue to be driving and creating new value for our dealers.
So we're improving vAuto with AutoTrader.com data and Manheim data that they didn't have to access to before. We're also taking vAuto data and proving it free to AutoTrader.com dealers.
Another example is VinSolutions, which offers an intergrated suite of solutions that include wesbite, CRM and desking capabilities. Many dealers today have to deal with an alphabet soup of vendors for software that come with numerous user names and passwords. It's mind-bloggling. VinSolutions has a single log-in.
This is important because when a dealer sells a car these days he ofte creates an email relationship with the customer. When the customer answers that email, the CRM can capture a cookie that identifies that customer through their web browser. When that customer visits the website in the future, the system notifies the dealer a current customer is on the website.
Technology has the opportunity to make general dealership functions more efficient. That's what AutoTrader.com is trying to do.
AOL recently reported figures about the number of dial-up modems that are still being used. When everyone is on broadband, will that unlock the potential even more?
Yes, I think there is the ongoing increase in the percentage of consumers using the Internet to shop. That's driven by the pervasive availability of broadband now. But it's also because of mobile devices, which are cellular or Wi-Fi enabled.
We see that the percentage of car buyers shopping online is in the 70- to 80-percent range. That's gradually growing every year by a percentage point or two.
More important than the (transition from dial-up to Wi-Fi is the capability of the software on third-party sites for consumers and dealers. The inefficiencies that can be eliminated through better software tools that go deeper into the car-shopping experience and deeper into the dealership operations workflow. There's a tremendous amount of innovation that's going to happen in the next decade and in the next two or three years.
For many years, third-party sites provided information side-by-side with email forms and banner ads. That was the way sites chose to construct their businesses and there wasn't much change.
But now there are tools to help people what car to buy.
If you look at a category like mid-sized SUVs, there are 25 or 30 different vehicles to choose from. How do you make that choice?
There was a recent column in the Wall Street Journal talking about how people are using software now to figure out what car they should buy.
One thing that isn't changing is the role of dealers in the car-buying process. Your company has been a big supporter of dealer organizations like the National Independent Automobile Dealers Association. So what do you see in the future for dealers in regard to interacting with technology?
At its core, the Internet will remain an influencing, advertising and marketing system for dealers, rather than a transactional or direct response medium. People will continue to buy cars from people, rather than automate the process.
Not many consumers have: the money in hand; the exact certainty on the car; and the lack of need for liquidity in their trade in order to do an end-to-end online transaction. There's only a very small segment of the consumer population that's able to do that. Plus, the tools are not likely able to go end-to-end cleanly anytime soon.
Technology plays three ways in the auto retail space three ways: Attract, convert and mine. It plays in the way of helping to attract consumers to their store. Secondly, it helps them convert prospects once they're in the net of the dealership. Thirdly, technology can help dealers mine and develop more business with existing customers and past customers.
We've been in 970 dealerships and spoken to 130,000 consumers through a third-party research firm. It shows that the Internet is killing traditional media in terms of how much more influence it has in the car-buying process. Seventy percent of the time, when people buy a car at the dealership, they have not previously contacted the store before showing up. They show up after doing online research, an average of 11 hours before buying their cars.
The email lead phenomenon has basically died on the vine in the automotive industry over the past decade. We still have to respond to email leads and it's important we do it quickly. But it's not the main event. It shouldn't be the centerpiece of any dealer's strategy.
One important use of the Internet is mining your current customer base. Provide good solid communication that is meaningful to loyal customers.
So how should dealers best use the Internet?
The centerpiece of a dealer's strategy should be, how do I use the Internet as an advertising medium to attract people into my store?' There's a few simple things they can do.
First, dealers need to purchase cars that are in demand at the right price.
Secondly, make your vehicles stand tall on the Internet, so people will want to come to the dealership to see the car they found on the dealer's website or third-party site.
Thirdly, a dealer needs to make their dealership stand tall online. They have to differentiate why it's a good place to do business. Talk about the positive attributes. For example, some dealers have automatic inspections, warranties or purchase-assurance plans with every car. Some might have the lowest price in town, but don't discuss the assurances they provide. So every dealer has their claim to fame about why they're the best place to do business. Many dealers today are not highlighting the positive attributes of their stores to maximum effect.
Are dealers starting to embrace technology more?
Yes they are. But there's still a fair amount of skepticism about technology because a lot of it has been oversold. There's been some tools that haven't lived up to expectations.
The bar is raised is raised for venders now. They have to provide high quality, transparent understanding of what a technology tool can do. You have to show how it works and back-up the (product) with post-sale support. Dealers expect to receive individualized service and support after they've bought a media or software tool.
The most important key to success, for technology providers, is helping a dealer succeed with their existing tool before asking them to adopt something new.
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