Tag: Zag

Dealer Megatrends Part 3 – Process Change

In my previous Megatrends article, I wrote about how advancing technology is changing the role of F&I.  This week, we examine some new business practices.  You already know what I mean.  We’re going to talk about:

  • Hybrid Sales Process
  • No Haggle Pricing
  • Salaried Employees
  • Flat Reserve

High line manufacturers have tried to promote “one face to the customer,” since I was at BMW in the twentieth century.  Lexus Plus is the latest iteration.  Tellingly, BMW called it Retail 2000.  I fondly remember hearing a radio spot for “the last BMW dealer” in San Francisco, because we had styled all the others as retailers.  “If you want to pay retail, go to a retailer,” the ad went, “to get a deal, you need a dealer.”

So, it goes in cycles.  Lexus, or Scion, or AutoNation, will roll out a new process only to be outmaneuvered by the wily dealers.  Then they retrench and, five years later, someone else tries the new process.  They could literally be passing around the same procedure manual.  Look at me.  I have been advocating price transparency since Zag.

One Sonic-One Experience offers no-haggle pricing with one sales rep using an iPad who takes the customer through the entire vehicle sales process, including financing and the F&I product presentation.

A good example of the new process is Jim Deluca’s exposition of the Sonic One Experience.  In their EchoPark process, Sonic also eliminates dealer reserve.  The fight over flats and caps lasted from roughly 2012 to 2014.  See here, and NADA’s endorsement of caps here.  Next, Sonic will leverage their heavy investment in training to roll all of this into an online process called Digital One-Stop.

I suspect that Sonic would soon like to fire all their trained F&I professionals in their self-interest of saving a buck.

Forum comments reveal that old-school practitioners dislike the new process.  It’s funny to hear an F&I manager accuse a dealer of shameless self-interest, but there it is.  On the other side, Sonic’s Jeff Dyke reports good results from hiring people with no prior automotive experience.  Meanwhile, at rival consolidator AutoNation, 70% of the sales staff opted to go on salary.

Well-known F&I trainer Tony Dupaquier is here, advocating the hybrid process at First Texas Honda, and here is Findlay Group’s Las Vegas Subaru.  Savvy dealers everywhere are experimenting with at least two or three of the four new practices (online selling and iPads come up a lot, too).

Smart people have told me that the hybrid process will never produce four-digit PVRs, but many dealers – and certainly the consolidators – reckon that’s a price worth paying for a streamlined process, reduced turnover, and improved customer satisfaction.

Ahead of Its Time

I like TrueCar.  I have used the service myself, and recommended it here before.  So, I was sorry to read that they are being forced out of Group 1.  My vision of Online F&I, in a nutshell, is that customers will someday desk their own deals.  That’s why I applaud AutoNation for their persistent efforts to move away from the antiquated “secret pricing” approach.

Group 1 had also been in the vanguard, but now Honda is pressuring them to drop the TrueCar relationship.  The comments from Honda remind me of some I heard way back when MSRP data first appeared on the internet.  “Unacceptable,” stormed Herr Heitmann, “must be stopped!”  Meanwhile, Edmunds was already publishing our invoice prices.

Of course, as an e-commerce guy, I am biased.  You can’t just say information wants to be free, to an angry factory exec – or a struggling GSM.  Except that it’s true.  Transaction prices, like invoice and MSRP, are going to be out there.  We might as well get used to it.

BMW Dealer Visit

TruckIn my business, you can never spend too much time in the dealership.  I bought a new car over the weekend, and took the opportunity to study their software (they didn’t believe me, that I had invented the InfoBahn).

“Hey, can I sign this waiver electronically?”  No.

“Does this desking system push to ADP?”  Not exactly.

Aeros is a slick little system, certified by BMW two years ago.  I gather they’re in a couple hundred dealerships.  I liked Aeros a lot, but noticed the F&I Manager rekeying between it and ADP.  Just user error, I hope.

The same goes for the menu presentation.  Scratching out the GAP row with a Sharpie is probably not what Maxim intended.

I enjoyed using Zag.  They have a good, web-friendly process, and it gets you close to invoice before the first phone call.  Of course, this cuts into gross – but hey, I drove past the other BMW dealer.  Like many BMW drivers, I will order a car sight-unseen. This makes BMW a prime brand for online selling, and Zag.

Upfront Pricing

AutoNation is going to have another try at no-haggle pricing.  This time, I think they will succeed.  I think the market is ready for it.  By coincidence, I had just read Zag’s white paper when Mike Jackson made the announcement.   He was talking about no-haggle in the showroom, but this has important implications for my field, e-commerce.

Zag’s argument is that if you’re the only dealer in town not giving a price on the internet, then you’ll be left behind.  The flip side is that if you’re the only dealer who is doing it, then your competitors can easily undercut you.  The trick is to create a movement in the industry – and AutoNation has the scale to do that.  The article also cites Sonic, Asbury and Lithia.

Mr. Jackson says pricing is the last frontier in auto retail, and this is doubly true on the internet.  It’s the one thing preventing true, business-to-consumer, online F&I.