Beepi and Vroom and Carvana - will they make a DENT?

[skutchhenks]

I empathize with Clay's rant. I'm surrounded by brilliant people, but it astonishes me on how few really understand what's happening inside dealerships. I must spend 80% of my efforts in teaching, mentoring and communicating.

IMO, here's why so few people understand WTF is going on.

1. Shoppers are invisible.
2. Dealers are pre-judged to be the cause of unethical behavior.

#1). Shoppers are invisible.
Car shoppers have a clear path, it's called ROBO (Research Online, Buy Offline). They prefer to be shopping stealth. Dealers AND vendors have no clue as to what or how the invisible internet shopper impacts their business. How can you measure ROI if you can't see the damn shopper? we're left with dealers and vendors chasing lead gen when in fact lead gen is NOT a productive shopping experience. The lack of performance visibility creates a features arms race that makes HIPPOs happy.

#2). Dealers are pre-judged.
The urban legend of evil dealers has to die. It amazes me how so many many intelligent people can't see the facts. Negotiation is a dance. In almost all cases, negotiation is begun by the buyer (not the seller). Car shoppers are very selfish. Car shoppers have all the tools to buy cars and financing at the cheapest rate. No where in this "evil car dealer" narrative do I ever hear about shoppers taking responsibility. This belief is un checked and is rooted in bad science. This legend has to end.


IMO we need more dealer voices in vendor world. Clay's apology was a welcome site.

Joe nails it, again.

The majority of any dealers sales every month are invisible shoppers, the first time a dealer even knows they exist is when they show up at their lot. The other remainder of the sales hit the CRM and maybe most can be attributed to a lead source, that MOST all dealers rely upon to make their advertising decisions. That's just crazy to me.

I also think it's an urban legend about dealers for the majority of shoppers out there. I think there's an outspoken minority of shoppers that make up the majority of this negative feedback perception. Shoppers want to visit dealerships to see cars, drive them, smell them, and I don't think that will change anytime soon.

 

[craigh]

I also think it's an urban legend about dealers for the majority of shoppers out there. I think there's an outspoken minority of shoppers that make up the majority of this negative feedback perception. Shoppers want to visit dealerships to see cars, drive them, smell them, and I don't think that will change anytime soon.

I do agree entirely with this statement. I'm not here to say that "dealers are bad", but I'm also not going to pretend that "dealers are good" is an all-encompassing statement. I grew up in a dealership and I worked in every corner of that store before I left. It was a family dealership and I maybe saw 3 upset customers in the entire 6 years I spent there - they based their entire business model around customer satisfaction and it's been reflected in 25+ years of being in business with no marketing expense, never contacting a customer after they buy a car, never pushing service onto customers and never trying to force a customer to buy. Pushy sales people last less than 2 weeks before they're asked to leave. I certainly believe dealerships can be a great place to do business and customers can be satisfied because I saw it first hand year after year.

That said, now that I've left the dealership and live in a vendor role I see all sorts of dealerships. I see dealers that are completely blind to their customer feedback, dealers that are just plain awful and dealers that can't don't play by the rules. These are all outliers, but outliers can sometimes give an industry a bad name with small groups of people.

A bit more back on topic...

The landscape is changing and big players are starting to make some big moves. I think we're seeing the launch plans now, but in 18 months we'll be seeing much more action.

45.9% of 1000 motorists are prepared to complete the car buying process online:
http://www.am-online.com/news/digit...ine-from-franchised-dealers-they-trust-survey

Only 1.5% of consumers expect to be satisfied with the shopping experience:
http://www.automotive.ventures/trust-and-transparency-key-to-dealers-survival-and-growth/

Consumer Discussion on Dealership Mystery Shops:
https://www.reddit.com/r/Calgary/comments/30nqac/most_new_car_dealerships_fail_mystery_shopper/

See? You can find articles and studies to support anything.

 

[skutchhenks]

I do agree entirely with this statement. I'm not here to say that "dealers are bad", but I'm also not going to pretend that "dealers are good" is an all-encompassing statement. I grew up in a dealership and I worked in every corner of that store before I left. It was a family dealership and I maybe saw 3 upset customers in the entire 6 years I spent there - they based their entire business model around customer satisfaction and it's been reflected in 25+ years of being in business with no marketing expense, never contacting a customer after they buy a car, never pushing service onto customers and never trying to force a customer to buy. Pushy sales people last less than 2 weeks before they're asked to leave. I certainly believe dealerships can be a great place to do business and customers can be satisfied because I saw it first hand year after year.

That said, now that I've left the dealership and live in a vendor role I see all sorts of dealerships. I see dealers that are completely blind to their customer feedback, dealers that are just plain awful and dealers that can't don't play by the rules. These are all outliers, but outliers can sometimes give an industry a bad name with small groups of people.

Right on, you just explained why the evil dealer urban legend exists. Now wrap in the whole world of car dealers, from a gravel lot BHPH to a glasshouse franchise dealer and there you go.

Also on the data you provided, and the customer feedback about the process, I believe is valid and true. As an industry I think it's up to the OEM to assist their dealer network here, it would be more valid (cost effective), and operationally functional. All the tools are already there, all they need to do is connect the dots. If they don't, you're right about the 18 months away part, because it's going to happen.

 

[joe.pistell]

45.9% of 1000 motorists are prepared to complete the car buying process online:
http://www.am-online.com/news/digit...ine-from-franchised-dealers-they-trust-survey

Only 1.5% of consumers expect to be satisfied with the shopping experience:
http://www.automotive.ventures/trust-and-transparency-key-to-dealers-survival-and-growth/

Consumer Discussion on Dealership Mystery Shops:
https://www.reddit.com/r/Calgary/comments/30nqac/most_new_car_dealerships_fail_mystery_shopper/

See? You can find articles and studies to support anything.

Craig, consider the source, not one of these studies originate from data captured inside the store.

I am 100% on board with addressing trust, but, I want to know how mission-critical is trust to shoppers?

For our experiment, let's assume that dealer trust is critical. From this thesis, we'd see shopper behavior that'll send us loud signals that 'lack of trust' is the shopper's #1, 2 or 3 concern. If this were true, then I would expect to see Dealer Reviews owning the shopping process (like it does in restaurants). I would expect to see mountains of anxious car shoppers seeking out dealer referrals from happy car shoppers (and shopping no where else). If this were true, the high trust stores would have an exponentially higher rate of repeat buyers than the benchmark.

Speaking as a car dealer, show me the money. If trust is so mission-critical to car shoppers, then every where we'd look we'd see dealers with top of class reviews winning the majority of the sales (like in restaurants). No? Let's flip it over... if trust is so critical to car shoppers, then how could dealers with poor reviews stay alive?

I have found pre-sale surveys universally speak to negotiation anxiety. This is because shoppers intuitively know they have to ask for a discount to discover the lowest price. Shoppers are not comfortable with this (they'd prefer to do it thru a broker like in real estate). Again, it's friggin 2015, not 1995. Prices are posted, shoppers can search 200 miles from home. Dealers are forced into this dance by the buyers.


"Buyers are liars?"
Wheres the study that follows 100 car shoppers from start to finish and counts how many white lies they told along the way. It's time for this urban legend to die. Someone outside our industry needs to fix this.

 

[craigh]

Craig, consider the source, not one of these studies originate from data captured inside the store.

I always consider the source, which is why I believe none of what I read in surveys.

See? You can find articles and studies to support anything.

My point was that you can find surveys to support any idea, so making operational decisions based on someone else's data is always a risk.

As to everything else you said, I absolutely agree and I think we've always been on the same page on that front. Just like dealers are good and bad, so are customers. I think we too often group customers into large buckets that are far too "mixing pot" and don't address individual needs well enough.

For example:
- Some customers buy a car strictly based on price. You had it, they wanted it, they bought it. You email them when the new model comes in and the price makes sense (payments are even lower than before) and they'll buy again. They may not have any loyalty to you at all, but price got them in the door twice.
- Some customers buy a car based on the experience they have. A good experience with the salesperson builds enough trust that the gross is no longer the only thing that matters. I see handfuls of reviews for dealerships that have 5 stars in all areas and 3 stars in price, but the review never once mentions the fact that they had an issue with price.
- Some customers impulse buy and have no financial sense at all. I see these customers all the time when they come in, the dealer barely gets them financed and 4 months later I see them coming in again with the keys to their vehicle because they couldn't make it work. These customers aren't even buying within their realistic means.
- Some customers do the entire purchase in the "passenger seat". I recently coached a friend from "What car should I buy" all the way through to her final purchase of a 2015 Elantra. She didn't care at all, she just wanted someone to help her navigate the dealership process because she had never purchased a car before and the idea was a bit intimidating.

Now, with my vendor hat back on, we're back at the issue of invisible shoppers and trying to identify which of the dozens of buckets each customer belongs in and how can I tailor the products, experience and process around them. It's stupid to say that "customers think dealers are bad" or "X% of customers don't trust dealerships" - unless your sample size is 1000 different dealerships and 100,000 different customers then I really don't buy into it even a bit. This whole idea of "customers" being a single-minded body that acts a certain way is a load of phooey and anyone who has spent a day in the dealership knows this. Vehicles aren't like high end fashion or other products that cater to a "small" group.

We can discuss how to target 75% of them or we can discuss the 80/20 rule and how to make the most of it, but I think the generalities are far less useful than studies would like me to believe.

IMHO of course. I'm years of experience behind almost everyone here and I'm learning as I go.

 

[Alex Snyder]

I empathize with Clay's rant. I'm surrounded by brilliant people, but it astonishes me on how few really understand what's happening inside dealerships. I must spend 80% of my efforts in teaching, mentoring and communicating.

As someone sharing in those efforts with you I obviously agree. And I sympathize with what Clay Toporski is saying about vendors thinking they know it all because they don't. Most don't.

Car sales are complicated. Cell phone sales are complicated. Mortgages are complicated. The laws around them force the complications. And then you mix the emotions of a consumer and it is a total cluster fuck that isn't easy to solve for.

Where vendors miss the boat is in their rational thinking. It seems to me many make the mistake of believing the car shopper they're interviewing or the dealer they're talking to is always as calm-headed and systematic as they are during that conversion. They don't appreciate that the best way to make a car deal is to join the customer in their emotional craziness and the stresses that come with commissions, targets, quotas, etc. Aside from the vendor's sales staff, and top executives, the rest of the company is typically on salary.

One of the greatest operational learnings I've made in seeing the stark contrast between dealerships and technology organizations is that pay plans absolutely drive the worker. The sympathies technologists have are purely based on the personality of that technologist when they haven't had to put food on the table based on the irrationality of some customer's insane emotions. They just don't get it and only would if they, themselves, were subjected to a dog-eat-dog way of earning income.

However, the long-term vision and rationality of the technologist is a compliment to the overall betterment of the industry. While the dealer is thinking month-to-month the technologist is thinking at least about the next NADA. Some may even thinking about the next 3 NADAs

The long-term commitment to a deliverable does drive new ideas and progression. The competition between those deliverables drives innovation. If the entire industry was stuck in a month-to-month customer feeding frenzy there wouldn't be evolution at all.

 

[ruggles]

At some point we should take inventory of all of the pie in the sky startups and list them on one side of the page. On the other side, we should list the ones that have succeeded and thrived. I'm not talking about the ones who still exist based on investor money, I'm talking about those who make actual operating profit. For example, if Amazon were automotive, it wouldn't be on the list because it is so far in the red since inception, God knows when they will see the light of day. Same with Tesla and/or TrueCar. You can be disruptive, but if you don't make operating profit your days are numbered. Some of these companies morph into something else and/or are folded into something else.

Companies like Amazon are a HUGE problem. For my part, I do around 200 transactions a year through them. I even buy cat litter through Amazon. I depend on them. I don't want them to go away. The last thing I want to do is to park outside a WalMart, walk half a mile to get inside, then walk another half mile finding the few things I need. But at some point, Amazon will have to start making money or do something else to survive.

You can put Beepi and Vroom into the failed department right now. I don't care how much money they've raised. They can't succeed in their current form. Same with Carvana and/or TRED.

An observation: These crazy big money investment automotive deals mostly come from CA, in particular, Silicon Valley. The smart money comes out of NYC. It isn't so easy to get. Take Beepi for example. In CA, there is no credit given for a tradein when calculating sales tax. Evidently, CA investors think that is how it works in the other states. In fact, there might be 3 - 5 additional states that charge sales tax on the selling price instead of the "difference." Ask yourself what happens to the additional $1500 Beepi says they will give for a consumers trade in after Beepi buys the consumers car and they go to the dealership to buy outright in most of the United States. It doesn't appear the "transparent" Beepi explained this to their investors. Perhaps they didn't explain it because they didn't know?

 

[Chris Leslie]

You should care how much money they've raised because it is not small.

We shouldn't be so blindly fixated on the financial statements of any one particular company here. The focus should be on that fact that it even exists. It represents an itch that us dealers are not scratching.

The companies are operating in a blue ocean market while dealers are battling it out in a red ocean.

Blue Ocean Strategy is a book published in 2005 and written by W. Chan Kim and Renée Mauborgne, professors at INSEAD and co-directors of the INSEAD Blue Ocean Strategy Institute. Based on a study of 150 strategic moves spanning more than a hundred years and thirty industries, Kim & Mauborgne argue that companies can succeed not by battling competitors, but rather by creating ″blue oceans″ of uncontested market space. They assert that these strategic moves create a leap in value for the company,
https://en.wikipedia.org/wiki/Blue_Ocean_Strategy

It's easy to wave an idea a way when it doesn't match up to your own view of the world. But I would suggest stepping out ones own ideas of how things are done or should be done and just play around with the idea of "What if these guys are on to something."

Just try it on like a pair of pants. Live in it for a couple of days.

 

[ed.brooks]

At some point we should take inventory of all of the pie in the sky startups and list them on one side of the page. On the other side, we should list the ones that have succeeded and thrived. I'm not talking about the ones who still exist based on investor money, I'm talking about those who make actual operating profit. For example, if Amazon were automotive, it wouldn't be on the list because it is so far in the red since inception, God knows when they will see the light of day. Same with Tesla and/or TrueCar. You can be disruptive, but if you don't make operating profit your days are numbered. Some of these companies morph into something else and/or are folded into something else....

The problem here is that Borders, and Circuit City, and scores of other businesses are out of business because of Amazon and other online players. Dismissing these companies because they have yet to show a profit is naive.
"Their profits may be a dream but the disruption is real."

 

[Chris Leslie]

Adding to Ed's Point...

Vroom, which has raised $73 million in total equity funding since its founding in 2013 by former AutoNation execs Marshall Chesrown and Kevin Westfall, expects to generate $300 million in revenue this year.

Last year, the firm generated $100 million in revenue, and it’s on pace to increase that to $300 million this year. In May alone, the company reported $20 million in sales. And with its new round of funding — which brings its total equity funding since its founding to $73 million — the company picked up investors that have backed sites like Snapchat and Kayak.

Next month, Vroom expects to launch a complete online financing process, one that will allow site visitors to secure financing and even select from the firm’s four F&I protections. F&I and Showroom spoke with Scott Chesrown about the company’s business model and why he believes consumers will buy F&I products online.

http://www.fi-magazine.com/channel/internet-department/article/story/2015/10/vroom-service.aspx