Video: Today's Automotive Technology
Greg Uland is a Marketing Manager at Reynolds and Reynolds.
“Video Killed the Radio Star, and online retailing killed brick and mortar stores. Or at least the ones that couldn’t evolve. In 1983 Best Buy operated 7 stores. By 2001, they were named the “Specialty Retailer of the Decade.” They were Forbes’ “Company of the Year” in 2004, and one of Fortune Magazine’s “most admired companies” in 2006. And then in 2007, there was a great deal of uncertainty and something happened – Amazon took off. Between building and people costs, in-store retailers simply had too much overhead to compete. They had become complacent and bloated. There were BIG losers – Circuit City ceased operations on March 8th, 2009 – but those that invested in technology and evolved also became BIG winners – Best Buy doubled down on technology in 2011 and their stock price from 2012 to 2018 more than quadrupled.
Fast forward to today, and the automotive industry is facing a lot of uncertainty. On top of highly-publicized declining profit margins, most industry analysts predict the current trend of stagnant sales will continue and anticipate a decline is on the horizon. With more pressures bearing down including rising interest rates, import tariffs, and manufacturer production decisions, you know you need to keep evolving to grow profits. But, the million dollar question is, “how?”
Before the great recession the number of dealerships was up as were the number of employees. During the lowest point of the market, we saw the number of dealerships and employees drastically cut back. However today, the average number of employees per dealership is the highest it’s ever been. One would assume with all the technology and advancements, we would be more efficient, right? But, we see the opposite is true. We see that efficiency and profitability are not about having more technology, they are about having the right technology.
As an industry, we are in an interesting spot. There is more to lose and conversely, more to gain. Over the next 2-5 years, we will likely see BIG winners and BIG losers, so deciding how to attack profitability will foundationally impact the future of your business. The question to ask yourself is: what technology is going to help my business be more efficient and in turn, more profitable?
As far as technology goes, there are three fundamentally different approaches in the market today.
The first approach I’ll call the silo approach. Do you remember owning one of these stereo stacks? The silo approach is built much like this. In this approach, your dealership works with one company who owns several smaller companies. In many cases, the parent company acquires another company because they created a product the parent company doesn’t already offer. The struggle is these products all function separately and don’t account for the parent company’s other solutions. While individual solutions address individual issues in your dealership, they don’t create new, overarching efficiencies. Dealership processes aren’t refined – if anything, they become more tedious and time-consuming requiring you to add people and drain profits.
The silo approach guarantees that, even as individual surface-level problems are addressed, your dealership will not fundamentally change. Your dealership will keep running the way it always has. There’s no way “how we’ve always done it” is good enough for the future of your business.
The second approach is the reliance approach. It asks third-party companies to create tools that follow the standards of the parent company so they can share data. Sounds logical enough, but there are some big hurdles with this approach. The companies creating these tools are still independent, so each person and transaction ends up duplicated across your system, nullifying the benefits of shared data. Does having seven Jesse Smiths in your system seem efficient to you? Remember the game guess who? Imagine playing that with every customer that walks through your door.
Additionally, it becomes extremely tedious, and in some cases impossible, to have accurate reporting and analytics to assess and improve your business. You end up with seemingly endless reports all citing various results on the same metric. There is no way to identify what improvements are needed.
It’s similar to adding different products to a car to increase fuel economy – an air filter that adds 15%, an additive that adds 10% - if they all impacted that metric as advertised, you will never have to fill up.
The reliance approach can’t provide the insights needed to create new profit centers, streamline operations, and drive the success of your dealership.
The third approach is the built as one approach – a single platform that accesses a single set of data and has a single unique identifier for every customer. What makes this approach unique is what happens between the products. This approach also allows for old processes, automated or manual, to be discarded. It allows for a legitimate promise time on a vehicle, with recommended services, to be generated before the first call from the customer is even answered. It allows for autonomous funding of a deal – not just sending a contract electronically, but removing the human set of eyes to evaluate the deal completely.
With a unique identifier for each customer and each transaction it becomes possible to predict what someone will buy, when they’ll buy it, and how you should present it. Because of this, the profit generated through technology using this approach increases exponentially.
At the end of the day, profitability is simple: either income goes up or expense goes down. A system with a single technology platform pulls both levers. More income per customer, less expense per transaction – think about your contracts in transit with seven days of interest expense on $2 million of floorplan.
This approach is about creating a new way of doing things that is otherwise impossible. With a single system your DMS isn’t just a DMS, your CRM isn’t just a CRM, your service write up tool isn’t just a service write up tool. All of it, together, is a Retail Management System. The technology improves efficiency, customer and employee engagement, and increases profits exponentially.
There is no question that our industry is continuing to change and you need to evolve to grow profits. The answer is not more technology and more people. The answer is the right technology.
These three approaches are fundamentally different. And they provide fundamentally different results. There are going to be BIG losers and BIG winners and now is the time to find the right technology for your business.
The stakes have never been higher.”