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ILLUSTRATION COPYRIGHT iSTOCK/THINKSTOCKTHE BIG STORY / SEPTEMBER 2017Auto DealersLove/HateThird-Party Lead ProvidersBY STEVE FINLAYDealers harbor a love-hate relationshipwith third-party automotive websites thathave become firmly established conduitsbetween vehicle buyers and sellers.In their perfect world, dealers wouldn’t need torely on and subscribe to the services of middleman websites that list inventories, post customerreviews and deliver sales prospects.

THE BIG STORY“It’ssomethingyou haveto accept,”Sergentsays.And in a perfect world,we wouldn’t needhospitals.Ideally, “we wouldn’tneed (third-party providers) because your dealer nameand recognition would be sostrong, everyone would go rightto you,” says Andrew Sergent,marketing director for SellersAuto Group, based in FarmingtonHills, MI, and representing Buick,GMC and Subaru.But the third-party sites – someof which have morphed into new2 WARDSAUTOWARDSAUTOSEPTEMBER 2017business models, most of whichhave enriched their content, functionality and usefulness over time– are go-to places for a majorityof online vehicle shoppers.“It’s kind of something you haveto accept,” Sergent says.Car consumers spend 60% oftheir time on those independentautomotive sites. That’s followeddistantly by dealers (16%), searchengines (11%) and automakers(9%), according to an IHS study.Consumers perceive the thirdparties as unbiased information

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THE BIG STORYsources, but some reality checksous and their business modelsare in order, says Steven Szakaly,can differ. The big ones includechief economist of the NationalAutotrader, Kelley Blue Book, Cars.Automobile Dealers Assn.com, Edmunds, CarGurus and“They absolutelyRoadster.SHOPPINGFORFORhave the reputationIn the used-carYOUR NEXT VEHICLE?of being impartial,”market, sites suchAccording to an IHS study,he concedes in aas Carvana, Vroomhere’s how car consumersprevious interview.and TRED sellspend their time online:“But this is a retailvehicles directly to 60% on independentmarket. Let’s notconsumers online,(third-party) automotivesitesfool ourselves bysomething thatsaying these comgives many auto 16% on dealers websitespanies are assistmotive industry 11% on search enginesing their customerpeople pause. 9% on automakers sitesout of the love theyMany of the thirdhave for them. Theyparty sites areare there to extractfounded and run byvalue.”MBA graduates of pedigree uniBecause major third parties areversities, including Harvard andtechnology juggernauts, they have Dartmouth. They are people whoamassed huge amounts of data.see opportunities and capitalizeAmong other things, that dataon it. New- and used-vehicle salestrove aids in search-engine optiin the U.S. total more than 1 trilmization, giving them high placelion a year.ment in search-result listings.At this year’s Automotive CX“They can really dominate theSummit in Los Angeles, manySEO game, to the point of showparticipants wondered (and oftening up higher with the listing of aworried) when Amazon – which isdealership’s car than the dealergearing up to sell cars in the U.K.ship’s listing of it,” Sergent says.– might make the scene in the U.SThe independent sites are numerThey figure if the e-tail giant can“Let’s not foolourselves,”Szakaly says.4 WARDSAUTOWARDSAUTOSEPTEMBER 2017

THE BIG STORYAmazon:Will it enterthe autoretailingbusiness?get into the grocery business inAmerica by buying Whole Foods,as it did this year, inevitably it willenter the country’s auto market.“Amazon is telling us its planis to serve us – serve us for dinner,” says Brian Benstock, dealerprincipal of Paragon Honda andAcura in New York City.In something of a preemptivestrike, he spearheaded ParagonDirect as a way for consumers todo virtually a complete auto transaction online, with the dealershipdelivering the purchase to them.Benstock calls it “click, buy and5 WARDSAUTOWARDSAUTOSEPTEMBER 2017deliver.” The system enabling itis powered by Roadster.com, acompany that has become closerto dealers after a business-modelreconfiguration. It started out asappealing directly to consumers.Now, it works through dealers.PIVOTINGTOWARDS DEALERS“We pivoted the company, takingthe technology we’d been offering to consumers and making itavailable to dealers as white-labelsolutions,” says Roadster CEOAndy Moss.

THE BIG STORY“We potentially were a threatto dealers because we directlywere offering consumers a fulle-commerce experience,” he says.“Now, we are offering solutions todealers so they can compete withsome of the threats they are facing.”Previously, Roadster hadacquired an automotive brokerage firm that allowed it “to takethe customer through the entireRoadster pivoted journey, right up to delivery,”toward a dealeroriented model, Moss says.But it shifted away from thatCEO Moss says.business model and toward dealers for a couple of reasons.One was that some tech-savvydealers contacted Roadster. Theysaid they didn’t like brokers butdid like Roadster’s technology,and were willing to pay to pluginto it. In response, Roadster provided what they needed to set upfull online commerce and complementary in-store technology.A second reason for the business-model shift was that eventhough Roadster as a broker wasdelivering about 100 vehicles amonth to online customers, itwasn’t easy.6 WARDSAUTOWARDSAUTOSEPTEMBER 2017“It was a microcosm of living inthe dealers’ shoes, with the realization that selling a car is a complex transaction,” Moss says. “It’shard for a tech company to learnto be a car dealer. If you don’thave the dealer DNA, it’s a loteasier to help a dealer apply anduse the technology. That’s whywe pivoted Roadster.”Consequently, he says, “Wewent from a starting point wherewe were among the people youmight put on the threat list toproviding solutions to dealers ontheir websites.”Without referring to a particular company, Brian Allan, groupdirector-business developmentat Galpin Motors, No.52 on theWardsAuto Megadealer 100, says:“People who thought they couldeat our lunch as dealers havebecome partners.”“We went from a starting pointwhere we were among the peopleyou might put on the threat list toPROVIDING SOLUTIONS TODEALERS ON THEIR WEBSITES.

THE BIG STORYA company that rebuffed Allanis now defunct, he says withoutregret. Online start-up Beepi hadsold used cars directly to consumers, but folded last year aftergoing through 150 million in venture capital.“I was so glad to see Beepi goout of business,” Allan admits.He recounts how he onceapproached a Beepi executiveabout working together. “I said,“I was so glad‘I’m with Galpin Motors, and weto see Beepi goout of business,” sell 32,000 vehicles a year and do 1.4 billion in business.’ He said,Allan says.‘Yeah, but you’re still a dealer.’”Moss says, “Beepi is a casestudy of having the technology,but going too fast and not understanding the complexities of theunderlying business. Being a dealer is harder than they anticipated.”Roadster’s digital tools are particularly popular with Millennialbuyers, says Michelle Denogean,the company’s chief marketingofficer. “Car buyers today expecta great customer experience, anda study indicates Millennials walkinto car buying with a much morepositive outlook than previousgenerations.”7 WARDSAUTOWARDSAUTOSEPTEMBER 2017At the CX conference in L.A.,one participant, Eric Angelo, aCadillac marketing executive,exhorted attendees to “defendthe industry before Apple orAmazon tries to take it over.”Among potential theories onAmazon entering new-car retailingis that it would either buy a dealergroup or persuade manufacturersto give it franchises to sell cars.(Selling used cars, online or inperson, does not legally require amanufacturer’s franchise.)“The threat isn’t that Amazonwould sell direct,” says Moss.“They would act more as a leadgenerator and as the first point ofcontact with the customer. Theywould hand the lead off to a dealer. It’s a question of which one.”UP AGAINSTTHE WALMARTAnother major retailer, Walmart,has teamed up with CarSaver, awebsite that allows car shoppersto search by body style, make,price and payment.Several Walmart stores nowinclude “Car Buying Centers”wired into CarSaver technology.

PHOTO COPYRIGHT JUSTIN SULLIVAN/GETTY IMAGESTHE BIG STORYWalmart andCarSaverhave teamedup.Th two businesses “are workTheing together to bridge the physicaland digital divide for auto sales,”says Chad Collier, CarSaver’s cofounder and president, who is nostranger to dealerships.He bought his first dealershipat the age of 26, becoming theyoungest non-succession dealerin Ford’s history. By age 32 he hadacquired and sold three stores,the last to AutoNation.He launched the CarSaver platform in 2011. Besides WalmartSupercenters, partners includeAutoNation and Univision, aHispanic media company.8 WARDSAUTOWARDSAUTOSEPTEMBER 2017Collier says the pilot programwith Walmart focused on, “Howdo we turn a grocery shopper intoa car buyer?”New-car consumers who usethird-party automotive websitesstill must buy the vehicle througha dealership. But Internet shopping has turned things around.In the old days, shoppers startedtheir buying journey at the dealership. Now, they end it there,because they’ve done so muchfront-end work on their own.Collier points to a survey thatsays features drawing people tothird-party sites include a build-

THE BIG STORYDealersdon’t feardisruptors,Kain says.a-deal functionality, a locked-inout-the-door price (and monthlypayment) and verification a car ofinterest remains on the lot.Interestingly, “lowest price” didnot appear in the top 10.(ALMOST) NO FEARDealers generally do not fear“disrupters” will displace them,says David Kain, president of KainAutomotive, an Internet trainingand digital marketing consultancy for dealerships. He retainsan interest in a family dealership9 WARDSAUTOWARDSAUTOSEPTEMBER 2017near Lexington, KY.“I’ve never heard dealers saythey are nervous about theseonline retailers,” he says. “Whatworries dealers more is whenthey see Macy’s and other brickand-mortar retailers close stores.They say, ‘I don’t want the samething to happen to me.’”He’s a fan of online initiativesthat work with and through dealers, calling the arrangement “asound system.”Sellers Auto Group’s Sergentsays not all dealers are prepared