AutoNation Reinvents Itself, Again

AutoNation Reinvents Itself, Again

For more than fifteen years we’ve watched AutoNation continually redefining their most recent redefinition.

Although I generally hold CEO Mike Jackson in high regard, watching the country’s top dealership chain reversing and reinventing itself has been amusing, probably because of the high level of seriousness and intensity those involved place on every move.

So, since the beginning I’ve found myself sneering and cheering as they launched every new initiative. You can’t argue with their successes unless you dissect their business-model efficiency to the level of each individual dealership. But Ziegler, their stock is soaring to record levels.

Of course when AutoNation, any company for that matter, owns that many dealerships in an up market, it stands to reason your corporation is going to be profitable and the individual dealerships will be profitable.

But does that mean that AutoNation, as a corporation with retail car dealerships is a good operator?

I used to joke that the way AutoNation gets a dealership to make $1 million  annually is for it to buy a dealership that was previously making $2 million under private ownership. 

Since the beginning of his reign, we’ve seen the company under Mike Jackson flirt with name changes and attempts at standardizing processes. They have tried 1-price selling unsuccessfully off and on.

Then they seem to have settled into a philosophy of giving the cars away at prostituted prices, but they whack the consumers to make up the gross in finance and insurance.

The original Wayne Huizenga Fully Reconditioned Used-Car Superstore concept crashed hard early on as I predicted repeatedly. I said those giant Used-Car Dealerships would become Big Outdoor Skateboard Emporiums, and they did.

From the beginning I’ve called AutoNation predictions with a high degree of accuracy.

Now, they have announced a $50 million initiative to once again redefine their entire process in a radical reinvention more ambitious than anything they have attempted.

I am predicting a phenomenal success as well as a dismal crashing failure.

The AutoNation Virtual Storefront Online is going to be revolutionary, and certain aspects of it will become the new cutting-edge industry standard.

To better understand what’s going on here, you have to look beyond the press conference hype, smoke and mirrors, and misdirection that are being fed to the consumers as well as to the industry.

This is NOT about consumer-friendly processes or AutoNation’s desire to streamline and automate their processes. This is a self-defense reaction and counter-strategy to the very real threat to dealership profits the industry is facing from vendors intruding into our profit centers.

When AutoNation announced the new all-virtual strategy, they also announced they were dropping outside lead providers and would be generating their own web traffic organically with massive campaigns.

In every news article I have read on the subject, they specifically mentioned TrueCar in connection with AutoNation’s relationship fracture with lead providers in general.

You see, TrueCar has announced plans to get involved in controlling other dealership profit centers, ie: TrueLease, TrueTrade-in, True Finance (F&I), and probably TrueService, True Accessories and virtually every profit center in the store.

That is, in my opinion why AutoNation and all of the other big public companies said “Screw it! We’re not playing this game.”

It’s not just TrueCar. Virtually every vendor in the lead provider game  has, to some extent, begun meddling in the dealers’ profitability, dictating prices and getting into lowering the margins in other profit centers.

More than most dealerships, the big public companies have always relied on finance profits and the profits from F&I products. It was predictable there would be a reaction somewhere, sometime as all of these vendors are becoming more aggressive at lowering our profits and charging us for it.

This may be the real battle of retail Armageddon in the car business. Google is the battlefield and “The Big Guys” have thrown down on the vendors and drawn a line in the sand which several have naively stepped over.

I do not see where the total virtual sale, semi-one-price aspect of the AutoNation initiative is going to be successful. They will have to modify and adjust that back to the business development center model we now use in most stores.

What I do see as being extremely successful is the public companies leading the way ahead a total backlash of dealers turning to reactive websites and self-generated traffic through search-engine marketing and search-engine optimization.

AutoTrader, Cars.com, Edmunds, TrueCar, CarGurus, CarFax, Kelley Blue Book, and a score of other players might find themselves forced to totally reinvent, or at least back off of their current business models as the market swings the other way. Most dealers feel some of these vendors are over-priced for questionable value.

I applaud Mike Jackson and AutoNation for leading the way. I predict a lot of burps and hiccups before they get it right. But they will prevail and show the rest of the industry the way.

Keep those emails, messages and phone calls coming. Find me on Twitter and Facebook.

Jim Ziegler president of Ziegler Supersystems based in metro Atlanta, is a trainer, commentator and public speaker on dealership issues. He can be reached at[email protected]. WardsAuto readers also may comment on this article by logging in or registering below.

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