One of the benefits of putting together the Ward's e-100 is that it gives us the ability to pinpoint new trends. And this year, there are several trends that you should know about.
We've narrowed them to the 10 that we believe, have the most potential to affect your dealership and how you do business. Much of what we've developed is based on conversations with dealers on the Ward's e-Dealer 100 and industry leaders. But this is sort of a “World according to Ward's,” so feel free to sound off on our opinions.
One other note: It is difficult to assign an order of importance to these trends, primarily because it will be relative based on your dealership. So don't read anything into the order of how we've listed the trends.
“New” players threatening to change how used vehicles are listed online.
Two of the players aren't really new and have been around for a few years. But they have been very quiet and behind the scenes.
That's changing. Both, Vast Media and NeoSynergy have propelled themselves into the marketplace the last few months with new products. Time will tell whether they get traction and have any staying power. But people are talking about them and are paying attention.
Vast Media, recently launched a partnership with AOL that lets dealers post their used-vehicle inventory online. The partnership forced Autotrader.com out.
Vast claims an inventory of more than 4 million vehicles on its site — some of which is gleaned by scraping data (Cars.com, Autotrader.com and Craigslist do not allow Vast to scrape their data); Vast also receives feeds from Dealer Specialties, CDM Data and Homenet, along with several other sources.
The model gives dealers flexibility in how vehicles are listed and how they pay for those listings. Vast likes to talk about a pay-per-performance model. The firm warrants a close eye this year. If it wants to be a player, it likely will have to have some sort of relationship with Cars.com and Autotrader.com — but if it gets much bigger, it may force those bigger players to make changes they aren't ready to make.
NeoSynergy also announced a partnership with AOL, called BestDeals. Dealerships can update their specials daily or even hourly on AOL. Essentially, it's supposed to let dealers push that inventory that isn't moving fast.
You're right if you're thinking, come on Banks, what's so transformational about that? It's what NeoSynergy is planning next that is so intriguing. It is launching a pilot, called BuyDirect, in the second quarter that will allow customers to complete the entire car buying process online.
Which leads us to the next trend — conducting the transaction online. This one may take time to develop. Already, ADP is piloting a similar process with AutoNation and Lithia Motors.
Here's a bold prediction: Being able to conduct the transaction online will be the one thing that revolutionizes how dealers buy dealer-management systems in the future.
What's the connection? A company such as NeoSynergy, or ADP, could charge a transaction fee for every car sold online. For it to work, the transaction engine has to be tied to a DMS, (which NeoSynergy and ADP both have). Instead of charging for the hardware, those firms could charge just for the software services.
I suspect ADP and Reynolds and Reynolds already are looking at the day when this will be reality. Meanwhile, NeoSynergy plans to make a big splash at next year's NADA should the pilot be a success. Stay tuned.
The changing lead model is a third trend. The leading third-party agregators tell me they aggressively are focusing on improving lead quality this year — even to the point of losing some volume.
It's likely someone will try to move off of a subscription model to a pay-per-performance model in those states that allow it. The question is whether they can make the new pricing models pencil. Pay-per-performance will lead to a significant reduction in lead volume which means fewer leads to sell to dealers.
Also, more dealers are starting to play with lead scoring, in which leads are assigned a value based on their propensity to sell. As a result, some dealers might be willing to pay a higher price for higher-valued leads.
Dealer reviews is another trend you need to watch. I should add an “unfortunately” to that sentence. Vendors tell us it is the future, but dealers aren't so sure, and neither am I. But the Cobalt Group's Kevin Root (as do others) makes some strong arguments when he discusses the results of a study his firm did with Yahoo last year.
I know, people like to point to sites such as TripAdvisor and restaurant and hotel review sites, but nobody is reviewing dealerships yet, despite some of these sites such as DealerRater and MyDealerReport having been around a few years now.
So I think we need to be careful as an industry not to get distracted or caught up in things that really aren't here yet.
Dealer reviews probably are coming, though - part of it will be driven by vendors with a service to sell. What will really drive it though, is Google and Yahoo likely will make it much easier for people to post reviews of specific businesses.
The growing importance of used vehicles online is the fifth trend. This is an area in which you can boost your sales this year, and even possibly, help make sure you survive the downturn in new car sales.
Tools are getting better every day that let you market your vehicles online and get them in front of the right buyers. Some of these tools also will provide deep intelligence into your competitors' used vehicle operations.
We're also seeing dealers beginning to post new-vehicle inventory online. Search-engine experts are telling me people's search habits are becoming more sophisticated. They're typing in actual vehicles into the search engines. By posting actual new inventory, dealers will be able to index those vehicles online, essentially creating separate pages for each vehicle. Supposedly, this will help make sure your dealership gets ranked higher on Google and Yahoo. In addition, clicking on the vehicle link in the search engine will take a customer directly to that vehicle's page in your website.
Again, it's too soon to tell what effect this trend will have, but it is something you should be aware of.
The massive shift of advertising money to online channels by the OEMs this year. While it may be the OEMs' money, dealers will have to beef up their Web-based advertising to comply with changing demands from the auto makers. Face, it's a virtual world now.
The industry will see an emphasis this year on merging the online and traditional advertising messages. If your Internet manager is making online advertising decisions with little or no input from the folks handling traditional advertising, it's time for your dealership to change its ways.
Shoppers are moving easily from medium to medium and your message needs to be consistent. Also, technology is progressing in such a way, that consumers will be watching TV and movies on their phones. It's a world in which the lines between virtual and physical are blurring. And dealers who figure out how to keep their product and message in front will have a big advantage.
The General Motors deal with the Cobalt Group will affect your business, even if you're not a GM dealer. Look for FordDirect to launch an answer to GM's strategy later this year. It also will be interesting to watch if Lexus stays with Cobalt as its dealers' website provider.
GM and Cobalt seem to have big plans. We'll see how this plays out in the next year.
The last trend — Autobytel's patent defense strategy. The online lead provider settled a lawsuit it filed against Dealix for $20 million back in 2006. In December of 2007, Autobytel filed suits against four other companies for violating the same patent.
The question is whether Autobytel plans to file similar suits and if so, how will some of the other players respond?
If Autobytel's claims are sound — and there is a history that they may be — then other lead providers likely will settle for millions of dollars, or agree to pay licensing fees to the Irvine-based company. This one could get interesting.