The Perfect Dealership

Surviving the Digital Disruption

By MAX ZANAN

PREFACE

My work as a professional consultant for all aspects of the auto dealership demands foresight. Without it, I could not do my job well, and what I now see is the following: there is a paradigm shift underway in the auto sales and service business. The older business model that made many of us a good living is now being replaced, yet most of the general managers, dealer principals, and others I do consulting for do not see this. These changes have already begun, but the veterans in this business remain in the dark. Only those who understand what is happening will take over the market share. In response to these changing conditions, I have written this book, which is unlike any other I am aware of. With “Perfect Dealership”, I want to offer the general managers, dealer principals, and others in our business an understanding of why such perfection is now necessary. I also want to provide a concrete plan for achieving this transformation.

Intelligence means, among other things, the ability to see the changes coming your way and to adapt to them-to understand the actualities in front of you and react in time. So far, only a handful of newcomers see these openings, and they have already moved to exploit them. Vroom represents the new model as well as any company out there. You would be hard-pressed to find a single dealership in America lately that has raised $10 million in investment capital, but Vroom has raised over $200 million in in the last few years. Vroom, Carvana, Shift, and a few other new companies specialize in used car sales on the Internet, where the showroom is a website. The product is late-model used cars of quality. The catch is brutally simple: "Try the car for a week or for up to a thousand miles. If you like it, keep it. If not, return it at no charge." We can examine Vroom in more detail later, but the seemingly simple business model has initiated a fateful paradigm shift in the used-car market, which will never be the same again. I repeat: Vroom initiated the shift, because what began in the used market will spread to all areas, including new cars, finance and insurance (F&I), and fixed operations.

At work here, underneath the top layer of an Internet business, is a fundamental principle: "Give the customer the tools to buy a car how he or she wants to, and support the process with the best-informed and best-trained staff you can develop." Develop, not hire or find. Careful development is another key, because our business has been operating in an ad hoc manner for too long. Creating the Perfect Dealership requires an understanding of all this, and of fundamentals that I have been pushing for years, like the principle that the whole is larger than the sum of the parts.

Your departments must function like a Swiss watch, where the parts are all interconnected and not de facto operating separately from one another. When one moves, the others are informed, and the assumption is that there is a common goal. In the dealership, all departments must work toward a common goal. In its simplest form, that goal should be this: customer satisfaction, which ensures customer retention. Sales needs to be a career commensurate with other respected careers, not a gig that has a high turnover. Offer people a career, not a job with high turnover. Training and support must be there for the new hires, and they must have the concrete opportunity to develop and rise to the level of their innate ability. We must support a solid future for our employees, because this is what the good ones want, and they also help us make our living.

Information technology (IT) has changed, and software is essential for the smooth functioning of day-to-day operations. This must also be addressed to create the Perfect Dealership. Related to this is the 24-7 world we now live in, where quickness of response will separate the winners from the losers. We will look into this. And we need to remember that car sales is a local phenomenon. Be active in the community, and take a genuine interest in the lives of your customers. Then, when they pass the dealership on the road, they will gladly turn in and do business with you. Become an asset for a man or woman raising a family inside a community, and you may well have a loyal customer for life. The fundamentals will always apply.

But it is crucial change that is blindsiding us, so we will never get a chance to improve those fundamentals. Don't let a Vroom alone blaze the path that you should have forged: Used car sales on the Internet leads to a broad, trusting customer base, and before you know it, Toyota grants Vroom a dealership. They brand their name in all areas and develop F&I products. Their service departments pop up all over the country, and everywhere they are trusted by their customers. Then, eventually they are selling parts, and it is game over. Amazon buys them out-and where are you?

Better yet Amazon buys AutoNation (the largest publicly held auto group in the country) similar to the way they acquired Whole Foods. Overnight Amazon will have 330 physical locations across the country. Amazon is willing to work on extremely low margins, they basically invented e-commerce, understand logistics, and have consumers' trust. Let that sink in for a moment.

This book is a wake-up call. The Perfect Dealership will address these topics and more. My goal in this book is to make all of us better and to bring respect to our business by aspiring to excellence-in all interconnected operations. I see no reason why this cannot happen, soon. Failure to adopt and change will result in the disappearance of the existing brick and mortar dealership model. Car dealerships might be the next corner video store and travel agency.