THIS SOFTWARE COULD MAKE SHOPPING FOR A CAR EASIER
Longo Toyota in El Monte, California, bills itself as the biggest new-car dealership on the planet. Yet until last week, its digital technology was so archaic that salesmen couldn’t produce a list of vehicles they’d lease for the same monthly payment without first toiling with hand-held calculators.
On Tuesday, Longo started letting customers use PCs or smartphones to form a list like this themselves. They can then proceed online through other processes largely kept within the confines of brick-and-mortar dealerships: selecting options, haggling over trade-ins and financing, and scheduling delivery. Buyers can avoid setting foot in the store, if they want.
The software behind Longo’s system is from Roadster Online Inc., and Brendan Harrington, the dealership’s president, is one of its biggest fans. In the decades-long battle between the e-commerce gurus who’ve seen dealers as sitting ducks and a Main Street American industry that’s largely fended off disruption, Roadster is one of the startups that could bring about a new equilibrium. In providing these services, dealers are trying to catch up to the online experience shoppers have come to expect thanks to the likes of Amazon.com Inc.
“Roadster brought us from about 1990 up to 2017,” Harrington said. “What so many other Silicon Valley software providers have tried to do is take the human element out of the equation, as if nobody has a question when they’re buying an item that costs $50,000.”
As Penske Motor Group’s flagship, Longo’s experience with Roadster will play a major factor in whether the nation’s second-largest auto-dealership company and its affiliates deploy the software elsewhere, Harrington said. The Penske family also operates Penske Automotive Group Inc., which has 294 dealerships.
Despite U.S. auto deliveries declining after seven years of growth, he expects Roadster to deliver a 10 percent boost over the next year to the 30,000 cars and trucks that Longo sells annually.
Read more: Online car-buying startups emerge as dealer aids, not disrupters
Car Dealers’ Share of State Retail Sales
Brian Benstock, vice president of Paragon Honda and Acura in Woodside, New York, said he’s already seeing the benefits of Roadster’s software. The dealership, which Benstock said is Honda’s third-largest in the U.S., boosted new-car sales by 20 percent in June and 8 percent in July, compared with roughly flat sales for the automaker nationally.
Giant iPhone
In the showroom, customers can use a do-it-yourself kiosk that Benstock calls “a six-foot iPhone” to shop for cars, alter monthly payments and schedule deliveries with taps and swipes of a finger. The transaction can take 45 minutes, down from as much as three hours.
Car dealers have been laggards in online services in part because the programming necessary is complex, said Neill Occhiogrosso, partner at Costanoa Venture Capital Partners LLC. The Palo Alto, California-based firm led a $7 million funding round that Roadster announced Monday.
“We have to own the fact that our business model is dead, and if we don’t transition, we are going to be disrupted,” Benstock said. “The Teslas, the Apples, the Googles are going to come in and change the way retailing is done for automobiles, and it’ll be too late for the dealers that haven’t already adapted.”
Smoother Process
Companies like Carvana Co. have a two- or three-year lead over new-car dealerships in being able to facilitate the entire purchase process for used vehicles online, said Andy Moss, Roadster’s chief executive officer. The Palo Alto-based company is growing by making the new-car buying process easier both for dealers and customers, he said.
For instance, long-term maintenance contracts are a high-margin option dealers love to sell. Roadster allows them to make these offers early in the transaction and not hours in, when customers are tired, Moss said. Roadster expects 1,000 dealerships will be using its software by the end of next year, up from 80 now.
At Paragon Honda, Benstock is betting the technology can help him make up in volumes whatever he loses in margins on car sales. Optimism aside, the transition to online selling isn’t always smooth or easy, said Alan Haig, president of Haig Partners LLC, a dealership brokerage company.
One Price
Moving to an online platform could contribute to more dealers embracing a non-negotiable “one-price” model, which often cuts costs by shifting salespeople from lucrative commission-based roles to flat hourly wages. That can lead to high turnover, lower profits, and even confuse customers who are used to haggling.
“It’s a painful, huge cultural change,” Haig said. “It’s still a small minority of dealers that are one-price, but I think an increasing number of dealers are considering it.”
Benstock’s dealership hasn’t adopted a one-price approach, but he has moved some of his sales workforce to an hourly wage. He’s changing his hiring practices, since Roadster software should handle most questions customers have about car prices.
“You’re not looking for a negotiator, a slickster,” Benstock said. “You’re looking for someone with the quality of niceness. Nice really works.”