Jeremy Sacco

Over the last few years, a combination of advancing technology and changing consumer behavior driven by the pandemic have pushed digital retail to the front of the pack of potential disruptors in the auto industry. OEMs from Tesla to Ford are embracing digital retail, but many dealers are struggling with the new landscape.  To get some perspectives that might help, I recently spoke with Lindsay Ciavattone , CarGurus’ Director of Dealer Relations for digital retail. With a background working at dealerships and an eye on the next generation of digital retail tools for dealers, she’s uniquely positioned to share insights on where digital retail is now, how dealers can choose the right solution, and what you need to do to get the most out of it. Jeremy Sacco: We’ve all been hearing about digital retail for years, and adoption has been slow to catch on. What makes this the time for digital retail to disrupt the old shopping models? Lindsay Ciavattone: Digital retail is disrupting the industry today because the customer is demanding a new experience. Until now, dealers determined the process, and customers had to go along with it. Now, with the increasing level of choice and availability online, and nationwide competition, dealers need to find a way to meet these new customer needs and provide the experience they want. Dealers need to disrupt themselves to serve the customer – before they get disrupted by somebody else. JS: We know that change isn't easy for some dealers, and incorporating digital retail is a significant change. What adjustments do dealers have to make to make sure they're getting the most out of digital retail? LC: Dealers need to understand first that a digital retail tool is just that: one tool in the toolbelt. It’s only as effective as the customer input and how the dealer personnel respond. Some think it’s a magic tool, that it’ll do everything for them, and essentially sell the cars in some new way – and of course that’s not true.  It’s also important to put a consistent lead flow and communications process in place – one that’s simple and holds people accountable. Whether you have one store or 100, process is critical, so your customers and your employees have a similar experience across the board. A great process means you can: Consistently move deals forward – you're not going back to ask questions you already have answers to in your CRM. Focus on removing obstacles that prevent sellers from doing their jobs. Act quickly – customers today expect fast responses, especially for sensitive information like credit applications. Provide a holistic approach to customer communications – phone, video, texting, however the customer wants to engage.  JS: We know that 'one size fits all' never works for dealers - or for shoppers, for that matter. But sometimes it seems like digital retail is implemented in ways that force both dealers and consumers down a narrow path. How can dealers make sure they have choices when implementing digital retail? And that they're providing options to their consumers?  LC: The first step of your due diligence when evaluating a new tool is to make sure the vendor can align with your values, your goals, your corporate structure or individual style – that they can work with you to meet your individual needs. Dealers should choose a vendor who can be their partner and work closely with them, and who can be flexible on implementation – including the ability to add or remove certain features to match your goals, as well as flexibility around integration with other systems. If it’s your first venture into digital retail, it’s important to take baby steps. A staggered rollout, for example: if you have several rooftops, get your digital retail footing in one, then roll it out to more stores. That approach helps if you have employees who may not be excited about new tools – when they see other stores have had success, they’ll be more eager to get on board. JS: If you were a dealer shopping for a digital retail solution today, what would you look for?  LC: A seamless integration with the lowest level of effort. It’s easy to say that, but not easy to find in practice – I'd look for a company that would work with me in a transparent way, that was quick to troubleshoot if necessary, and that provided all the support I needed to get up and running.  The tool itself should be as frictionless as possible, allowing customers to choose which steps of the buying process they do or don’t want to do online. Some customers are comfortable going all the way to putting in a deposit or a credit app, while others are less comfortable and just want to get through finding the right car and booking an appointment, so look for that flexibility.  Finally, as I mentioned above, you want flexibility on your side as well – in which features you implement and how you integrate with your existing systems so you’re able to create that seamless process from start to finish. JS: You’ve touched on that integration piece a couple of times. Can you give a little more detail on how a digital retail tool should connect with existing systems?  LC: If you walk into any dealership and take a look at the F&I manager or any salesperson’s computer, you’ll see 27 tabs open: OEM tools, CRM tools, inventory management, accessories, parts, financing, all kinds of things. A digital retail tool that simply drops customer information into existing dealer systems is ideal – that’s one less thing to open, to learn, to get running. I’ve talked to many, many dealers who are unwilling to work with a partner that requires dealers to use a new system, and I can completely understand that from my past experience working in dealerships. Ultimately, success will come from integrating a digital retail tool that fits into the flow of what you’re already using and allows you to maintain control of the sale.

Ups and downs on the road to more normal inventory levels How long have we been waiting for inventory levels to return to normal? At this point, the ongoing inventory crunch in both new and used cars is just part of the environment, but we know it’s not permanent: while we’re not seeing much concrete evidence of an easing of supply pressure, there are indications that it’s not too far off. That said, there are multiple factors that seem poised to  delay  a return to normal. In addition, “normal,” when we do get there, might not look the same as it used to. The days of a 60+ day supply being the standard might be behind us, as industry-wide changes like the rise of digital retail and build-to-order continue to evolve.  Here’s a look at some of the factors we’re seeing and what they will mean to dealers, with one small warning: they all change quickly, and the picture may have changed between writing and publication. What does the data say now? To answer a question like this, we first turn to the data. At CarGurus, we’re lucky to have a huge amount of real-time data on vehicle availability, pricing, and time to turn, which our Industry Analyst Kevin Roberts uses to publish the monthly  Vehicle Availability Index .  The VAI compares month-end inventory per dealer to a starting point of November 2019. The most recent index, for February 2020, showed new car availability barely down over January, but still down almost 70% YoY. Prices were just slightly up for the month and sit 25% higher than last February. The picture is better on the used side, with the index up 2% over January and up about 5% YoY. As with new vehicles, prices were barely up over January, but YoY used prices are up 39%. What was interesting on the used side was that we saw the first signs of declining prices throughout most of the month, which made sense given that used inventory was back to pre-pandemic levels. However, the decline didn’t hold as consumers continued to snap up vehicles across a wide range of prices and styles. What could lead to a continued rebound towards more normal inventory levels? Early in the year, there seemed to be more potential positive factors that would help get more vehicles back on dealer lots. Here’s some of what we’re watching that could help the rebound, in a rough order of most to least likely impact. By far the most impactful factor would be new vehicle production levels getting back to target. LMC Automotive’s forecast originally expected that in Q3, but a combination of circumstances has pushed it back to at least Q4. Keep in mind that pent-up demand will probably absorb the beginnings of increased production, so inventory won't instantly rebound as manufacturing ramps up.  The potential for more interest rate hikes in the US to counter inflation would reduce demand fairly quickly as loan rates go up, and lower demand would give dealers a chance to restock.  As businesses continue to develop return-to-office plans, commuters may start to get over fears of rideshare, carpooling, and public transport. That would also reduce demand, although it could take a long time to set in. Rental companies could also get back to more normal operations, focusing again on building their fleets with new cars and offloading highly in-demand late-model vehicles into the used car market. What could prolong the situation even further? Unfortunately, as we’ve gotten through Q1, it seems like those positives are starting to get outweighed by an accumulating pile of negative factors. Supply chain issues continue to be the biggest threat – and it’s not just about chips anymore. Industry analysts downgraded production forecasts in response to two big developments in Q1: Russia’s war on Ukraine disrupting supplies of both raw materials and automotive parts  A new round of COVID-based shutdowns in China shuttering critical factories Those two factors, combined with ongoing semiconductor shortages, have the potential to push out the return to normal inventory levels to the end of 2022 or longer. But they’re not the only threats: Ongoing economic improvement would be a good news/bad news situation for dealers: if a small bump in interest rates keeps inflation down and employment continues to expand, that’s great for the country as a whole – but it puts more pressure on inventory as consumers have more buying power and more need for vehicles.  Good old seasonality could also drive up demand. While tax season looked a little delayed this year, the typical refund/warm weather buying patterns are likely to bring more customers in looking for both new and used vehicles.  Other more general factors could improve consumer sentiment: if the Ukraine conflict comes to a reasonable resolution and COVID fears and restrictions remain low in the US, we could see more buyers out there competing for a limited inventory pool.  Gas prices could have an impact as well, but that’s more likely to shift demand to smaller or alternative powertrain vehicles than it is to reduce demand entirely. That could increase competition even further in the EV/hybrid market, but it’s also probably a short-lived impact.  Finally, and I can’t believe I have to say this, we’re also hoping no more container ships full of cars catch fire. It might not have had much real impact on the market, but the symbolism was just a bit too much.  So, what does it all mean? Over time, we know that consumer demand, OEM production, and dealer pricing will return to a more normal balance. It might not be the same as it was in 2019, but it won’t look like the craziness of the last two years. Overall, it seems like the return to normal is being delayed by the combination of new economic, supply chain, and political factors. We expect markets to head towards more typical levels late in the second half of 2022, but we’re going to keep an eye on those negative factors to see if that gets pushed out further. 

As a business leader , you understand the importance of recognition. It's not just that it feels good to be celebrated for your hard work and dedication: it can be a powerful marketing tool when leveraged properly.  The most effective way to gain impactful recognition for your dealership is to win or be nominated for industry awards, such as  CarGurus Top Rated Dealer . That honor is for exceptional customer service and top review scores, but there are plenty of other types of awards your dealership can win and put to work: community involvement, leadership, and more. Winning and promoting awards is something every dealership can incorporate into their marketing strategy . Here are four reasons why awards are worth your time and investment, plus some tips for leveraging them.   1. Awards boost your credibility  Industry awards provide the objective, third-party validation that many shoppers crave. Ultimately, they help differentiate your dealership from the competition. Depending on the award, it can even serve as an instant seal of approval, inspiring trust and credibility in your business for consumers. Not every dealership wins awards and consumers know that which is why many feel more confident purchasing from a business with an independent endorsement.  Tip:  Don't keep your award to yourself! Promote your award win by adding a digital badge to your dealership website , displaying the plaque front and center in your showroom, and including the honor in your marketing materials. The more visible your award is, the more impact you'll get out of it.  2. Your business gains brand awareness It's no secret that today's shoppers use the internet to research their purchases, but with so many online resources available, it can be difficult for dealerships to stand out. That's another area where awards can help. Your dealership automatically gets a free promotion and increased brand awareness when the organization giving the award announces the winners. Not only will this help you build your reputation, but it will also give you the chance to win new business.  Tip:   To maximize your dealership's exposure, don't leave the promotion up to the awards organization. Put up a blog post on your website, issue a press release, and announce your award on social media — an especially  influential channel among Gen Z and younger Millennial shoppers . There are countless benefits to a well-publicized award.  3. It's a reason to connect with past customers While winning an award can put you on the radar of shoppers who weren't already familiar with your dealership, it also gives you a valid reason to reach out to past customers. Shout your news to your customer network to remind them of the advantages of buying from your dealership. Plus, news of a recent award could help you cut through the noise and stand out from the countless other communications shoppers receive each day.   Tip : If you've won a service- or review-based award like  CarGurus Top Rated Dealer , it's likely that great ratings from customers helped you earn the award. Share your success with them via email and thank them for their feedback. Encourage them to visit your store again when their car needs to be serviced or they're in the market for something new. 4. It sends a great message to your employees Beyond brand building and business opportunities, awards also help boost employee morale. By making accolades a priority at your dealership, you send the message that you're invested in the business and care about being the best. This can build team morale, increasing motivation among existing employees, and attracting top talent for future success . Tip : Celebrate the victory with the people who helped make it possible: your staff. Your dealership wouldn't be what it is without them. It always feels good to be recognized for hard work and dedication, and your employees will appreciate the gesture.   Once you've won an award, don't ease up on your efforts. Awards should play an ongoing role in your marketing strategy, whether you run an independent dealership or franchise or sell used cars or new ones. Set your dealership up for long-term success by creating an awards calendar to keep track of what's coming up next. Assign ownership of key responsibilities like managing reviews or putting together awards submissions to a trusted staff member, so you never miss an opportunity. However, you approach it, plan for your dealership to be a winner in 2021!

The idea that car researching, shopping, and purchasing is moving online is not a new story, but Covid-19 accelerated that trend in a significant way. As the retail environment returns to a more normal state, one change that is likely to stick around is consumers' increasing preference for completing financing pre-qualification online. That means connecting with those pre-qualified shoppers is an essential skill for today's dealers. Changing preference due to Covid  During the Covid crisis, prospective buyers increasingly turned to digital tools and resources for safer car shopping. According to CarGurus' most recent Consumer Sentiment Study from November 2020, a fully digital auto purchase has become a more palatable option to many buyers, but it's still not the preference for most. 60% of shoppers say they're open to the idea, vs. 32% before the pandemic, but only 37% say they  prefer  buying online. 1   On the other hand, the same study showed that more than half of car shoppers (52%) say that they now prefer financing online (compared to only 36% pre-pandemic). It's true that the safety concerns that contributed to these changes are likely to fade, but shoppers' increased openness to financing online is also a result of their desire to save time and feel more financially prepared – and those factors do not seem to be going anywhere.  The idea of online financing can feel threatening to some dealers: financing is a crucial profit center. While shifting the process online can feel uncomfortable, providing shoppers with remote financing solutions and pre-qualification resources can improve your overall lead quality and in-store efficiency while also ensuring that you maintain control and profitability within those critical financing operations.  The key takeaway is that pre-qualified leads are 60% more likely to purchase and close faster 2 . When this is combined with a pre-qualified process that incorporates lenders you already work with, it means these leads can actually be more profitable and efficient than others.  Here are three key best practices to help close more pre-qualified leads faster 1) Offer more transparency to appeal to financially prepared shoppers According to our recent Consumer Financing Study ,  69% of those who will be purchasing a car in the next year reported a high likelihood to pursue pre-qualification . The leading barriers to pre-qualification come from consumer fears of rates not being "real" or changing. So – make sure your shoppers have access to your most accurate offers and rates during the pre-qualification process to help set the right expectations and minimize shopper objections during the sale.  2) Identify and prioritize pre-qualified leads 66% of shoppers find value in completing more of the car shopping process before they step foot in the dealership, which indicates that many are eager to speed up the car buying process. 3 This means these pre-qualified shoppers should be met with the same level of urgency that they're putting in by making sure you get those leads in front of your sales team as quickly as possible and that the sales team jumps on them. That last part shouldn't be hard, given that they are more likely to close and close more quickly! 3) Create a seamless online to in-store experience Another potential barrier to pre-qualification among shoppers is the fear that they will have to repeat their work and it's understandable since having to re-do an application in person is incredibly frustrating. Save time for your staff and the shopper by making sure they won't have to repeat pre-qualification process in-store by pulling the customer's information in advance and making it easily accessible by your team. And unless you can really offer them better financing, don't try to switch them to other loans or lenders, even if your take is slightly more.  While they may not be a significant chunk of your leads yet, indications are that the share will continue to increase. At CarGurus, we saw a 78% increase in pre-qualified leads between January and September 2020. 4 If handled right, pre-qualified leads can provide quicker closes and consistent back-end profit. 1  CarGurus Consumer Financing Study, November 2020 [N=754] All survey respondents were considered in-market car-shopper that either financed or are at least considering financing their purchase.4 CarGurus email leads submitted by pre-qualified shoppers to financing-enabled paying and Restricted dealers from January – September 2020. Includes content supplied by IHS Markit; Copyright © IHS Markit 2021. All rights reserved. Lead analysis based on IHS Markit 2019 & 202 Registration Data.

Chances are, your dealership has been leaning into digital and contactless services more than ever in order to sell more cars during the ongoing Covid crisis. Online financing, virtual walkarounds, home delivery, and more — resilient dealers have adopted many of these digital retail tactics in order to keep business going. It makes sense because the majority of buyers are used to leveraging online resources:  78% of car shoppers say online tools and resources make them a smarter shopper .  Ultimately, digital retail is about giving shoppers the transparency and control they want, when they want it. So, how do you build a successful strategy? Use these steps as a guide.  #1 Get buy-in from your entire staff The idea might start with you, but your digital retail efforts won't be successful without buy-in from your entire team. From the sales staff working the leads to the marketing team advertising your services, to the GM signing the contract, everyone at your dealership needs to be on board. A bit of self-interest is key to getting people on board, so focus on:   Educating your team . Don't assume a few nods from staff members mean they understand exactly how digital retail works and what's expected. Offer information, answer questions, and provide real-life examples of success at other dealerships. Emphasizing how it will make their jobs easier . There might be some growing pains as you get started, but a little extra effort and training upfront will make things easier in the long run. A streamlined buying process for shoppers will lead to customer loyalty and repeat buyers down the road.  Recognizing wins . Whether it's a shoutout at your next team meeting or a small financial incentive, highlighting successful digital retail efforts, such as a salesperson's first virtual appointment or home delivery, is a great way to gain buy-in and drive adoption.  #2 Map out what success looks like for your dealership Once your team is committed, map out your dealership's path to digital retail success. This includes everything from setting priorities and assessing existing processes to creating goals and establishing benchmarks. But don't stop there: make sure you provide a clear picture of what specific actions and behaviors are needed to achieve success. Once your roadmap is defined, you'll be ready to start your dealership's journey into digital retail.  #3 Start by mastering one digital retail component first Digital retail is about giving shoppers the transparency and control they want. (Image source: Automotive Ventures) Digital retail isn't an all-or-nothing proposition that means a shopper can click a buy button on your website and have a car show up in their driveway. In fact, it's best to start small, then expand your offerings as your comfort increases. According to our recent Consumer Sentiment study,  shoppers are more likely to prefer online financing  (52%) than completing the full transaction online (41%), so enabling online financing might be a good starting point. This could be as simple as providing a calculator for those who just want to know what their payments will be before going to the dealership, or it could mean letting buyers complete all of the financing paperwork online before they come into the dealership to complete the sale.   Enabling online financing is relatively easy to implement with the help of your existing lenders and third-party sites, and you can do it without giving up any of your backend profits. Additional benefits for your dealership include:  Ready-to-buy shoppers . Shoppers who go through the pre-qualification process are further down the buying cycle and more ready to buy.  Close with confidence . Your team will know more about shoppers' buying power and can close the sale quickly and with confidence. Better customer experience . It brings transparency to the process, which ultimately creates a smoother, faster, and more enjoyable experience for your shoppers.  #4 Take your digital retail efforts to the next level with external partners There are many vendors, including us at CarGurus as well as AutoFi, DealerSocket, Modal, and more, that can help you expand your digital retail offerings and take your efforts to the next level. Not only will using a vendor allow you to add digital sales components more quickly – for example, instant trade valuations or home delivery – but it will also provide a partner to help you with processes. As you try vendors out, look for one that offers things like training for sales staff or reporting and tracking tools to see how digital retail is impacting your bottom line. Keep in mind, you don't have to do everything at once. Your digital retail strategy will probably look different from another dealership's — and that's okay.   It's the connected dealer who will win the sale Doing what you've always done is no longer enough. By laying the groundwork now, you'll avoid future disruption down the road and set your dealership up for success. If you enjoyed this article, take some time to listen to the latest podcast episode on Experimarketing  with  Colin Carrasquillo