The interesting thing about auto-industry acquisition rumors is that they so often turn out to be true.
So ears perked up when scuttlebutt started circulating that AutoTrader.com, a third-party, online automotive marketplace, planned to acquire vAuto, a leading provider of advanced software for dealership used-vehicle management, pricing and inventory optimization.
Sure enough, the other day AutoTrader announced it will acquire vAuto. It’s a case of two Internet pioneers hitching their wagons together.
vAuto will become an AutoTrader subsidiary. They largely will operate independent of each other, but collaborate on product development and customer training.
Both companies in their own right and own ways are part of the Internet-driven auto-retailing revolution.
“Over the past decade, the Internet has enabled consumers to have a tremendously more transparent view of used-vehicle availability and pricing on a local, regional and national basis,” says AutoTrader.com President and CEO Chip Perry, noting more than 75% of today’s car buyers shop online.
Firms such as AutoTrader and Cars.com allow dealers to list their inventory on heavily visited third-party sites that also give customers an array of vehicles to shop for by using their computers and, now, mobile devices.
Meanwhile, firms such as vAuto allow dealers to use real-time market-demand data to buy the best-selling used-car inventory and price it properly. Some dealerships, such as Hyundai of St. Augustine (FL) even use the vAuto software to price new vehicles.
vAuto founder Dale Pollak, a former dealer and a modern visionary, preaches what he calls “velocity” pricing. Essentially, that means pricing to sell, not to obtain the highest gross possible.
Doing the former means a dealer can turn, turn, turn inventory and end up making more money than pricing too high and running the risk of wading into the deep and dark waters of aging inventory that sits unsold on the used-car lot.
When thousands of used cars of similar makes and models are listed for sale in a local market, it’s the competitively priced vehicles that get the most hits on third-party site such as AutoTrader, Pollak notes.
You don’t have to have the lowest prices online, but you must be competitive or the millions of Internet users shopping for cars online won’t give you a second look.
I’ve talked to many dealers who are zealous converts to velocity selling and to stocking right based on inventory-management software systems. “We’ll never go back to the old days,” a used-car manager of a Texas Ford dealership told me.
“The change in the way consumers shop for cars has created a strong need for dealers to efficiently manage and merchandise their vehicles in a way that ensures they remain competitive,” Perry says.
He is a visionary in his own right, someone who often speaks at auto industry events and conferences about the new order of doing business in the Internet age.
“The many dealers who use third-party classifieds sites like AutoTrader.com and who also employ state-of-the-art inventory management and pricing tools like vAuto are generating strong growth and profitability even in the face of a soft automotive market,” Perry says.
That is a far cry from the days of the 1990s when dealers feared the Internet might elbow them out of business.
Pollak and vAuto President Keith Jezek will remain with the company.
“By working together, AutoTrader.com and vAuto will accelerate the automotive retail industry’s adoption of efficiency and profit-enhancing tools for used-vehicle marketing, management and merchandising,” Pollak says.
One of the promised byproducts of the deal is that dealer customers of both firms will see enhancements to both companies’ products and services. That includes more real-time, market-demand driven tools.
