Dealers, Pick a Business Model, Any Business Model

ATLANTA – Paul Whitworth rebuts a suggestion that car dealers are limited in choosing ways they can stand out in the auto-retailing marketplace.

The short-list argument is a dealership may distinguish itself by focusing on, say, big inventory, low prices, top service or deep community roots. But the bill of fare to pick from isn’t much longer than that, right?  

“I’d challenge you a bit on that,” says Whitworth, senior vice president-dealership management systems for Dealertrack, a provider of computer operating systems. “There are many different business models, particularly for dealer groups.”

The menu of ways dealerships can differentiate themselves is long and varied, he says. He goes down it during an interview here at Dealertrack’s DMS Edge User Conference, an event held for dealership personnel to get the most out of their computer systems.

“The niche of a dealer group near my home in San Diego is to have nearly every luxury franchise,” Whitworth says. “They are luxury specialists.” 

Then there’s a Cleveland dealership group that centers on Millennials and social causes. It has built an eco-friendly “green” store and invested in arming service advisers with computer tablets in part to show how tech-savvy the place is.

“They are trying to project a modernist image,” Whitworth says.

He also cites Dave Smith Motors. It is in remote Kellogg, ID, yet has effectively used the Internet to expand its market reach to other states, including California. About 75 salespeople are assigned to the dealership’s online sales.       

Other dealers’ business models are to acquire the lion’s share of a brand’s franchises in a particular major market. Meanwhile, dealers in some small towns may opt to represent a wide range of brands.

“There are many different business models, particularly for dealer groups,” Whitworth says.

And in ethnically diverse markets, some dealerships tout that their sales staffs are multi-lingual, up to 14 languages in one case, Whitworth says.

In cart-before-the-horse advice, he urges dealers to devise or in some cases revise their business strategies first, then acquire the appropriate computer systems, not the other way around.

Years ago, technology was secondary at dealerships. Now, it’s primary, Whitworth says. “While a dealership isn’t going to write its own software, it needs to think through what it is trying to achieve from a business standpoint, and then configure a set of solutions.”

Forward-thinking dealers “focus on how they want to run their businesses, and then on what tools can help them,” he says. “We are trying to bring that thought process around to the DMS space.”

Yet, when new software systems are installed at dealerships, it can trigger a range of staff emotions, he says. “There’s hatred and optimism, fear and excitement.”

Whitworth holds an undergraduate engineering degree from the University of Toronto and a master’s degree in engineering from the Massachusetts Institute of Technology.

His recommended reading list includes “The Blue Ocean Strategy” by W. Chan Kim and Renee Maugorgne.

“The book’s thesis is, don’t compete,” he says. “Instead, find a niche. Do something no one else does. So I would argue that every dealer in the country needs to find things they do a little different from what everyone else does. Those who find their niche will thrive, even as traditional business models come under pressure.

“You have to have a strategy to succeed. You need to be able to adjust that strategy as you go. And there’s a direct relationship between the tools you need and your strategy.”

Asked if he thinks full online car buying will become common among consumers anytime soon, Whitworth recalls doing a research project circa 1997 while working for Anderson Consulting, now Accenture.

“I wrote a blueprint for online car buying,” he recalls. “I said it was just around the corner. Here we are 20 years later, and it’s just around the corner. So I can’t say today it is going to happen quickly. But we do see a consumer demand to interact differently with retailers.”

With the right digital tools to meet such demands, dealers will thrive, he says. Without them, “someone will come along and disrupt this business.”

Whatever happened to that online car-buying blueprint he created? “It’s hanging in my office.”

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