Car Dealers’ Challenge: Manage Today, Keep Eye on Future

KANSAS CITY, MO – People using modern technology routinely touch a lot of screens on things like mobile devices, kiosks and vehicle infotainment system.

But there’s another touch that’s vital: the human touch, says Sandy Schwartz, president of Cox Automotive. “No technology can take its place, though you need that balance between people and technology.”

Schwartz delivers that message to a hotel ballroom full of dealers and dealership managers attending an annual user conference put on by VinSolutions, a Cox company that specializes in customer-relationship management systems.

Cox owns a variety of automotive-related brands including Autotrader and Kelley Blue Book (both online car-buying websites), Manheim (remarketing services including auctions), Dealertrack (dealership-management systems) and Clutch (a vehicle-subscription platform).

“We’re long-term thinkers,” he says of Cox Automotive.

With mobility services such as Uber and Lyft growing and the coming of self-driving vehicles, many people wonder where auto retailing is headed, he says.

Schwartz encourages conference attendees to “be ambidextrous” by keeping up with changing times while at the same time managing in today’s business environment.                    

Afterwards, he sat down for a Q&A with WardsAuto. Here’s an edited version of that conversation.

WardsAuto: You talk about the future, but also balancing it with the now. How hard is that for dealers to do?

Schwartz: It’s not easy. Their business will change dramatically someday. I get calls from dealer friends who say, “Is now the time to sell?” It’s a tough one to answer. There’s a big difference between (publicly owned dealership chains) AutoNation or a Penske and dealers who have their whole wealth in their dealership.

But there is a new generation (of dealer principals) coming up, a lot of them have MBAs, and they’re thinking of this differently. There is tremendous pressure.

The good dealers will do well. Some will get out for various reasons. Some who are short-term thinkers will have problems.       

WardsAuto: Yet, don’t a lot of dealers think short term strictly because it is the nature of their business? For example, they focus on 30-day sales, and automakers expect them to look at things from that sort of quick-time perspective. By its nature, auto retailing is not a business for long-term visionaries.   

Schwartz: No. But is long term five years or 20? Some of the smartest people I’ve met are car dealers. They are amazing business people and a lot smarter than people give them credit for. Again, it’s balance. 

WardsAuto: Just to clarify, I wasn’t referring to intelligence.

Schwartz: I knew that.

WardsAuto: It’s a matter of what one does professionally. If you are a journalist assigned as a daily production reporter, you are not thinking about doing a deep-dive investigative piece, just like the investigative reporter isn’t thinking about cranking out stories every day.

So how much can or should a dealer think about the future world of mobility and the changes that are coming, even though we don’t know exactly when? 

Schwartz: They should think about it a lot, because it is dependent on their investments and the role they want to play.

An example is Clutch, a vehicle-subscription platform we invested in. We have no idea where this is going. But dealers have said they’re going to use it because they have customers who are uncertain about buying cars and multi-year leasing. They are OK with them having a different car every month.

It’s a 15% premium over leasing, but it allows people to flip in and out of vehicles. We currently have 23 dealers using it and expect that number to be 40 by the end of the year. They see it as part of the future they want to be part of.

Dealers are looking for different ways to do business and at different business models. We can debate whether that’s short or long term, but to me they are testing things out because they know their business will change.

That said, there are still dealership staff members, such as commissioned salespeople, who are focused on today.      

WardsAuto: Could that salesperson who depends so heavily on commissions as an income source conflict with today’s business philosophy of offering positive customer experiences? 

Schwartz: Yes. A lot of dealerships are looking at a different way of doing business, about sales staffers being more like consultants. There are high-pressure salespeople, but even they understand the importance of long-term customer relationships. It’s changing all over.   

WardsAuto: High-pressure selling aside, how important is good salesmanship in today’s world when the customer does so much online and goes to the dealership to basically close the deal? Are showroom staffers even required to sell the car to someone who has decided what they want?

Schwartz: I recently bought a car with my wife. At one dealership, the guy was sharp. He knew the car. He had a sales mind. He was very effective. We went to another dealership where the person we dealt with didn’t know a thing about the car. You wondered how many he sold a month.

A knowledgeable salesperson still has a better chance of selling (regardless of how much shopping and research a customer may have done online beforehand).

I don’t know how long this trend will last, but our research indicates almost 90% of people want to go to the dealership to do some part of the purchase process. The experience they have there will seal the deal. It remains highly important. 

WardsAuto: You mentioned in your conference presentation that dealers will play a role in the coming age of mobility and autonomous vehicles, a time when there will be fewer owners, but more miles driven. What role will dealers play?

Schwartz: First of all, those vehicles will have to be titled and registered. They will need to be fixed more often than today. If those vehicles truly are running like fleet cars, they may need to come in at all hours for service. There are tremendous opportunities for us and dealers in this new fleet world. I don’t know exactly what those opportunities will be, but they will be there.   

WardsAuto: Is it servicing more than managing a fleet?

Schwartz: Yes. We don’t yet know who will own these fleets. We won’t. Some dealers may choose to own small fleets. Service clearly will be the No.1 area for dealers, but there will be others.