Technology Sure Helps, But Dealers Sell the Cars

Mike Burgiss is thoughtful, chooses his words carefully and stops short of saying digital retailing will completely take over the auto-dealership business, despite its impact so far.

Burgiss, who holds a degree in mechanical engineering from Virginia Tech, is vice president-digital retailing for Cox Automotive.

Cox Automotive consists of 20 brands. Those include Autotrader (inventory listings), Kelley Blue Book (price and trade valuation information) Dealer.com (websites), vAuto (inventory management), Dealertrack (dealership-management systems) and VinSolutions (customer-relationship management software).

In a WardsAuto Q&A, Burgiss speaks about what he does and where he sees the auto-retail industry headed as digital technology becomes more prevalent.

WardsAuto: What do you do exactly?

Burgiss: Three or four things. I work with our teams to get our message out. I’m the product leader for the retailing and connected retail. That includes a level of business ownership or market readiness of our solutions.

It’s the take-the-product to market. Our message is around connected retail. It’s next. In a few years, we’re not going to be talking about “digital retailing.” Retailing will just be digital.

WardsAuto: What is connected retail?

Burgiss: It’s about connecting the online experience to the in-store experience. Our vision is making both of those consistent. It’s about connecting dealers and car buyers. To do that, you must connect systems, workloads, data and processes. You have to get your website working with your listings, working with online experiences and have that consistent in the store.

Cox asked us to create “Make My Deal.” It’s a start up. We’re integrating it into our broader retailing strategy.

WardsAuto: What is it again?

Burgiss: It’s an online tool set that helps car dealers come to terms on car deals with shoppers over the Internet. So the in-store experience transforms into a confirmation of those numbers (price and payments), the test drive and then a smooth transition into the F&I office. It’s not, “Are you going to buy the car?”

It’s getting to that “yes” moment on the payment, deal structure, taxes, fees, price, trade – the whole thing. That’s the most arduous part for the consumer. And it’s the most costly part of the process for the dealer.

WardsAuto: With Make My Deal, the customer is doing the work, essentially?

Burgiss: They’re starting the work. I call it a self-pencil. A customer starts on a VDP (vehicle details page on the dealership website; the full display of a particular vehicle in inventory) and personalizes their own terms for the car deal. They share that with the dealer who still sets the (pricing) parameters.

The dealer can respond online to that, getting closer and closer to a “yes” on both sides. Both are in control of the things they care about most. We have two happy people making an agreement faster. For the consumer, control involves getting a good deal. For the dealer, it means profitability.

Whether they get all the way there or just start down the path to the “yes,” in either case, the customer is happier and feeling more in control of the buying process. A happier customer typically leads to higher profitability. And the dealer saves time and cost on what has been the costly part of the process for the dealer.

WardsAuto: So that abates the pain point of vehicle negotiating?

Burgiss: It makes the in-store experience all about the car and the relationship, not this back-and-forth “Let me check with my manager” or “Sorry, you’re credit isn’t good enough.” All those negative experiences get shifted to the online process and become not so negative if say, there’s a credit issue. The customer doesn’t get embarrassed in the store in a case like that.

If they are doing it at home and don’t have a great trade value or great credit profile, who’s the bad guy? It’s not the dealer. The computer is the one who told them. It starts to transform the relationships between the dealer and the buyer. These days, consumers are put in a position to buy, they can’t be sold.

WardsAuto: So what about the prospects of doing the entire deal online?

Burgiss: The car business fundamentally is a relationship business. It’s not a checkout-counter business. It’s a relationship business that requires a human. It’s not a question of buying a car from the computer or the dealer in the future. It’s not the computer or the dealer. You are buying it from the dealer through the computer. That’s a mindset shift.

WardsAuto: Do most dealers understand that?

Burgiss: Dealers know digital retailing is coming, but a lot of them don’t know what it will mean to them. The biggest fear is loss of control, which means loss of profitability.

Well, all of the early indications, and we’ve had four years of experience doing this with several thousands of dealers, profitability is higher. It all comes back to putting the payment in the customer’s hands. If you put a payment (calculator) on a VDP and allow people the ability to self-pencil, consumer engagement goes up eight to 10 times.

It’s a me-centered world on the Internet right now. It’s mass customization. Just look at Facebook.

Payment means price, trade, financing terms and taxes and fees in our case. What matters is the consumer sees all those line items. It doesn’t matter to the customer if it’s penny-perfect, because consumers realize at that point, the dealership hasn’t run their credit or has seen their trade-in. What matters is there’s nothing hidden.

We have done consumer interviews during which people say, “The last time I bought a car, they went in the back room, did voodoo magic on the numbers, and brought those back out to me.” Where else is it black magic where they came up with what you pay?

Trust happens when you show that whole deal structure the consumer is submitting. If the dealer doesn’t want to receive certain price offers due to a business model, we can configure it that way. It’s getting the model ready.

WardsAuto: The market seems to have reached de facto 1-pricing, if not to the penny, as you say. With online pricing transparency, there’s a narrow pricing band dealers don’t stray from. It’s not like the old days when the MSRP meant nothing and nobody thought about paying it. Now the prices seem more real. The pricing today seems more logical. It negates a lot of negotiating.

Burgiss: Digital retailing may mean that true single-price accelerates. Or we may see segmentation. One segment of dealers will operate aggressively in the single-price space. Others may appeal to those (consumers) who want to discuss price. Our role is to enable those business models, not to dictate what they are.

There is a ton of hype about selling online. It’s being simplified and overstated. The oversimplification is click a button, put it in a shopping cart and it shows up at your door. It ignores that the car business is a relationship business.

The overstatement is, “We sell cars online.” Well, no, you don’t because there’s a buyer’s order with legalities and compliance rules. There are binding provisions. You have to have proof of identity.

We can’t oversimplify digital retailing to pushing a button and filling out all the paperwork in one fell swoop. That’s not how cars are bought and sold. We need to be careful with terms. Buy and sell means someone is signing a buyer’s order.

WardsAuto: What isn’t the future?

Burgiss: We may get to buy-now in 10 or 15 years. Who knows? We’re focused on the state of the market today and for the next three years.

WardsAuto: If customers have basically sold themselves or essentially purchased a car online, all that remains is take care of some things. Is there a future job description for the person who wraps it up, but hasn’t done anything regarding the sale of the vehicles?

Burgiss: Think of the archetype of the car salesperson. Think of re-archetyping that. There are two schools of thought. One is the job is more like a realtor. High training, respect, professionalism, a bit of entrepreneurialism, a bit of skin in the business, education and training.

That person at the dealership is using digital tools to accelerate sales. They consistently do 30 cars a month, because they have efficient tools and the customers are leading themselves to the sale. That salesperson can do F&I. They know the products and how to present them. They use the Internet to tee up and they upsell when the customer gets into the store.

That’s one archetype. We see some of that. Some folks call it cradle to grave. High touch. Full service.

Another scenario is what you might call a retail clerk. Think Best Buy. Blue polo shirts, product experts, respect, hourly compensation, (bonuses) not on a percentage basis, but on a unit basis.

Or they only act as product experts, with no responsibility for the sale. You see that already today. Some stores use delivery experts whose only job is to deliver the car and familiarize buyers with its features.

Those different types of jobs aren’t in conflict. They may even co-exist at the same store. It depends on how dealers want to address their market and clientele.