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No Pain, No Gain

The business of connecting consumers to dealers is not for the faint of heart, as several tech firms have learned. But the editor believes the battles between dealers and those who seek to digitize the car-buying process are good for the industry’s future.

February 6, 2014

The e-mail arrived last January. A tech firm wanted to pen a story about the dealership of the future. I was game, but I was surprised the company was, especially since such gazes into the future have become the source of several recent dustups in our industry.

The problem with taking on such topics is the author opens himself up to criticism that he’s out of touch with the realities of the car business. But I guess that’s the chance you need to take when you’re in the business of connecting consumers to dealers. But you better choose your words carefully or you could end up the target of a Jim Ziegler column.

It became clear to me that Jim is on the minds of these companies when a communications person from one of these firms stopped by the office. She chose her words carefully when describing the customer-to-dealer relationship. Not only was she sure to note how little dealers make on the sale of a new vehicle, she blamed the disconnect between consumers and dealers on an information gap.

Frankly, I don’t know how you balance the needs of both consumers and dealers. There’s just too much history between the two sides. Take this consumer group in California that’s trying to get a measure on the November 2014 ballot that would, among other things, eliminate rate markups in the state. When asked if dealers should be compensated for arranging a car buyer’s financing, the group’s leader said this: “Why would you pay someone to put you in a bad loan?”

Last year, we saw Cars.com come under fire for its treatment of dealers who pay to market their used inventory on the site. And once again, F&I and Showroom columnist Jim Ziegler was in the middle of the fray. “For too many years, there have been a number of vendors selling dealers near-worthless leads that have been sold, regurgitated, resold and sold again,” he wrote last July. “They keep passing the same customer around … in the name of the customer experience, another buzz word they’re using to disguise their greed.”

Carfax also came under scrutiny in 2013, with about 500 dealers joining a mass-action suit that charges the vehicle history report provider with monopolizing the market through its agreements with vehicle OEMs and vehicle merchandising sites. The real reason these dealers are pursuing this lawsuit is because they’re tired of the company’s advertisements, which play up old dealer stereotypes to urge car buyers to ask for a Carfax report.

I didn’t bring up these storylines from last year to remind tech vendors that the road to our industry’s future runs through dealer showrooms and Ziegler’s living room. I bring them up because each controversy, at least to me, serves as a reminder that our industry is changing and evolving. And with each fight, our industry is forced to address an issue standing in the way of our future.

That was the case when dealers took on TrueCar two years ago. Not only did tech firms see just how out of date the laws governing our business are, but they witnessed firsthand the maze of regulations we face on every deal.

And thanks to Jim’s data-wars rants, data access was another issue we tackled last year. I’m not choosing sides here, but I do think Jim’s columns were responsible, at least partially, for the National Automobile Dealers Association releasing a 14-page memo on data access this past August. And what that memo did was warn dealers that the privacy notices they hand to customers may not reflect the connection OEMs and tech vendors have to their dealer management systems.

This is important stuff folks, as identify theft has been the top consumer complaint received by the Federal Trade Commission for 13 straight years. And if a major corporation like Target can’t protect the information of 110 million customers, who’s to say our tech vendors can do better?

And that’s why I think these consumer experts need to slow down a bit. I know studies point to consumers wanting to avoid the dealership altogether, but we have some real issues we need to solve before we can deliver that experience. And besides, I’m not sure consumers are ready to complete transactions online.

That’s what dealers testing out General Motors’ new Shop-Click-Drive buying option told us recently. As it turns out, most car buyers are dropping off when prompted to complete an online credit app.
You know, I never did get that article on the dealership of the future. Maybe the issues that emerged last year clouded the company’s vision. Maybe it saw Jim’s shadow. Whatever the case, let’s keep blazing that trail to our future, no matter how painful it might be.

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