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Transforming Automotive Retail

Dealertrack’s Raj Sundaram says the industry is in the midst of major change. He believes the company’s acquisition of Dealer.com puts the firm in the perfect position to respond.

April 2014, F&I and Showroom - Feature

by Gregory Arroyo - Also by this author

Founded 13 years ago as an online credit application network, Dealertrack has become much more than that through a number of acquisitions. The company’s evolution continued in mid-December when it agreed to bring Dealer.com into the fold for $620 million in cash and 8.7 million of its common stock. The acquisition comes at a time when tech firms are angling to turn dealer websites into true car-buying tools.

In its 2013 dealer study, the National Automobile Dealers Association (NADA) noted that the share of dealer advertising budgets directed toward newspapers dropped 30 percentage points between 2002 and 2012. During that same period, the share of dealer ad budgets directed online grew 22 percentage points to 26.5%. Companies like Dealertrack are keying in on stats like that. They believe that in order for dealers to realize a solid return on their digital ad investments, their websites need to do more than allow shoppers to search their inventory.

That was the thought behind Dealertrack’s February 2011 unveiling of its PaymentDriver online payment calculator. The following year, the tech firm rolled out FinanceDriver, a web tool designed to prequalify car buyers for vehicle financing. The company added its shop-by-payment SmartFind feature last year, and officially rolled out its TradeDriver trade appraisal tool this year.

The purchase of Dealer.com, which was founded in 1998 as a designer of dealer websites, puts Dealertrack and its suite of digital retailing solutions even closer to dealer websites. So far, Dealertrack has said it will retain the Dealer.com name, as well as its CEO and co-founder Rick Gibbs. He will lead a newly formed Digital Marketing Solutions team out of Dealer.com’s Burlington, Vt.-based headquarters.

Before the deal closed last month, the editor sat down with Raj Sundaram at the 2014 NADA Convention & Expo in New Orleans. The executive vice president and group president of Dealertrack’s Dealer Solution business unit offered his thoughts on what the acquisition means for the company and its dealer customers.

F&I: I think anyone who has followed Dealertrack’s activities in recent years wasn’t surprised by this acquisition. But why don’t you tell our readers what the motivation was behind this purchase.

Sundaram: Clearly, the biggest motivation for us with Dealer.com is being in a leadership position from the standpoint of digital marketing. Digital has become more pervasive. What we are excited about is we now have the industry’s leading digital marketing platform.

F&I: You’ve released several plug-ins for dealer websites in recent years. Could this purchase change the way you build those solutions? In other words, could we see you guys developing TrueCar-like buying sites for dealers?

Sundaram: Your comment is an interesting one. That is one of the added benefits. Our vision for digital retailing remains the same, as we will continue to go down the path of both building services and plugins. We think that’s a smart way to go and it needs to continue. The advantage of having Dealer.com is they will be able to absorb the services and create a much richer experience on their own.

F&I: Talk for a second about your digital retailing strategy, which you began discussing last year.

Sundaram: It was in its infancy. We didn’t have all the drivers launched. We have SmartFind, PaymentDriver, FinanceDriver and now TradeDriver, but we had only two things last year that we talked about. Since then, we’ve launched a more enhanced version of PaymentDriver. The big news 90 days ago is we launched TradeDriver. What’s important to note here is, in some cases, we’re into the second generation with these tools. TradeDriver is new, but everything else, including what we launched for mobile devices, has already gone through, based on dealer input, what works and what doesn’t.

F&I: Is taking transactions online the play here?

Sundaram: What we are after is creating the richest online experience a dealer can deliver to their customers, one that is a lot deeper than what it is today. Today, we can all agree that inventory is fantastic. There are great pictures, a lot of descriptions, a lot happening. What I think we’re offering dealers are tools to say not everyone comes to a dealer’s website to search his inventory.

Dealertrack’s Raj Sundaram says the firm remains committed to building web services and plugins, but he believes the acquisition of Dealer.com will allow the combined entities to create a richer online experience for dealers websites.
Dealertrack’s Raj Sundaram says the firm remains committed to building web services and plugins, but he believes the acquisition of Dealer.com will allow the combined entities to create a richer online experience for dealers websites.

For the dealer, the challenge is attracting that customer who says, “I know the car I want. What’s the payment going to be? I don’t want to hear the ‘Come on in. Don’t worry, I’ll tell you.’” We’re not saying all customers want this, but that becomes compelling. So the real opportunity here is the dealer’s investment in digital marketing. You draw in all the eyeballs; you want to make sure you have programs that are compelling. So what dealers really need right now is for the websites to deliver higher conversion rates. We’re offering them tools that will drive that.

What we are not after is dictating that this has to be done this way. We have to be fair and say some customers are more comfortable saying, “I saw the pictures. I’m willing to come in for that appointment.” Hey, not everyone was comfortable buying everything on Amazon, but now everyone is. It’s the same thing here.

F&I: Everyone is talking about the big change that’s coming to automotive retailing, but could we already be in the midst of that change?

Sundaram: Yes, I think we’re experiencing the change now. In terms of what’s an inflexion point, 2015 might be that springboard. I don’t have a crystal ball, but here’s why I’m confident we’re already in the middle of this: The stakes are so high from a standpoint of digital advertising spend. It’s incredible how much OEMs and dealers are pushing digital advertising. That’s already happening.

And as I said before, you can’t spend that much money on digital advertising to drive customers to your website and not have the tools to drive the funnel conversion. So again, I would be shocked if it wasn’t 2015. But mark my words, 2014 might surprise us with respect to some of this stuff. All it takes, like everything else in this industry, is a few dealers starting to see a lot of traction.

F&I: Does the current regulatory climate slow things down?

Sundaram: I think it accelerates it. Here’s why: I think what we’re putting out here is the ability to diffuse [the issues raised by regulators]. For a dealer, the advantage is not only can he deliver on some of the compliance or so-called transparency comments we keep hearing, he can control what is getting displayed in a very secure manner. I think it actually provides an excellent platform for dealers to embrace this and leverage it.

Comment

  1. 1. Tarry Shebesta [ April 25, 2014 @ 09:47AM ]

    ACS, through its LeaseCompare.com (launched in 2000) and DriveItNow (Launched in 2008), pioneered what DealerTrack and RouteOne are just now beginning to roll out.

    As a dealer and leasing company, ACS has worked with online car shoppers for over a decade. With years of direct-to-consumer experience, DriveItNow incorporates the best credit based shop-by-payment selling practices in a conversion tool that is effective and FCRA compliant.

 

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