July 2013, Auto Dealer Today - Cover Story
John Wehr (left) and Grant Feek (right) cofounded Tred in 2012. Wehr, the company’s chief technology officer, spearheaded technology projects for HiiDef Inc., creators of Flavors.me and Goodsie.com.
Burton “Buzz” Bruggeman had his mind set Ford Escape SE. But the Seattle resident ready to pay his local Ford dealer he knew for certain the crossover fit in his small driveway. That’s called Tred, a local startup company turning a time-honored tradition into a lead-conversion tool.
For $19, Tred will deliver a new vehicle to a shopper’s home or office for a 15-mile test drive. Dealers who’ve tested the service, which officially debuted in June, say it delivers solid leads, while car shoppers like Bruggeman say Tred allows them to get answers they can’t find from an online search — but without feeling the pressure of having to commit to a purchase.
“What these guys have thought through is such an infinitely better idea and model than present,” says Bruggeman, who also used his Tred test drive to see how the Escape performed on the roads and interstates he travels daily. He also admits that spending less time at the dealership was another motivation.
A DEALER’S ALLY
Tred’s service works simply enough: Shoppers visit Tred’s website, select the vehicle they’re interested in and schedule a date and time for the test drive. A Tred employee then shows up with their vehicle at the appointed time. Customers can select up to two vehicles, and each test drive incurs the same fee.
The service is only available in King County, Wash., but Grant Feek, Tred’s co-founder and CEO, says he plans to expand into new cities.
Feek spent five years working in sales, parts and F&I at a Seattle-based BMW dealership before leaving in 2004 to dabble in the real estate and private equity industries. He had just completed a year as a senior associate at California-based PCCP, a real estate finance and investment management firm, when he decided to focus on his brainchild full-time.
Tred promises to present car buyers with a dealer’s lowest price, but Feek says that’s because dealers are able to focus their resources on serious shoppers. He makes clear that price isn’t what drives his service. “New-car dealers are hungry for a positive innovation,” he says. “The Internet has brought some transparency to the new-car buying space, but it hasn’t always done so in a way that is positive for dealerships. We change that.”
Michael’s Toyota of Bellevue (Wash.) is a Tred client.
The dealership already had plans to remake the test-drive experience before Tred came along. In fact, Erik Paulson, the store’s vice president and general manager, was already in the habit of taking vehicles home so his neighbors could try them out.
“It’s something we’ve all thought about as dealers, but nobody’s implemented it,” Paulson says. “Anyone in the car business has helped their friends and family through this type of model. Thse people just don’t want to come in the dealership. So we’ve been doing it. We’ve just never put in a process like this.”
Other automotive veterans are taking notice of Tred as well. This past November, the company rounded up $1.7 million in seed funding. One of the most noteworthy investors was Rick Wagoner, former chairman and CEO of General Motors.
THE TRED WAY Feek hires employees who are trained experts in the automotive industry, but they’re not salespeople. Their income is based on consumer reviews, not the number of sales leads they pass along to dealers. During Bruggeman’s test drive, Tred’s general manager, Mike Fingado, delivered the Escape personally. He explained some of the vehicle’s voice-activated features and how to use the pre-installed GPS navigation and Bluetooth audio systems. He even threw out some mileage stats while Bruggeman put the car through its paces.
The one thing Fingado and other Tred concierges can’t do is negotiate the price stated on the price certificates, which are handed to shoppers once they commit to buying a car. That policy, which guarantees no haggling on the showroom floor, was imposed on Tred’s employees to avoid accusations that the service equates to brokering or “bird-dogging.” The policy makes clear Feek is aware of the issues that stalled the expansion of other online car-buying services.
In an e-mail sent to Auto Dealer Monthly, Christine Anthony, spokesperson for the State of Washington’s Department of Licensing, confirmed that Tred is in compliance with state laws. “We will continue to make ourselves available to answer questions Tred might have about being in compliance with the laws governing motor vehicle dealers,” she wrote, adding that the agency did share information with Tred on rules governing companies that act as an agent of a dealer.
Tred’s business model launches at a time when a slew of companies are experimenting with ways to improve the customer experience. The main focus seems to be cutting down on transaction times. According to AutoTrader and Polk, consumers spend, on average, 15.25 hours shopping for a vehicle. They then spend another 4.3 hours running through the dealership’s sales process, according to J.D. Power and Associates’ estimates. The latter figure is the one online-buying channels are hoping to reduce.
Consolidating the price research and negotiation process through guaranteed pricing is how vehicle-shopping sites like TrueCar and Edmunds are going about it. But that approach hasn’t played well with many dealers, who say the tactic cuts into their profits in today’s margin-compressed retail environment. Dealers also complain the marketing of those services can paint them as the bad guys. Feek, however, believes his service can strike the right balance between what dealers need and car shoppers desire.
“We cut [the time in the dealership] in half, and CSI (customer satisfaction index) is inversely correlated to time in the showroom,” Feek says. “We tell all of our dealers, ‘Look, when we get there, they don’t want to test drive the car, they want to buy it. So get them directly into F&I. Then after F&I, get them the brochure, get them the keys and get them the heck out of there.’”
Feek says his expedited process is the result of providing dealers with actionable leads. The company is working through its pricing model, but it currently charges $39 per prospect. Feek claims dealers are converting 40 percent of the leads his service delivers.
“We take conversion rates very seriously,” Feek says.
But Feek is quick to note that Tred isn’t out to eliminate the salesperson’s role, saying his service puts the focus on how the vehicle is delivered. Michael’s Toyota’s Paulson says Tred offers other benefits as well.
“Even though the [Tred concierges] know a lot about the vehicle, we want to show them all of the features and be the contact person if they have any concerns,” he says, adding that Tred’s streamlined process also frees up salespeople to work with other customers.
“We also want to introduce customers to our service department and get them comfortable with our surroundings,” he adds. “We don’t sell people cars. We want to help them purchase cars; we want to give them all of the information, and I think Tred’s taken that philosophy as well.”
Feek says consumers using Tred are mainly tech-savvy Gen-Yers, as well as busy parents who dread dragging their children to the dealership for several hours at a time. “Not everybody’s a Tred shopper,” Feek says, “but there’s a certain kind of person who just doesn’t want to go to the showroom for one reason or another.”
Small driveway aside, Bruggeman says the main reason he called Tred was to side-step the traditional sales process. As it turns out, he opted to wait until August, when the 2014 Ford Escape is released. But that doesn’t mean he didn’t like the experience.
“The Tred guys have been great. It’s a wonderful idea,” he says. “I’m sure I’ve told a dozen friends of mine about the service.”