September 2011, Auto Dealer Today - WebXclusive
Imagine a customer coming in completely ready to purchase and driving off the lot in a new vehicle just an hour later—with no hassle or negotiation. This is the reality every day in Dallas, Texas, at driversselect, an independent dealership opened in 2004.
In late 2009, President Steve Hall realized the traditional business practices in place at his dealership needed to make a complete shift to the Internet, so he began the dealership’s expansion and business model overhaul. Sales shifted quickly from around 150 to about 300 units per month, even as the dealership cut back on personnel, going from 23 salespeople down to 17.
Hall calls himself a “big reader” and keeps up with business trends. When he realized markets were shifting so that customers had control over the purchase, he was inspired to change his business. He paid attention when Amazon “disrupted” Borders and Netflix “disrupted” Blockbuster, realizing that “the winners are those who adapt boldly.” He viewed the recession in the auto industry a few years ago as an opportunity, not a setback.
A couple years ago, Steve Hall, owner of driversselect in Dallas, Texas, noticed customers were shifting more towards the Internet for purchasing, so he shifted his operation that way as well. Now his customers can practically complete the sales process online, from choosing a vehicle to selecting which finance company to work with.
“What’s amazing is that I look at Borders and Blockbuster, and customers all have good experiences, but consumer preference is so strong to purchase online,” he said. “If they are willing to give up those good experiences to shop online, what will they do with a transaction that’s filled with pain, fear and distrust [like many auto dealer transactions]?”
Historically, consumers had to go to the dealership and had only a few options for obtaining information. “They couldn’t get it all before they went and spent several hours [at the dealership]. That put pain, fear and frustration into the process, but the growth in Internet and social media put more consumers online.” He explained that given the choice, most consumers would rather do their research online—comparing prices and information so they’re “armed with choices” before they reach the dealership.
The new buying process involves, as Hall put it, “complete transparency.” Customers visit driversselect.com and research vehicles from the comfort of their own home or office or on their mobile device. They can view over 40 pictures of each vehicle that show the complete, unedited condition of the vehicle. To him, the definition of transparency is “what you see is what you get.”
“We zoom in on tire treads, wear and tear, and give as good or even better views virtually than at a dealership. The customers will see things online that they wouldn’t see when they come in. Sometimes it’s at night, or if it’s hot or raining, you miss things,” Hall said. The site also gives the complete vehicle history, including the number of previous owners and any accidents or major repairs, and it discloses any cosmetic or mechanical problems that have not been repaired. Customers can also get a trade-in appraised online.
Another part of Hall’s business goals at the dealership is transparency of the financing process. Online, customers can select financing from more than 20 national banks and credit unions. “When they come to the showroom, they will know the interest rate, the down payment, and the terms and conditions already.”
The customer will also see a set price, which is firmly non-negotiable at the dealership. “We give them our lowest price up front on day one,” Hall said. “[Salespeople at other dealerships], using the old strategy, leave room for negotiation using a higher price and an aggressive sales force to win that battle, but there’s a cost of employing that sales force.” At driversselect, the price of a vehicle is based on the answer to this question: “What is the minimum we would sell this vehicle for?”
“Before the expansion, there was more flexibility in the price. There were not as many photos and condition reports, and we didn’t show as much information. Customers could still get more when they got to the store,” Hall said. “Now everything you could do from the showroom you can now do from your home or office … with the exception of the test drive.” He doesn’t spend near the amount the average dealer does to deliver a vehicle with his new approach, and his lower costs are passed on to the customer.
Customers have taken notice. They are encouraged to compare prices, as driversselect is confident that its prices are the lowest—so confident, that the new 8,000-square-foot facility houses computers where people can research and compare vehicles at their leisure. “They don’t want to be sucked into expensive showrooms and then be subjected to a hard sell,” Hall said. “They want more respect and choices.”
The success of the new sales process led to the expansion of driversselect from a two-acre facility to more than six acres, creating four centers at the dealership: operations (now housed in the old building), the new showroom, the mechanical reconditioning center and the cosmetic center.
The showroom’s appearance is different than traditional dealerships. To increase the communication flow, employees are set up in an open area of desks, and there are various stations around the room equipped with computers to accommodate customers. The environment encourages a quick and painless experience for the buyer.
If a customer doubts the pricing, Hall said the staff can do price comparisons right in the showroom. They can show the customer what other dealers are selling (the make and model, with similar options), what they are currently being sold for and what they have sold for in the last 30 days. But usually, the in-person meeting just involves the test drive and the paperwork for the purchase.
Even though the no-negotiation policy is posted throughout the dealership, people sometimes still struggle to understand that the given price really is the lowest one that will be offered. “We have to be firm and clear,” Hall said. “It forces us to be price-competitive.”
When he said no negotiation, he meant it (right down to his neighbor who recently came in to purchase a 3-Series BMW). Hall had to tell him that his motto was that everyone would receive the exact same treatment—whether a neighbor or a stranger. “I’m committed to that, and I recognize that I do give up some business.” That’s a risk he has calculated and is willing to take.
Customers still have questions, even if they are shopping online and not in person, so much of the driversselect team is dedicated to online interactions. Upon entering the site, a chat window immediately opens and asks the shopper how they would like to be assisted. Once the research is completed online and the customer’s questions have been answered, the actual signing and delivery of the vehicle can take under an hour in the dealership.
The appearance of the new driversselect showroom is a bit different than most. Employees are set up in an open area of desks, and there are workstations with computers around the room so customers can research and compare vehicles while they're at the store.
“Most of the time we work by appointment only. However, we have some walk-ins,” Hall said. “We leave customers in charge of the transaction.” The only customers who do not eventually set foot in the dealership are those purchasing from out of town.
Such an expansion also required an inventory increase. The dealership used to carry about 130 vehicles, and now stocks 300 at a time. “We also have a 27-day turn in supply,” Hall said. “That’s been fairly consistent.”
One area, however, that’s not as profitable is hybrids. Because they hold a high resale value, it’s tough to competitively price them. “Once they are at auction, and you’ve paid all the fees, and then have to price it at the minimum margin, it’s not worth it,” he said. “The 2011 model with a few thousand miles isn’t that much less than a brand-new one.” Staying with what works, and knowing the market, has made him successful.
The dealership’s expansion and culture change did not come without growing pains, and some staff members did not make the transition from the physical to the virtual world. Others had to redefine their jobs to accommodate the new business model, taking on new duties or adjusting their old ones.
“I didn’t underestimate how difficult the culture change is. When you change a business model, especially to this level, it requires a different way of thinking, and you have to get your people to think and act differently,” Hall said. He made sure to devote time to properly explain his ideas to employees and gain buy-in, which was very important to him. “You have to be careful that you don’t outrun your people.” This was especially important because the dealership’s employees needed to reflect the brand and philosophy “from the inside” to achieve the dealership’s culture of “complete transparency.”
Hall said employees resist change because they either don’t care or don’t understand it. “If they are pushing back because they don’t care, then we have to part in a respectful way. I have a zero-tolerance policy for people who don’t want to change,” he said. However, sometimes they don’t understand why the company is changing or how their role will fit into the new atmosphere. That is where Hall comes in.
“The responsibility for that training is on us. The responsibility to care and grow is on them,” he said. Hall implemented a 10-point training process that walked people through the first 60 to 90 days of the expansion. It included one-on-one training, team training, and training in different areas including: CRM tool and technical skills, online chat technique, product knowledge, and cultural training. In the end, the staff is one “sales force,” though some employees are more skilled at online chat techniques or phone conversations. “We have had to hire some people who have an understanding of the virtual world,” Hall said.
His upcoming goals involve reaching true transparency levels within the company. “We have to be transparent with each other.” This goal pervades all the departments, from human resources to the showroom. “Our big focus this year is to continue to drive the culture of transparency, not just in sales, but through everyone.”
Vol. 8, Issue 7