Automotive News - February 1, 2021 - 41

FEBRUARY 1, 2021 * 41

TOYOTA

Here's the deal

'Time, transparency
and trust' are the keys

These are the steps a customer
takes to purchase or lease a vehicle
through Toyota's SmartPath digital
suite. However, the customer can
contact or visit a dealership anywhere
in the process.
1. Input ZIP code and select area
dealership
2. Select vehicle in inventory, along
with accessories
3. If there's a trade-in, receive value
generated by KBB.com
4. Select lease, finance or cash
5. Select protection products
6. Apply for financing, get immediate
credit decision
7. Finalize deal and schedule delivery
8. Sign contract
9. Take delivery

continued from Page 1

owner Danny Wilson says.
" I keep comparing it to Apple Stores or Verizon stores, " Wilson says. " We used to all go
there and line up to get new phones. Now,
most of us order them online and set them up
ourselves, maybe with a little help. It's evolving very quickly. "
SmartPath, introduced to Toyota's 1,238
U.S. dealers in September 2019, is a software
suite that enables retailers to promote their
new-vehicle inventory in real time on the Internet, with accurate, dealer-set pricing inclusive of incentives, local taxes and fees. A
rebranded version of the software, called
Monogram, is aimed at the automaker's 242
Lexus dealerships in the U.S.
SmartPath seamlessly integrates a dealer's
new-vehicle inventory across toyota.com,
regional shopping portal buyatoyota.com
and the dealership's own website. It is enabled in only about 50 Toyota dealerships,
but the urgency to ramp up was influenced
by COVID-19.
While the initial suite was a marketing tool
and allowed customers to apply for financing,
they still had to go to the dealership - or at
least meet with their salesperson - to close
the deal. The expansion allows consumers to
complete far more of the transaction online if
they desire, including completing financing,
buying accessories and finance and insurance
products, valuing their trade-in and adding
any equity to the deal - almost everything up
to signing on the dotted line, which must be
done in person in most states, although that
could be at the customer's home.
The initial results: The average transaction
time for consumers in the dealership to buy a
new vehicle and take delivery dropped to just
32 minutes - a significant decrease, though
Toyota declined to disclose the previous average. Customer satisfaction with the sales process improved, said Jack Hollis, senior vice
president of automotive operations at Toyota
Motor North America.
" The keys are time, transparency and trust, "
Hollis told Automotive News. " We have learned
over time that the longer a transaction takes, the
more likely it is that frustration will enter into

Source: Toyota

both sides, from the customer and the dealer. "
Hollis said transparency refers to the customer being able to put together their own
deal, or as much of it as they want and with as
much help as they want, at their own pace. As
a result, trust among the brand, the dealer and
the customer increases substantially.
And the dealer sees more profit.
" We won't talk about the exact numbers,
but what we can tell you is that there's more
front-end gross, there's more total gross in the
deal, and that is a fact, " Hollis said. " Because
of the transparency of the inventory, of the
deal, and then the pricing on it, there tends to
be a very high percentage of people who accept that first offer, that first deal, that first
pencil that has a higher number. "

How it works
While several automakers and dealer vendors quickly ramped up digital retailing efforts as COVID-19 struck the U.S. last year,
their approaches differed greatly, as did the
depth of their penetration into a transaction.
Some work more as internal lead generators,
others expedite finance applications or allow
cross-shopping between dealerships.
Toyota's approach is very dealer-centric, explains Tim Bliss, general manager for retail
transformation at Toyota Motor North America
and the man leading the in-house development of SmartPath. One example: A prospec-

OUTLOOK

2021 outlook

taken to rehire only his strongest
sales employees. Jack Daniels Motors in New Jersey subsequently had
its best-ever year in 2020, CFO Ronald Dubin said.
Strict shutdown orders in the state
prompted the five-store group to
trim sales staff to a skeleton crew.
When sales roared back in May, Dubin took the opportunity to overhaul
the entire department.
" We brought back the cream of the
crop, " he said. " We redid every pay
plan in the company and realigned it
towards profitability. "
John Pitre, dealer principal of Motor City West in Bakersfield, Calif.,
said he adopted shorter business
hours that required only one shift
per day instead of two.
Supervising half as many employees allowed managers to become
more efficient.
" Our people got better. Our processes got better. We eliminated unnecessary steps and unnecessary
vendors, " Pitre said. " That streamlining has allowed us to be more efficient in not only our pricing but our
delivery of services. "
Survey respondents said they see

Q: What is this year's unit sales
outlook for your dealership,
compared with last year?
Respondents: 181

continued from previous page

tive buyer can look at the inventory of only one
dealer at a time.
" The biggest piece to really get this up and
running was building that real-time inventory integration with the dealer's DMS system,
and that's really the key to the whole platform, " Bliss explained. Pricing, incentives
and availability update automatically.
When a consumer looking for a new Toyota
lands on one of the web pages, they are asked
to input a ZIP code and then are offered a
choice of area dealerships. With SmartPath
enabled, the consumer can search the new-vehicle inventory, and if they find something
they like, they can begin the purchase process:
choosing whether to lease or buy, finalizing incentives and shopping for accessories.
The consumer is asked whether they have a
trade-in, and if they do, they're given a KBB.
com-generated value for the trade. If they accept the offer, any equity is integrated into the
new vehicle payment.
The online purchaser is then moved into the
virtual F&I office, where they can apply for
and receive an immediate credit decision
through Toyota Financial Services, or they can
indicate whether they have outside financing
or will be paying with cash. They're also offered a menu of available warranties and protections through Toyota Financial, the cost of
which is immediately baked into the monthly
payment. If everything is a go, the customer
can finalize the deal and then is contacted by
the dealership to schedule delivery and sign
the purchase or lease contract.
As with the earlier versions of SmartPath, consumers can save their work at any point, and if
they visit the dealership, all of their information
and earlier work is immediately visible to dealership personnel. Contacting the dealership, by
phone or video call or in person, allows the consumer to haggle if they desire.
In the beta test at Wilson Toyota, General Sales
Manager Josh Holz says the customer is handed
an iPad in the dealership and offered as much
- or as little - assistance as they require.
" The beauty of it is, when they walk in our
dealership, we can hand them an iPad or a
tablet, and we just say, 'You're in control. You
drive this process. What do you want to do,
and how do you want to do this?' And that really becomes a different type of interaction, "
Holz explained. " People are more comfortable with it, and as they experience it, they tell
their friends how easy the whole process is. "
For dealers operating what might be con-

sidered traditional business development
centers - cold calling, chasing down Internet leads, etc. - the upgraded SmartPath
functionality enables workers there to act as
online guides for shoppers, Hollis said.
" The BDC becomes more of the customer
concierge instead of just an appointment-setter, " Hollis said. " You would think that the
process would be 'less touch' with the online
piece, but what dealers are telling us is that
it's more 'high touch' " because there is a dedicated team to help those shopping online.

Rollout plan
Although the initially conservative rollout
plan for SmartPath was upended by
COVID-19 - the automaker hoped to have
200 dealerships up and running by the end of
2020 - Bliss said the expansion process is
speeding up. He also said the new functionality of the system will be rolled out across the
existing SmartPath dealerships, without additional fees, and then will be automatically
included as new dealerships come online.
In addition to the 50 SmartPath dealers operating nationwide - at least one in every region, according to Hollis - Toyota has another
50 waiting in its " launch factory " and has hired
additional field personnel to speed the rollout.
On the Lexus side, a " handful " of dealers are
piloting Monogram, and that software will get
its expanded abilities by summer, Hollis said.
As was the case when it was announced, no
dealership will be forced to adopt SmartPath.
" The customer is in so much more control
of this process [on SmartPath], which is exactly what they're experiencing across almost
every single other industry, with all their other purchases, that they feel like it's more consistent with what they're used to and that
their time means something, " Hollis said.
While a majority of Toyota and Lexus dealers
are expected to adopt the system, not all will,
Hollis said, because some have already crafted
their own solutions using other vendors. The
decision to adopt SmartPath or Monogram remains with dealers, he added, but he believes
he knows what many of them will do.
" If it wasn't effective, our dealer partners
wouldn't see value in it, and they'd toss it
aside like any other vendor, any other retail
tool, " Hollis said.
" That's why we've said all along that this is
optional; it's not a top-down factory push.
This is a tool, and we're gonna make it so good
that you're gonna want it. " a

Automotive News surveyed 183 dealership executives between Jan. 15 and Jan. 23 about operations during the pandemic, 2020 results and their
outlook for 2021. The group generally reported a robust bottom line last year - and that they expect even better results this year. Here are highlights:

Q: What is your profit outlook
for your dealership for 2021,
compared with last year?
Respondents: 182

Much better

opportunity for profit growth this
year?
Respondents: 180

No, it was not profitable

1% Collision
1% Parts

26%

25%

Worse

Q: Where do you see the most

in 2020?
Respondents: 180

43%

55%

21%

Better

Worse

Yes, though
profits were
down from
2019

3% Other

19%

28%

Same

13%

Q: Was your dealership profitable

63%

Yes, more
profitable
than in 2019

26%

Service

8%
F&I

New-vehicle
sales

43%

Used-vehicle
sales

Note: Figures may not equal 100% because of rounding.

the most opportunity for profit
growth this year in used-vehicle
sales, followed by service and then
new-vehicle sales.
Nearly one-third said they plan to
hire to expand dealership head
count this year.
At Harbin Automotive, a two-store
group in Scottsboro, Ala., used-vehicle
sales jumped 85 percent last year, said
Tom Vosen, the stores' general manager.
When the industry rebounded, de-

mand rapidly eclipsed supply in
both used and new.
" Especially in the last half of the
year, we were selling off the [delivery] truck, " Vosen said.
New-vehicle inventory levels remain a wild card in 2021.
More than a third of respondents
expect them to be back in line with
demand by the end of June. Another
quarter don't expect that to happen
at all this year.

Cox Automotive's Smoke estimates
supplies won't normalize until next
year. That will continue to both help
and harm dealerships, he said.
" The bad news is, it's certainly going to be more challenging to have
the inventory to support dramatic
increases in volumes, " Smoke said.
" The good news is, it creates much of
that very strong pricing power that
directly related to the improvement
in margins experienced in both the

new and used markets. "
Randall Hebert, dealer principal of
Mountain View Chevrolet in Chattanooga, said he sourced inventory
during the early weeks of the pandemic from dealerships closed by government orders. But those stores aren't
selling to other dealers any longer.
" The factory still has the same
problems that they had before, " Hebert said. " They have never been able
to ramp production back up. " a

http://www.KBB.com http://www.toyota.com http://www.buyatoyota.com

Automotive News - February 1, 2021

Table of Contents for the Digital Edition of Automotive News - February 1, 2021