Shift Magazine - September 2021 - 9

fragmented in terms of ownership, even
after 25 years of gradual consolidation
under public and private megadealer
chains. According to Lithia's investor presentation
in July, no single U.S. dealership
chain represents more than 1.5 percent
market share.
LONG DISTANCE
A key limiting factor is that the factories
control how many new-car franchises a
single owner can have for a given brand,
and in what locations.
Meanwhile, online selling isn't tied
to a single brick-and-mortar dealership
or even a local handful of dealerships.
Online, megadealer groups can - and
do - market and sell new and used vehicles
outside their geographic footprints,
making all of their inventory available for
review, regardless of where the customer
is located.
At the same time, because of the current
inventory shortage, customers are
shopping online for vehicles farther from
home than ever before.
In the second quarter, Lithia's
average delivery distance via
Driveway was 940 miles, said
CEO Bryan DeBoer. That's up
from 740 miles in the first quarter.
" I think with the scarcity of
there are definitely
vehicles,
consumers that are more apt to
turn to the Internet to find inventory
just because there is just a
massive shortage, " DeBoer said
in a July conference call.
George Hines, chief innovation and
Penske's partnership with Cox will enable the online sale of used vehicles through CarShop.
margins are higher on used vehicles than
on new ones.
Sonic's EchoPark is used-only. So is
Penske's CarShop. Driveway offers new
and used, but its sales ratio of used to
new is about 5.5-to-1, vs. 1-to-1 for brickand-mortar
Lithia dealerships, the company
said.
Sales for Asbury's Clicklane
in the second quarter were
the exception, with 54 percent
being new vehicles, CEO David
Hult said in a conference call.
DIFFERENT
APPROACHES
How these companies are
DeBoer: Buyers'
search widens
technology officer for Lithia and Driveway,
said in a separate phone interview that
Driveway divides the country into six
regions. It charges customers a shipping
fee from $295 within the same region, to
$695 between adjoining regions, to $1,295
between regions that are not adjoining.
USED VS. NEW
A factor motivating the public groups to
develop nationwide online used-car sales
channels is that unlike with new vehicles,
there's no factory limit to how many
used-car locations a franchised, new-car
ownership structure can have. In addition,
executing their online strategies
varies.
Sonic's EchoPark, for
instance, has no plans to offer
service. That keeps the investment
in
new EchoPark locations low. And it plans
to enter markets where Sonic has no
brick-and-mortar dealerships. In contrast,
Lithia won't promote its Driveway channel
outside the footprint of its physical dealerships.
Service retention at the Lithia
new-car dealership network is a central
part of the Driveway concept, even if the
customer makes their purchase entirely
online.
Martin Jenns, senior vice president of
global transformation at Assurant Global
Automotive, says research shows most
customers want an omnichannel approach
that lets them switch back and forth
between online and in person. Assurant
Inc., of New York, is a service contract
provider.
" Despite a willingness to engage in the
process of purchasing a vehicle online,
they want to complete the transaction at
the dealership 80 percent to 85 percent of
the time, " Jenns said.
FLEXIBILITY
Lori Wittman, senior vice president
of Dealer Software Solutions at Cox
Automotive, said Cox researched 450
franchised dealerships since the pandemic
began to see which ones were
" thrivers. "
Successful dealerships are picking and
choosing which online technologies to
use - a popular one is text messages to
communicate with service customers -
without necessarily adopting every innovation
that comes along, she said.
" It's all about being flexible and figuring
out what pieces work for your dealership, "
she said.
What the " thrivers " have in common
is that they offer customers a lot of digital
options;
they respond to customer
preferences for communications, such as
the use of text messages; they maximize
the use of data, such as finding out which
other vehicles a customer has researched;
and they invest in staff, Wittman said.
" Some dealers are using some pieces, "
she said. " It's not all or nothing. " n
september 2021 * shift
9

Shift Magazine - September 2021

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