Are You an Instamatic in an iPhone World?

Kodak Instamatic- circa 1965

Kodak Instamatic- circa 1965

An Apple commercial recently debuted showing the many ways that iPhone users were utilizing the camera.  In the commercial there is only one line of dialog, “Every day, more photos are taken with the iPhone than any other camera.

It made me think about the last ten years; where we have been, where we are going, and how some companies not embracing new technologies and business practices will be left behind.

We all remember when Kodak was a dominant force in photography, providing cameras for the family and film for photographers to capture those important moments in our lives.

The world changed and Kodak tried to make the move to digital cameras.  In the end they lost out to a device that wasn’t even a camera.  We saw they couldn’t compete, and today Kodak is all but a distant memory. The world evolved and technology moved on.

Change is coming to the auto industry but many are still clinging to the old ways of doing business in this new day and age.  The overall perception of auto dealers and often manufacturers isn’t always the best in the mind of the public.  The reality is a majority of auto retailers do a wonderful job of taking care of their customers, their employees and their communities, but if they’re using a “Kodak process” it will be a long road before things turn around for the auto industry.

iPhone 5 replaced traditional digital cameras

iPhone 5 replaced traditional digital cameras

The process of buying or leasing a vehicle hasn’t changed much in the last 50 years.  There’s the selection process, the test drive, the trade-in valuation and the back and forth for negotiating the total price, not to mention dealer fees, arbitration clauses, and other aspects of the traditional sales process. Oh, and let’s not forget the back-end paperwork and F&I products.  The process makes consumers uncomfortable.  Our industry needs to change the process and improve the customer experience before someone from outside our industry does it for us.  When that happens, I can guarantee up to 40% of the dealers out there run the risk of becoming irrelevant.

Skeptical that will happen? Think about CarMax and how they re-engineered the used car buying process.  Last year their net income rose 5 percent to $ 434.3 million and revenue grew 10 percent to $10.9 billion.  Many predicted they would not last or  be around long, but consumers responded to the non-confrontational buying process and they continue to grow and expand into new markets.  And as mentioned above, the smartphone (which debuted in 2001 in the U.S. with the Palm/Kyocera 6035) has replaced traditional cameras.  We need to recognize that our only constant is change.

The Internet increases transparency, social media amplifies the voice of the consumer, third party vehicle shopping services promise to streamline the shopping and price negotiation process for consumers; and they have all forced dealers to look at how they do business.  Often dealers are migrating to a big box store mentality where they look to boost their volume by selling cars at or below invoice, hire sales people at minimum wage or just barely above that, provide little training and then complain when they aren’t holding good grosses on transactions and experience double digit employee turnover that’s higher than the fast food industry.

What’s troubling is most dealers don’t comprehend where their future competition could be coming from or who it might be.  For auto dealers the biggest threat is not from the dealer up the street, or even the publicly owned auto dealer groups who face these issues on a bigger scale.

Previously, I worked at National City Bank, one of the largest banks in the Mid-West  ($140 billion in assets in 2007). In meetings we always discussed local banks and how we could beat them at loan generation for home mortgages and auto loans.  In truth, local banks weren’t our competition because with the advent of the Internet and the flexibility it offered consumers, the competition was Quicken Loans, LendingTree, and eLoan.   The bank had no strategy or plan to go after Internet customers and as a result lost a good portion of the market to online lenders. (Note: National City pursued sub-prime home loans, and lost substantial value in their portfolio when the housing industry collapsed. PNC Bank acquired National City for pennies on the dollar. Clearly they weren’t too big to fail.) 

Think about companies known for providing a great customer experience, cutting edge technology, and value to their customers.  Names that come to mind are Disney, Google, Yahoo, Amazon, Microsoft, Apple, Wal-Mart, Intel, Hewlett Packard, and General Electric.  What would it look like if any of these companies decided to enter the auto retailing arena?  Would they design a sales process that is exactly what dealers are doing today, OR would they re-engineer the entire process to provide a stellar and streamlined customer experience?

We all know the answer to that question. They would design a simple, friction-free, transparent process that would excite customers, attract a new class of employees, and restore the reputation of auto retailers.  Their marketing would be local, organic, socially conscious and not reliant on price or promoting ridiculous trade-in values.  While their operations would rely on the latest technology the work environment would be very attractive to employees, offer a powerful home/work balance, and create generous incentives for revenues from repeat customers, their friends and family members.  A new level of networking will replace most of the traditional advertising and marketing strategies; and all media messaging would be consistent across all channels.

If our future competitors have the ability to see our issues and challenges and develop new solutions, then why can’t the current leaders in auto retailing do it too?   I know we have the ability to create a new business model. Now it becomes a question of do we have the will to change the status quo?

Mark Dubis

May 3, 2013

Auto Retailers and vehicle manufacturers who would like to be part of this new future in auto retailing can contact Carfolks to discuss next generation automotive retailing strategies.