Franchised dealerships equipped to evolve with changing auto retail model

Franchised dealers have the entrepreneurial skill and spirit to adapt their businesses to meet a changing industry, executives at two retail technology companies said Thursday.

From the rollout of more electric vehicles, to providing a consistent customer experience, to bringing more technology to the purchase process, the franchised new-vehicle retail model is best suited to keep up with evolving trends, Cars.com CEO Alex Vetter and Brian MacDonald, CEO of CDK Global Inc., said at the Automotive News Retail Forum: Chicago event.

Dealers who work in partnership with the automakers they represent not only will win market share but also be equipped to compete against non-franchised manufacturers such as Tesla and Lucid Motors, they said.

“We certainly believe that the dealer model is here to stay, and we convinced a lot of people to put a lot of money behind us to do that,” said MacDonald, who became CEO of CDK Global in July after the company completed its sale to investment firm Brookfield Business Partners. He previously had been CDK’s CEO from 2016 to 2018.

In meeting with dealers and automakers since rejoining CDK this summer, MacDonald said he has heard from dealers who say, ” ‘I have 26 brands, I can’t have 26 digital retailing tools from the automakers. I can’t operate in that environment.’ And then you go and talk to the OEM, and the OEM says, ‘Look, I have to have a consistent experience for my brand and that’s why I need to develop my own tools.’ “

Technology providers can be the link between automakers, which want a consistent consumer experience, and dealerships, which handle the local delivery and connection with consumers, MacDonald said.

“That continues to stay relatively the same,” he added. “What changes is, I think that OEMs will play a bigger role in the technology that they want dealers to use to provide that consistent consumer experience.”

One competitive advantage for franchised dealerships is that it is difficult to generate profits when selling vehicles on a national level, Vetter said. Technology can be an enabler for dealers whose businesses primarily are local.

“I think we will see the OEMs that work in partnership with their dealer partners are going to take market share from those that are banging heads with them over who controls what,” he said.

To protect the franchise model against new entrants, including manufacturers that sell vehicles directly to consumers without dealerships, MacDonald said, it’s critical that dealers are able to provide a similar experience online.

Not every customer will want to purchase a vehicle fully online without visiting a dealership, but “there are some and they’re growing,” he said.

One positive sign is that more dealership owners and general managers are getting involved in discussions about digital, Vetter said. It’s becoming a central topic of conversations happening at the executive and board level, he added, not one that is delegated to a dealership’s Internet department.

Those discussions should include a rethinking of the term “digital retailing,” he added. All sales are digital before a vehicle is purchased, he said, regardless of whether a consumer uses a particular tool to transact.

“The research is happening online prior to purchase and they’re researching you,” Vetter said. “We’ve got to get out of some of these legacy boxes that we put things in, like digital retail, and start to know the customer’s online and how do we bring them into our store?”