Leadership Insights: Digital Transformation of the Car Industry

Transcript

Amanda Razani: Hello. I’m Amanda Razani with Digital CxO and I am here today with Nathan Hecht, CEO of Rodo, which is an online marketplace that connects car shoppers with auto dealers. How are you doing today Nathan?

Nathan Hecht: Good, thank you, thanks for having me Amanda.

Amanda Razani: Well you have some insights to share with auto dealers how to catch-up with the digital era. Can you share a little bit more about that?

Nathan Hecht: Sure. I think it really starts with accepting that today’s consumer wants to purchase a vehicle online and it really starts with that. Because for the last 20 years or so it was possible for consumers to get a lot of information about cars, images on cars, availability of cars, et cetera, but up until only a few years ago they were unable to actually purchase the vehicle online.

So it starts with dealerships really coming to the realization that this a new era and consumers will not only research cars online, but they will actually complete the transaction. Once you’ve come to that realization then the question is, “Are you going to sell cars online, through your own website or are you going to join marketplaces such as Rodo or you know other alternatives that are out there?”

So we offer dealerships the ability to show their vehicles to a wide audience of consumers across the country. On our marketplace they can sell new and used vehicles. And the reason consumers come to us is because we, as I mentioned a moment ago, allow the consumer to actually complete the entire transaction, including searching for a vehicle, getting monthly payments on the vehicle, placing an order for the vehicle, and ultimately having the vehicle delivered to their home, all through our app or our website.

The advantage to the dealer is that the dealer still controls the transaction. They decide how much they want to sell the car for, they’re communicating directly with the consumer, but they’re doing it through technology.

Amanda Razani: Interesting. So for someone who’s looking to improve their digital presence how do they go about getting started? How easy is it to go from no digital presence to the level that Rodo is?

Nathan Hecht: It’s with us it’s incredibly easy. First of all you can be live on Rodo within 24 hours of reaching out to us. It’s literally that easy. We have a brief you know agreement that we sign with dealers around some fees, around data sharing, et cetera, but outside of that the dealership just sets us up with their inventory feed provider, which doesn’t cost them anything to do and they send us their new and used car inventory feed. We then normalize that inventory and set it up in the way that’s appropriate for our customers to browse those cars on our platform. Then the dealers have access to a portal where they can go in, price their vehicles, decide which vehicles they want to sell online that day, maybe they want only a portion of them, maybe they want all of them, decide which lenders we should be quoting off of and all it is is just clicking a few boxes.

Decide how broad of a territory they want. You have dealers who say, “I want to be selling in my own backyard,” others who say, “I can ship cars across the United States.” So we give them all of those tools. It’s a really slick user interface that anyone at the dealership can really access to setup their inventory and to start selling these vehicles online.

Once the consumer places an order on a particular car we notify the dealership that they have a new order on our platform. We sent it to them via text message, we sent it to them by e-mail. All they need to do is click on a link, it opens up the consumer’s order, the particular vehicle that the customer ordered, the worksheet describes the financial construct of the deal, the customer’s driver’s license, the customer’s credit application, all in one place. All the dealer needs to do is confirm everything. The consumer will then be prompted to upload insurance, because you need insurance to drive a car and then the dealer will setup the vehicle for delivery for the customer.

So it’s super easy to get setup and then the transaction itself we say, “You can sell a car in less than five minutes.”

Amanda Razani: So compared to the old days when you would go to a car lot and meet with a sales person and shop all the cars and you would go to multiple car lots to shop all the cars. Why is it, why do you think we’re here now to where more people want to shop digitally? Do more people want to shop digitally is the first question and is it just going to continue to get more online digital shopping or are we ever going to go back to the in-person? What’s your feeling on that?

Nathan Hecht: So there’s a couple of points to be made there. First of all, do consumers want to purchase vehicles digitally? The answer is unequivocally yes. There’s no question about it. I mean we can look at what’s going on with used cars and some of the online used car platforms, like Vroom and Carvana and Shift and others, that are essentially pipeline businesses where they purchase their own inventory, recondition those vehicles, and then sell them to consumers.

You know despite some of the turmoil in the stock market and some of the other stuff that are going on with those companies, consumers are buying vehicles online through some of those companies in mass, those numbers are growing month-over-month, it’s undeniable.

Same for our platform, consumers are – you know our business has grown exponentially in the last few years that we’ve been online. Every single month has month-over-month growth, every quarter, every year, et cetera. So the fact that you know the businesses that are doing this right now are putting up the sorts of numbers that we’re putting up, shows that there’s consumer adoption there.

In addition to that, keep in mind the EV OEMs are pretty much exclusively or at least the exclusive EV OEMs are only offering consumers to purchase their new vehicles online, Tesla being the best example of that. They don’t even offer the consumer to make a purchase in a brick-and-mortar store. Even when you go into a Tesla showroom you’re doing the transaction online through an iPad, et cetera, and most consumers don’t even go into their showrooms, they’re simply purchasing them from their desktops or from their mobile devices. So as the industry evolves the new up-and-comers are doing everything online, because they don’t see a need for that.

Lastly, you know if you listen to the, to the messaging that’s coming out of the OEMs, in Europe, in the Far East, in the US many of them are talking about moving their businesses online. I wouldn’t say completely avoiding the typical franchise dealership, but in many cases it is avoiding the franchise dealership and starting this sort of agency model where they’re trying to go consumer direct. So all indications are that this trend will continue to grow.

Customer satisfaction is at pretty much its highest ever. We poll our dealers on our marketplace constantly about their CSI scores, “Are we maintaining that very high CSI score that you need?” We’re polling our consumers all the time for feedback. I would say generally speaking you know you’re between 9s and 10s across the board in 1-out-of-10 you know sort of surveys on satisfaction, et cetera. Not to say that this is perfect, we’re learning all the time, but generally speaking consumers enjoy it.

Lastly, I would point out that this is a super-efficient way for a dealership to sell a car. There is so little overhead in acquiring the customer this way in, in the process of selling the vehicle, that it’s really just a no-brainer. You can grow so much more per vehicle as a dealership, whether you’re an independent used car dealer or a franchise dealer that’s selling new and used vehicles. When you think about your layers of overhead and typically selling, acquiring the customer just to get them into the store, get them through BDC, get them to the store, get them to the sales person, get them into the box. You know and every layer and all the expenses that are there compared to Rodo has just sent you a completed transaction, completed and delivered the car you can’t compare really when you think about expenses.

So when you start to show that to, to car dealer groups and owner principles and managers they’re pretty clever, they get, they get this very quickly.

Amanda Razani: So it’s both a time saver and a money saver and just overall a lot more efficient.

Nathan Hecht: Indeed.

Amanda Razani: Especially considering the recent supply shortages and the supply chain issues I would think that being online digitally is helping with that as well?

Nathan Hecht: Yes, yes I mean absolutely. You’re giving consumers variety and this goes to your earlier point also about the days when we went from store-to-store-to-store. Today as a consumer if you’re going from store-to-store-to-store it used to be because you were negotiating, you know maybe you were looking for a different you know relationship or whatever. Today you’re going from store-to-store-to-store because you simply can’t find what you’re looking for at store one and store two, there’s such limited inventory, especially around new vehicles.

So when, we’re, we’re gathering all of that for the customer and saying, “No need to leave the couch, we’ll bring everything that’s available to you and it’s still limited to some extent and now choose from what’s actually available to you.” So it avoids that whole you know shopping experience which can be very burdensome for a customer today, especially in the limited inventory environment.

Amanda Razani: So considering all that do you think that we still will have in-person car lots and dealerships or will everything be virtual in the future?

Nathan Hecht: I think there’s, there’s a lot of value and I’m not just saying this because the dealers are our partners and this is our business model, I do think that there is a lot value that the local car dealership brings to the consumer. First and foremost there are plenty of consumers who still want to touch and feel a car. There are plenty of consumers who still want to see, “Does my car seat fit,” you know, “Do I have enough room for luggage?” “It looks like it’s grey, but maybe it’s blue, let me go in and actually take a look at it.” So there’s a lot of that still, number one.

Number two, dealers will need to service vehicles, which is still a very, very important part of this transaction. I think that there is an element of consumers who want that in person. But being frank and honest about this, it will be less-and-less as time goes on and more consumers are comfortable doing this online.

You sit at the dinner table and a guest says, “I ordered my car online.” Like, “How was this?” “It was awesome. You know I didn’t have to waste two weekends, there was no negotiating. I did some comparison on pricing. The car showed up at my door. I have the same exact warranty. You know it was a super cool experience.” Then you’re like the next time you need a car then, “Maybe I should try that.” So over time it, it starts to take a piece of that brick-and-mortar experience, but I still think that there’s value as I mentioned a moment ago for those consumers who still want to do brick-and-mortar.

Look, it’s like comparing ecommerce to the shopping experience in brick-and-mortar. Ecommerce is a massive portion of global GDP today, but we have not eliminated the ability to still walk into a Macy’s, right? You can order your food, but we have not eliminated you know the fast food joint, you still want to walk in there. So I think there will be a healthy blend of the two, but for the foreseeable future probably will get a little bit, a little bit more market share than people expect will start to go online.

Amanda Razani: Do you think the auto industry is going to start delving into aspects of the metaverse and VR and the AR with car deals?

Nathan Hecht: There’s been some fits and starts already. There are some very creative dealer groups out there and there are some really interesting startups, et cetera, that have tried virtual test drives, as an example and a myriad of other things.

Internally at Rodo we’re working on some pretty fascinating stuff for the industry that we will be releasing in the coming months and quarters going forward. So the short answer is yes I think that there’s a lot of opportunity there. I’ve seen some car dealers even that have started to buy property in the metaverse, that have started to put up some pop-up dealerships in the metaverse. There’s a few in California specifically, I won’t mention names, that we’re following that, that are doing really interesting stuff.

So yes I do think that there will be a lot of that. And as that starts to propagate and consumers start to you know, you know congregate if you will in the metaverse it will be interesting to see how that evolves.

Amanda Razani: That’s really fascinating to me. So lastly, for those trying to digitally transform and this can go with any industry where is the biggest challenge? What’s the biggest roadblock?

Nathan Hecht: That’s a really important and succinct question. The answer really is it starts with state of mind. We started at the beginning of this with you first need to just simply realize that this is something that’s happened. You know for a while there was a lot of pushback from the industry. Automotive has a tendency of first saying like, “No. Wait a minute you’re threatening my existing business model.” And, and the kneejerk reaction is, “Whoa, what’s going on here? Let’s, let’s stop this for a moment.” Then they start to sort of let off the brakes a little bit. We’re already in the letting off the brakes, now even accelerating as dealers and dealerships, all the way up to the OEMs are starting to embrace this or have already embraced this.

So I think the number one thing is philosophically as an, as an owner principle, as a CEO of a public dealer group you need to buy into what’s going on.

Second is process and procedure. Then you need to start to support it like legitimately. You can’t just say, “Hey guys you know we’re on Rodo. If you get orders make sure you _____ them.” It has to be a top-down approach from ownerships, through management, and them from management all the way through to the lower-level employees of everybody buying into the process. Everybody making sure that the experience is, is you know what, what we all want it to be and ultimately then connecting systems so that it is super efficient. The dealers that do that are the dealers that are already online and they’re already loving it.

The dealers that are sort of like, “Yeah, you know I think I need to be there, but I’m not a hundred percent sure yet.” So they sort of sign up, but then the orders start to come and they don’t have a process for it, then it becomes a little bit problematic. So buy-in from the top and, and investing in it. I don’t mean necessarily monetarily investing in it, but investing in it in your process and procedure.

Amanda Razani: Thank you so much Nathan for sharing your insights with us today. I really appreciated talking to you and look forward to hearing more about digital transformation in the auto industry in the future the things you were talking about.

Nathan Hecht: My pleasure. Thanks for having me.

Amanda Razani: Thank you.