The coronavirus pandemic forced dealerships to get better at e-commerce last year. And it wasn’t just because some states and cities declared it was the only way stores could do business.
Consumers were already embracing the convenience and speed of shopping online. And they likely will continue to shift in that direction, as industry surveys consistently show that auto buyers don’t want to wait for hours to sign paperwork or reenter information they filled out digitally.
But now, more than a year into the pandemic, a second wave of innovation around digital retailing is transforming auto retail. Companies ranging from automakers to software vendors and from large public retailers to smaller family-owned groups are building on the e-commerce foundation laid in 2020.
The trend is also drawing growing interest from dealership technology companies, now scrambling to expand into spaces where they didn’t compete before or possibly were just starting to compete. In recent months, a series of high-profile developments, partnerships and acquisitions have materialized as those groups segue into the role of providing the means to improve customers’ experience with buying a car.
Here are some of the biggest moves in automotive digital retailing so far in 2021.
Dealership management system giant CDK Global made a splash in June when it bought digital retailing provider Roadster of Palo Alto, Calif., for $360 million in cash. The acquisition signaled that CDK, of Hoffman Estates, Ill., is making a strong bet on the future of online sales as mission critical for U.S. franchised dealerships.
The company said adding Roadster to its product arsenal — enabling an omnichannel buying experience for customers who shop online, in-store or in some combination of the two — will give CDK more to offer dealerships than it previously had.
CDK already had an online retailing tool called Connected Store, which offered payment and quoting functionality. But Roadster’s platform was bigger — with nearly 2,000 dealership customers on Roadster, compared with about 1,000 on Connected Store when the deal closed June 2.
CDK executives have not yet shared their plans for Connected Store, other than to say the company will have “one modern retailing process,” COO Joe Tautges told Automotive News. And dealerships will be able to use Roadster regardless of the DMS provider they use, CDK leaders said. Roadster CEO Andy Moss will continue to lead product and engineering for Roadster and also work on CDK’s efforts to build what it’s calling a modern retail product strategy.
CEO Brian Krzanich said in an earnings call this month that the sale of CDK’s international business this year strengthened its balance sheet, reduced debt and helped the company pursue the Roadster acquisition.
“Roadster is proving to be that final piece in our puzzle to really help modernize and really deliver a modern retailing experience for customers,” Tautges told analysts.
Privately held Reynolds and Reynolds bought retail technology provider Gubagoo, of Boca Raton, Fla., in a deal that closed in June, less than two weeks after CDK’s acquisition of Roadster. Financial terms of the transaction were not disclosed.
Reynolds, of Dayton, Ohio, saw Gubagoo as a way to expand into products that Reynolds previously had not brought to market, and also as an expansion of its Retail Anywhere strategy, executives said in June. Retail Anywhere aims to give dealerships the ability to work with customers whether they’re shopping online, in person or both.
Gubagoo specializes in conversational and digital retailing tools, and its technology is behind Asbury Automotive Group’s omnichannel retailing platform, Clicklane, which launched in late 2020. Gubagoo works with more than 6,500 dealerships, more than 5,000 of them U.S. franchised dealerships.
Kasi Edwards, Reynolds’ senior vice president of marketing, said in June that the company liked Gubagoo because of its product innovation, growth, employees and vision. Gubagoo founder and CEO Brad Title will run the operation as its president under an independent brand within Reynolds.
At the same time, Reynolds is overhauling its business in an effort to improve its reputation with dealerships and attract new customers.
The Atlanta-based dealership technology company said in July it co-developed an online-buying platform called Esntial Commerce with Penske Automotive Group. Penske plans to roll out the platform initially to its seven CarShop used-vehicle-only stores in the U.S., with plans to offer it to its franchised dealerships for used-vehicle sales in the future.
Cox plans to offer the Esntial Commerce tool as a white-label product to dealership groups beyond Penske starting this fall, with new-vehicle capabilities possible in 2022.
Cox and Penske co-developed the tool with artificial intelligence that can automate and power Penske’s CarShop digital platform, allowing customers to compare vehicles, select vehicle protection products, value a trade-in vehicle, get approved for financing, sign paperwork online using e-contracting capabilities and set up delivery.
Cox leaders were interested in building a digital product that can help dealerships offer a better customer experience and improve profitability with online sales, Marianne Johnson, Cox’s chief product officer, said in July. The company will be the sole owner of the Esntial Commerce technology.
Cox also added new features to its Autotrader online vehicle marketplace, including My Wallet, which generates personalized payment information.
Under the leadership of a new chief executive this year, vehicle listings company CarGurus is branching out beyond its core online marketplace business.
After CarGurus founder and former CEO Langley Steinert stepped back to focus on product and strategy, new CEO Jason Trevisan, who took the top job in January, is steering the Cambridge, Mass., company as it expands its focus into more retail and wholesale offerings for dealerships.
In January, CarGurus completed its acquisition of a 51 percent stake in CarOffer, a wholesale trading platform started by automotive retail technology entrepreneur Bruce Thompson. CarOffer provides dealerships an automated platform to create standing buy orders and generate instant offers.
In July, CarGurus launched a fully online instant cash offer feature powered by CarOffer that allows consumers to sell their vehicles to participating dealerships.
On the retail side, CarGurus is adding products that bring more transactional capabilities to its traditional online listings business. In April, the company began offering dealerships early access to its CarGurus Convert digital retailing product, which allows consumers to calculate their vehicle trade-in, taxes and fees; get pre-qualified for financing through partnering lenders; and select from a dealership’s finance and insurance products.
TrueCar, of Santa Monica, Calif., has lined up partnerships as the company moves deeper into transactions beyond its primary vehicle listings business.
In May, the company said it was piloting an integration with digital retailing provider Roadster — announced before CDK’s acquisition of the company, which TrueCar said did not affect its work with Roadster — that touches about 650 dealerships that share relationships with both companies. And in August, TrueCar said it was working with digital vehicle sales and finance platform AutoFi to allow car shoppers to apply for financing through a participating dealership in TrueCar’s marketplace network.
The partnerships are initial steps toward what TrueCar CEO Mike Darrow said will be additional integrations with other digital retailing providers as well as the development of its own in-house online sales tool, which could be finished by the end of the year. The in-house product could become an option for TrueCar dealership clients that don’t already have a relationship with a digital retailing vendor, Darrow has said.
CarMax sees its acquisition of vehicle listings and information company Edmunds as a way to gain further footing in digital retail and ultimately the wide-open used-vehicle market.
The No. 1 used-vehicle retailer in the U.S. completed the purchase June 1. That same month, CEO Bill Nash said in a conference call with analysts and investors that the Edmunds acquisition “brings us closer to a broader set of consumers and brings us closer to dealers.”
He said the company will provide more updates as the businesses launch new offerings. So far, the only joint effort highlighted by the two is an online instant-appraisal and cash-offer tool.
In the June earnings call, an analyst asked for clarity on the benefits of the deal. The analyst understood that there were vertical integration perks, noting procuring and retailing vehicles, but wondered about CarMax’s competitors paying Edmunds for lead generation. If CarMax gets preference, would those competitors still want to use the service?
Nash responded that Edmunds will be operated as a separate company and brand, but with teams collaborating on programs that help both companies, such as the instant-offer tool.
Analytics pioneer J.D. Power is placing big bets on digital retailing by launching its own technology division through the acquisition of one of the largest F&I software companies in the country.
Superior Integrated Solutions Inc., the parent company of Darwin Automotive, was purchased by J.D. Power on July 7 and will be the foundation for further expansion in the space.
J.D. Power also launched a partnership with one of the biggest F&I product and training providers, JM&A Group, to enable development in the F&I training and product sales space. On July 1, J.D. Power and JM&A said they would collaborate on a line of co-branded F&I suites, starting with a certified pre-owned product to be launched this year.
The moves further the company’s goal to channel its data and industry reputation into profit streams.
David Muller and Jackie Charniga contributed to this report.