Speaking to a jam-packed sold out room, CADA Chairman Steve Chipman kicked off the 3rd annual CADA Summit at the Hyatt Regency in Toronto, Ont.
From left to right: Rick Gauthier, President & CEO CADA, Michael McGhee, Senior Vice-President and Business Head, TD Auto Finance, Gino Cozza, Head of Canadian Sales, TD Auto Finance, Mike Jackson, Chairman, CEO & President Auto Nation, Steve Chipman, CADA Chairman, Tim Reuss, President & CEO Mercedes-Benz Canada
“It is my distinct pleasure to welcome you to the 2015 CADA Summit,” says Chipman.
Chipman says the association created the CADA Summit to explore what the automotive retail network of the future will look like. Several years ago, CADA authored a white paper to explore those issues, and the CADA Summit is a living exploration of the main themes.
Darren Slind, Senior Director, Regional Auto Practice Leader, for Canada and Latin America with J.D. Power, delivered a thought-provoking overview of the major consumer trends that are going to forever change the automotive retail experience.
“The dealers who don’t change will go away. Consumers aren’t going to shop the way they used to shop,” says Slind, quoting a U.S. auto industry executive. “Why is this happening?” says Slind. “There are forces outside our industry causing this underlying shift.”
Slind explained that J.D. Power developed a model to better understand what is driving the change in the retail model. He says it’s changing for consumers, dealers and for manufacturers.
Some of those major forces are the Internet empowered consumer, and the changing consumer expectations that are driven by other retail experiences, something he describes as the “Amazon effect.”
“Web-based shopping is not new, but mobile shopping is accelerating at a frenetic pace,” says Slind. He cited industry stats that showed 41 per cent of consumers are accessing the Internet from within a dealership and 61 per cent of buyers are looking for pricing online while in your store. “The days are over of the playing field being tilted towards the dealers. It seems if anything that the playing field has tilted in the consumer’s favour,” says Slind.
From the retailers’ perspective, consumers are using advanced technology tools such as smart phones and tablets to help with their vehicle purchase — but it’s time for retailers to follow suit. “From the retailers standpoint, the opportunity we see, is that technology can help to level the playing field with this empowered consumer.”
Slind says J.D. Power’s preliminary research data shows a positive ROI with nine per cent higher gross for dealerships using tablets in the sales process. Other data showed that while only seven per cent of new vehicle buyers reported their salespeople used a tablet, those consumers were generally more satisfied with their vehicle purchase process.
Slind says dealers who try to hold onto information, and only provide it when the consumer “earns it,” isn’t working. “The old paradigm no longer holds,” says Slind.
As web purchases become routine — big ticket items are next. “Consumers are showing a willingness to move down the path of purchasing online,” says Slind. Apart from just using technology during the sales process, the role of the salesperson is also changing dramatically.
Slind says J.D. Power’s information shows that 61 per cent of Canadians say they knew exactly which vehicle they wanted before they entered the showroom — and 91 per cent of shoppers ultimately bought that vehicle.
“Were those vehicles really sold? Or did we just facilitate the transaction of a vehicle that they already wanted?” he asks.
It’s a good question. The role of the salesperson in the vehicle delivery process is something dealers also need to consider. Although research shows that consumers want every step of the vehicle sales process to be faster, the one area that bucks that trend is the vehicle delivery process.
The “sweet spot” that consumers like most is about 45 minutes spent on vehicle delivery. Yet, more than 60 per cent of vehicle deliveries in Canada are less than 30 minutes. This just isn’t enough time for a consumer to adequately understand the infotainment, safety and convenience technology in their vehicles. This also leads to poorer scores in J.D. Power Initial Quality Survey ratings.
Slind encouraged dealers to adopt a “retail technology strategy” for their dealerships.
He also offered up his thoughts on the trends and forces facing dealers during a Q&A session led by moderator Niel Hiscox, publisher of Canadian auto dealer.
Michael McGhee, Senior VP and Business Head of TD Auto Finance
Michael McGhee, Senior vice-president and Business Head of TD Auto Finance, the exclusive sponsor of the CADA Summit, presented his 2015 outlook from a finance point of view.
McGhee says that as 2015 takes off, the auto industry will be facing some strong headwinds. He cites the lower oil prices that will impact the industry in different ways across the country, as well as the problem of rising consumer debt due to low interest rates and longer amortization terms.
Even so, McGhee remains bullish on auto sales. “While the outlook may seem a little grim, we expect to see marginal growth in year over year car sales,” he says, adding he expects the auto market will remain strong with interest rates at historic lows and dealer reserves at all-time highs.
McGhee also went on to discuss the emerging trends that will play out in 2015. One noticeable trend is extended term financing. The average cost of vehicles has gone up by $4,500 since 2009, resulting in the average consumer borrowing 12.5 per cent more. But the average monthly payment has increased by only $20.
With lower interest rates and long amortization periods, there’s movement into negative equity with the lower possibility for recovery in the event of default.
“That’s a serious issue in the market that we will all have to contend with,” says McGhee.
McGhee says consumers are taking advantage of these conditions to purchase more vehicles, which has led to criticism of what’s seen as risky practices and loosened lending standards — and more scrutiny from the government.
With all of these factors coming into play, and concerns of a U.S. subprime credit bubble on the minds of policy makers, McGhee says it’s important for dealers and financial institutions have these conversations and learn from one another.
Addressing the dealers, he says: “We’re all trying to serve you better and provide a better buying experience.”
There was also an economic panel discussion on the current and future economic trends affecting the Canadian automotive retail sector, and a keynote from Google Global Automotive Lead Joe Maciariello on marketing in the age of connectivity.
CADA Summit Highlights
Mike Jackson, AutoNation’s Chairman, CEO and President
During his dinner keynote address and in an engaging question and answer session that followed, Mike Jackson, Chairman, CEO and President of AutoNation didn’t disappoint attendees of the sold out CADA Summit.
Jackson paced the stage, with only a handful of slides to guide his discussions, and waded into a broad range of topics ranging from the state of the U.S. economy, his views of whether Tesla poses a threat to dealers, the arrival of Warren Buffet as a competitor, and his company’s own ambitious plans to improve the customer experience by offering more robust tools to allow customers to purchase their vehicles online.
“I have never met a Canadian I didn’t like.,” he said with a laugh during his opening remarks.
He presented his interpretation of the impact of the historic meltdown of the auto sector by saying the government had to intervene. “It pains me as a free enterprise capitalist to say the moment demanded government intervention,” he says. “This was one of those moments.”
Jackson is bullish about the industry today. “We are in this amazing recovery in automotive,” says Jackson. “It’s unprecedented that we have had six years or growth.”
But the dealers were most interested in hearing him map out how his company plans to transform automotive retailing to bridge what he calls the “great divide” between the in-store and online vehicle shopping experience. Consumers spent hours researching vehicles, “then when they come into the stores it’s like starting over,” says Jackson. “It’s a huge source of frustration with the American consumer.”
“They want to sit in the comfort of their home and not just get information but they want to transact,” he says. “That’s ultimately what they want. You need real cars, real prices and they can actually buy the car and do everything else they want to do.”
And it’s working now. “We are up and running with transactional sites saving time, money and hassle,” says Jackson.
After outlining his vision and implementation plan for making it all happen, Jackson got a standing ovation from the dealer crowd.
