Column: Digital retailing transformation means some will lose, disappear as efficiencies grow

I've always imagined that walking must get a little awkward at times if you're an auto dealer, with all the third-party hands regularly reaching into your pocket.

Vendors for this, services for that, consultants to weed through them all — and each with the stated goal of helping boost profits or reducing costs or improving efficiencies.

That is why, in the five years since I first started writing about Toyota's SmartPath digital retailing system, I've always believed that its most seductive promise lies not in transforming the consumer sales process, which it does, but in the potential to redefine how dealers interact with the army of vendors promising to make their operations "easier" or "more successful."

Up until August, that notion of what might happen has always been a bit of a personal theory. Brothers Michael and Steven Alf, the dealer principal and general manager of St. Charles Toyota in suburban Chicago, which is beta testing the third component of SmartPath right now, showed me that I might have been onto something back in 2019.

The Alfs run their dealership like an Internet startup — always eager to try new things and always willing to change. Michael Alf majored in computer programming at Ohio State and had built his own bespoke digital desking tool long before those became a thing across the rest of the industry. They were early adopters of the SmartPath digital retailing tool when it first came out, quickly jumped aboard when the service component debuted just after the COVID-19 pandemic, and now are helping work the bugs out of the piece, which integrates finance and insurance, before it goes live across the broader network.

In other words, they're all in, and Michael Alf explains why: "That's the real efficiency we're getting out of this, whether its sales or service, it's that you can do so much more with less." The dealership, which sells about 120 vehicles a month, has about 60 employees total, including a sales staff of seven people. They run the same lean operation in service, where intakes are handled through a single lane because they're done so quickly, and almost every employee dealership-wide works a four-day, 36-hour workweek.

The same efficiencies now permeate the dealership's vendor relationships, the Alfs said. On sales, for example, about 60 percent of their allocation arrives on the truck pre-sold because the program allows the dealership to market the vehicle as soon as it's allocated by Toyota.

"We cut the Costco auto buying program, we cut all of our buying [sales] leads from third parties, and because of [how depleted our inventory was], we only now have one vendor that we list our inventory with," Steven Alf said. "We kind of went all in because our leads have gone up so much due to being on toyota.com and that driving [customers] to our website, that we don't really need third-party vendors to go get leads."

And because the shoppers who were coming to the dealership through its website or toyota.com were essentially self-selecting interest, the percentage of those leads that led to a completed sale were something like five times higher than the close rate on a lead from an outside third party. "It's just a higher-quality lead, instead of, you know, those leads you buy from other sources. You're closing at like 3 percent and wasting your time. So that was definitely a huge game changer for our organization," Steven Alf said.

Technology will continue to transform automotive retailing, making it more efficient — that's a given.

But it's worth remembering that there will be inevitable losses as well, whether that means fewer jobs as more processes become automated, or fewer vendors as their services are rendered obsolete or unnecessary.