As industry evolves, dealers embrace tech

Editor's note: An earlier version of this story misspelled Aaron Wallace's name.

Aaron Wallace is a fourth-generation car dealer, not a software developer. He's the guy, he says, "with the marker and the white board."

But Wallace also was the guy with an idea. Today, that idea — A2Z Sync, a software platform that enables a one- person, one-price dealership sales model — is a standalone software business that last year exited beta testing and is now being shopped to dealerships across the country.

Creating a technology company wasn't what Wallace set out to do. Originally, he was trying to solve his own business problem — scaling a new customer-friendly finance-and- insurance model beyond a single BMW store in his family's Schomp Automotive Group in the suburbs of Denver.

Wallace isn't the only dealer dabbling in software to find solutions. Dealers and retail consultants say it's necessary for dealerships to embrace technology to evolve with a transforming industry. Some of the improvements dealers are pursuing include reducing costs, speeding up processes and competing for customers by offering a better car-buying experience.

"With compressing margins, increased negative customer sentiment, this move to being transparent online but not being transparent in the store ... for me, it's a point of doing the right things to make sure that we can as an industry continue to thrive," Wallace told Automotive News. "At some point, there's a critical mass — that if we don't change the way we have done things forever, then the Teslas and the whoever will try to go around the dealer body."

Some dealers who step into software are motivated by a need to improve a particular part of their business and can't find an existing solution on the market. So they draw on their deep knowledge of auto retail to develop one, said Ron Frey, an industry veteran who now works as a strategic adviser to dealerships. Others simply are interested in building technology for the sake of it.

Meanwhile, he added, larger groups might look to new software tools for a competitive edge. They may innovate faster than the market and are more likely to have resources to build something in-house. While software innovations may begin as an individual solution, some wind up growing to the point that they're acquired by a larger player.

"Historically, a lot of auto retail let the solution providers dictate what they needed," said Frey, a former executive at software giant CDK and megadealer AutoNation. "Dealers are starting to ask different questions and look for different solutions, and many of these providers aren't able to provide it holistically. Now you're beginning to see them look at how can I put pieces together to create a broader experience on their own."

Costs are frequently underestimated, Frey said, and it can be difficult to scale a software tool since it's always evolving and never truly finished.

It makes developing software an expensive prospect, both in money and time. That's proved true for dealers such as Wallace, who helped launch A2Z while also managing his dealerships.

"The goal wasn't necessarily to build something that we were going to make into a business," said Wallace, who wears dual hats as owner of the seven-store Schomp auto group and chairman of A2Z Sync, created in 2015. "Four years and a lot of money later, we're on market, [and] we've got some interest and a learning curve on being a software business daily."

Dealers who take on the challenge are part of a culture of innovation that often begins at the dealership level, said Paul Whitworth, senior vice president of retail operations at Cox Automotive. More than half of the Atlanta company's dealership software acquisitions had at least one founder from auto retail, he said.

The secret sauce in successful ventures is the dealer's knowledge of the business, Whitworth said. That's often paired with a developer's aptitude for building back-end functions to make a tool accomplish what it was envisioned to do.

Montana dealer Steve Zabawa hired someone with technical skills to build what would become digital retailing platform WebBuy. He provided the concept.

Seven years ago, Zabawa saw the number of brown boxes being delivered to his house and wondered why buying a vehicle wasn't as simple. He said he realized that dealers' interest in negotiating and controlling the sales process was a factor.

As dealership technology advanced, "I was like, 'You know what, the market's changing really fast, and I'm becoming a dinosaur.' It was really self-realization," he said. "If I don't become part of the change, I'm going to be changed."

WebBuy, which launched at his Billings, Mont., dealership in 2017, now enables digital retailing at his Rimrock Auto Group's five stores, as well as at other dealerships across the U.S. since sales began last year. It's a white-label platform that dealerships can customize to fit their own brands. About 150 dealerships are using WebBuy, and it's being installed at another 50 stores, Zabawa said.

"It is different than running a car dealership, for sure," said Zabawa, who splits his time between Rimrock and WebBuy.

He did not provide revenue figures, adding that WebBuy only recently began to sign up dealerships. The company charges about $1,000 per month for a dealership selling fewer than 200 vehicles a month and $2,000 for higher-volume dealerships.

The same changes Zabawa saw coming were on Wallace's mind when he developed A2Z Sync with a finance-and-insurance consultant. The software set out to smooth the transition away from a separate F&I department.

That process, meant to be speedier, instead proved clunky, Wallace said. Employees spent too much time toggling between software windows, and F&I options weren't presented in a customer-friendly way.

A2Z Sync began as a digital customer-facing menu. Today, it allows a customer and a sales rep to work together on a single screen — eliminating buyer concern that the dealership is hiding something, he said.

"It's all done in front of them," Wallace said of the new F&I experience. "They can see everything we're doing."

A2Z Sync is led by Natalia Giner, its CEO and Schomp Automotive's former finance director, whose role was eliminated when the dealerships went to one-person, one-price. A2Z became available to other dealerships last May and now has eight retailers on board, with 23 stores using the platform, Giner said.

Mike Boyd said he had "zero background" with computers when he decided to develop a software tool called iReconCars.

The idea came while he worked as used-vehicle sales director at a Lexus dealership in Ohio that was selling used cars faster than it could get them ready to deliver to buyers. The store averaged 18 to 20 days from acquisition to being able to give keys to a customer, and that created a backlog on the lot.

So Boyd set out with 32 pages of handwritten drawings and plans for a tool to speed up reconditioning. He developed iReconCars as a side job outside of dealership hours, pitching the concept to software developers and early investors to help raise capital for the project. He said he initially raised $75,000 in outside funding, not counting his own time and money.

"You have to be laser focused," Boyd said. "You have to be black-and-white to a certain point, where you look past your own interests and say, 'Does the market need this? Will the market pay for a solution like this?' "

In the first 30 days using the tool, Boyd said his dealership's average reconditioning time dropped from 18 to eight days. Within the first two years, he signed up about 15 dealerships and decided to pursue iReconCars full time.

His work paid off in November 2018 when Cox Automotive's vAuto inventory management brand bought iReconCars for an undisclosed price. Selling to vAuto was his goal from the start, said Boyd, now senior director of business enablement for the renamed iRecon. He would not share the current dealership count.

When considering an acquisition, Cox wants to know whether a software tool is widely applicable to dealerships, how it fits with Cox's other software offerings and whether it has proven results with dealership customers, Whitworth said. Cox prefers to partner with the dealer who created the tool rather than spend years trying to replicate it.

Whitworth called iRecon "our best case, where it fits a gap and can snap into the jigsaw puzzle with the neighboring pieces that we already have in our solutions set."

Integration might be the way of the future, Frey told Automotive News. Dealers may be less inclined to build the engine that powers the software and instead focus on tools to enhance customer experience.

The future also could bring advances to improve workflow efficiencies, rather than new widgets, he said.

Boyd's advice to others looking to take the leap? Try to disprove your idea. If it won't die, he said, it may be worth pursuing.

"I have to start down this path," Boyd remembers thinking. "I can't kill this idea. It keeps coming back."