Switch to digital brings new challenges

Over the past year, automotive retailers relied more heavily on digital finance-and-insurance tools to maintain sales amid the COVID-19 crisis.

But rapid adoption of digital and omnichannel retailing processes has created questions dealerships are now facing.

One of the most important: how to maintain F&I profitability in an online transaction. In many instances, digital tools allow for a faster buying process. With a click, a customer can choose a type of tire protection, start a credit check or sign an electronic document.

Some dealerships are wrestling with the larger-scale shift from in-person F&I to digital deals, looking for a way to reincorporate well-trained employees into the digital buying process.

As dealerships reckon with the transition, some experts say allowing customers more freedom to self-select F&I products or lender partners has proven successful.

In a way, the pandemic-driven focus on digital retail was a blessing, said Natasha Del Barrio, CEO of Texas megadealer Bert Ogden Auto Group. It took dealers out of their comfort zones and forced them to take a hard look at what the digital retail format means for the future.

Bert Ogden has 22 automotive brands across 18 dealerships. It sells an average of 2,500 new and used vehicles per month.

Del Barrio said the company began preparing for a digital future in late 2018, offering retail compliance training for all its managers. Her dealerships had to prepare for how sales consultants would adjust to handling customers submitting private and personal information online instead of in stores.

The idea, she said, was to ensure any employee interacting with a customer online would have the training to facilitate any part of the deal. Yet relinquishing control of F&I selection felt like a risk, Del Barrio said.

"They're in charge of what they're accepting and what they're declining right there on the spot," Del Barrio told Automotive News. "That was a little bit of a concern."

But, it turns out, she didn't need to worry.

"Contrary to what I was concerned about, we found that customers are continuing to buy products at a very similar rate," she said.

Offering F&I product options to customers is vital to the selling process, said Ron Reahard, president of Tennessee-based F&I training company Reahard & Associates. Yet customers don't focus on those as much as they do tangible things, such as the vehicle color and seats.

"When a customer contacts a dealership, that's because they're interested in buying a car," Reahard said. "But when they come to a finance person, they basically just want to get their paperwork done."

In December, Asbury Automotive Group Inc. in Duluth, Ga., debuted Clicklane, a digital retail platform that streamlines the car-buying process. CEO David Hult told Automotive News last month the company's choice in software provider — Gubagoo of Boca Raton, Fla. — came from the desire for a "full end-to-end solution" for purchasing vehicles.

Two software companies that met with Asbury were wary about offering functionalities typically reserved for the F&I office, Hult said. They didn't believe their other dealership clients had interest in a full end-to-end solution.

"The feedback that I got was they feared the F&I piece and not being able to control that. ... You couldn't afford to lose that money," he said. "Listen, it's a good fear. I understand it, we had it too. But I think you can see the evolution of what's coming."

The majority of these tools are not new, said Emil Banga, associate vice president of F&I dealer operations at Cox Automotive. When F&I software provider Dealertrack arrived in the market, it was assumed there would be a major adoption of similar tools. That didn't happen, Banga said.

But the pandemic revealed to dealerships how those all-important consumer interactions could change form.

A 2020 Cox Automotive study of 1,859 potential car buyers from 462 dealerships offering digital retailing processes found 72 percent of customers were "highly satisfied" with their overall shopping experiences. That's up from 60 percent in 2019.

"I think [F&I managers] realized they can provide overall better customer experience by leveraging what that customer is doing online and interacting with them before they come in," Banga said.

The pandemic only accelerated the shift to digital retail, said Laurie Foster, founding partner of dealership consultancy Foster Strategies Group based in Charlotte, N.C. She has approximately 30 dealership clients.

The market is akin to a stretched rubber band right now, Foster said. Market pressure, economic pressure and competitive threats are pulling it by both ends.

When those taut ends are released, the snapback is going to be a problem for the industry. Late adopters of digital retail tools could fall behind the innovation curve, and are unlikely to develop a balanced digital strategy, she said.

"You're trying to convince the inconvincable," she said.

F&I managers may not have leveraged the tools before because they didn't yet perceive consumers wanted those options. But now virtual interactions could improve customer satisfaction scores, Banga said.

"I think we'll get to a point, eventually, to have full e-commerce as well, like full e-commerce where consumers get to buy a vehicle online," Banga said. "But until we get there, I don't see that they're going to suddenly just say 'Hey, pandemic's over, let's stop everything that we learned and we had success with.' Because it has made true, big strides."

Jackie Charniga contributed to this report.