Next big step for Toyota's SmartPath

The leading edge of Toyota's massive push into digital retailing is in a single dealership in the seventh-largest city in Iowa.

Wilson Toyota of Ames — a dealership that last year sold about 1,200 new Toyotas in a town of just over 66,000 residents — is the first in the country to use a significantly expanded version of Toyota's SmartPath digital retailing system, one destined for dealerships nationwide. Dealers will get an update during the automaker's make meeting at next week's virtual NADA Show.

The expansion allows customers, for the first time, to complete a new-vehicle purchase without ever having to set foot in a showroom. It's been in quiet operation at Wilson Toyota since August and has the promise to be "transformational" in the way Toyota dealerships interact with customers in the sales process, owner Danny Wilson says.

"I keep comparing it to Apple Stores or Verizon stores," Wilson says. "We used to all go there and line up to get new phones. Now, most of us order them online and set them up ourselves, maybe with a little help. It's evolving very quickly."

SmartPath, introduced to Toyota's 1,238 U.S. dealers in September 2019, is a software suite that enables retailers to promote their new-vehicle inventory in real time on the Internet, with accurate, dealer-set pricing inclusive of incentives, local taxes and fees. A rebranded version of the software, called Monogram, is aimed at the automaker's 242 Lexus dealerships in the U.S.

SmartPath seamlessly integrates a dealer's new-vehicle inventory across toyota.com, regional shopping portal buyatoyota.com and the dealership's own website. It is enabled in only about 50 Toyota dealerships, but the urgency to ramp up was influenced by COVID-19.

While the initial suite was a marketing tool and allowed customers to apply for financing, they still had to go to the dealership to close the deal, or at least meet with their salesperson to close. The expansion allows consumers to complete far more of the transaction online if they desire, including completing financing, buying accessories and finance and insurance products, valuing their trade-in and adding any equity to the deal — almost everything up to signing on the dotted line, which must still be done in person in most states, although that could be at the customer's home upon delivery.

The initial results: The average transaction time for consumers in the dealership to buy a new vehicle and take delivery dropped to just 32 minutes — a significant decrease, though Toyota declined to disclose the previous average. Customer satisfaction with the sales process also improved, as did front-end grosses and profits, said Jack Hollis, senior vice president of automotive operations at Toyota Motor North America.

"The keys are time, transparency and trust," Hollis told Automotive News. "We have learned over time that the longer a transaction takes, the more likely it is that frustration will enter into both sides, from the customer and the dealer."

Hollis said transparency refers to the customer being able to put together their own deal, or as much of it as they want and with as much help as they want, at their own pace. As a result, trust among the brand, the dealer and the customer increases substantially. And there's a direct benefit for the dealer as well.

"We won't talk about the exact numbers, but what we can tell you is that there's more front-end gross, there's more total gross in the deal, and that is a fact," Hollis said. "Because of the transparency of the inventory, of the deal, and then the pricing on it, there tends to be a very high percentage of people who accept that first offer, that first deal, that first pencil that has a higher number."

While several automakers and dealer vendors quickly ramped up their digital retailing efforts as COVID-19 struck the U.S. industry early last year, their approaches differed greatly, as did the depth of their penetration into a purchase transaction. Some work more as internal lead generators, others expedite finance applications or allow cross-shopping between dealerships.

Toyota's approach is very dealer-centric, explains Tim Bliss, general manager for retail transformation at Toyota Motor North America and the man leading the in-house development of SmartPath. One example: A prospective buyer can look at the inventory of only one dealer at a time.

"The biggest piece to really get this up and running was building that real-time inventory integration with the dealer's DMS system, and that's really the key to the whole platform," Bliss explained. Pricing, incentives and availability update automatically.

When a consumer looking for a new Toyota lands on one of the web pages, they are asked to input a ZIP code and then are offered a choice of area dealerships. With SmartPath enabled, the consumer can browse or search the new-vehicle inventory, and if they find something they like, they can begin the purchase process: choosing whether to lease or buy, finalizing incentives and shopping for accessories.

The consumer is asked whether they have a trade-in, and if they do, they're given a KBB.com-generated value for the trade. If they accept the offer, any equity is integrated into the new vehicle payment.

The online purchaser is then moved into the virtual F&I office, where they can apply for and receive an immediate credit decision through Toyota Financial Services, or they can indicate whether they have outside financing or will be paying with cash. They're also offered a menu of available warranties and protections through Toyota Financial, the cost of which is immediately baked into the monthly payment. If everything is a go, the customer can finalize the deal and then is contacted by the dealership to schedule delivery and sign the purchase or lease contract.

As with the earlier versions of SmartPath, consumers can save their work at any point, and if they visit the dealership, all of their information and earlier work is immediately visible to dealership personnel. Contacting the dealership, either by phone or video call or in person, allows the consumer to haggle if they desire.

In the beta test at Wilson Toyota, General Sales Manager Josh Holz says the customer is handed an iPad in the dealership and offered as much — or as little — assistance as they require.

"The beauty of it is, when they walk in our dealership, we can hand them an iPad or a tablet, and we just say, 'You're in control. You drive this process. What do you want to do, and how do you want to do this?' And that really becomes a different type of interaction," Holz explained. "People are more comfortable with it, and as they experience it, they tell their friends how easy the whole process is."

For dealers operating what might be considered traditional business development centers — cold calling, chasing down Internet leads, etc. — the upgraded SmartPath functionality enables workers there to act as online guides for shoppers, helping them down the purchase path, Hollis said.

"The BDC becomes more of the customer concierge instead of just an appointment-setter," Hollis said. "You would think that the process would be 'less touch' with the online piece, but what dealers are telling us is that it's more 'high touch' " because there is a dedicated team to help those shopping online.

Although the initially conservative rollout plan for SmartPath was effectively upended by COVID-19 last spring — the automaker hoped to have 200 dealerships up and running by the end of 2020, but ended up with about 50 — Bliss said the expansion process is speeding up. He also said the new functionality of the system will be rolled out across the existing SmartPath dealerships, without additional fees, and then will be automatically included as new dealerships come online.

In addition to the 50 SmartPath dealers operating nationwide — at least one in every region, according to Hollis — Toyota has another 50 waiting in its "launch factory" and has hired additional field personnel to boost the rollout speed across the dealer network.

On the Lexus side, a "handful" of dealers are piloting Monogram, and that software will get its expanded abilities by summer, Hollis said. As was the case since it was first announced, no dealership will be forced to adopt SmartPath.

"The customer is in so much more control of this process [on SmartPath], which is exactly what they're experiencing across almost every single other industry, with all their other purchases, that they feel like it's more consistent with what they're used to and that their time means something," Hollis said.

While a majority of Toyota and Lexus dealers are expected to adopt the system, not all will, Hollis said, because some have already crafted their own solutions using other vendors. The decision to adopt SmartPath or Monogram remains with dealers, he added, but he believes he knows what many of them will do.

"If it wasn't effective, our dealer partners wouldn't see value in it, and they'd toss it aside like any other vendor, any other retail tool," Hollis said.

"That's why we've said all along that this is optional; it's not a top-down factory push. This is a tool, and we're gonna make it so good that you're gonna want it."