Editor's note: An earlier version of this story, which also appeared on Page 20 of the Feb. 10 issue, incorrectly characterized the trajectory of TrueCar’s dealership customer count. The company has added dealership customers in recent years.
Third-party vehicle listings sites, which helped change auto retail more than two decades ago with the advent of online auto classifieds, are again on the verge of disruption.
And the catalyst for the ongoing transformation — the Internet — will be a familiar one to dealers.
In the 1990s, vehicle marketplaces such as Cars.com and Autotrader helped usher in the era of the savvy shopper arriving at dealership lots armed with specific model, price and payment information researched on a third-party website. Today, with shopping as easy as clicking a button, experts say providing leads alone won't be enough for these companies to stay relevant: They're going to have to help consumers buy a car.
Some companies say they're reinventing their businesses to help dealerships capture more online shoppers — and keep up with upstarts such as online used-vehicle retailer Carvana — with technology and software that support transactions, not just advertising.
"The consumer expectation is changing," said Nick Gorton, vice president of product innovation at Edmunds, a company once known for printed pricing guides that now allows customers to value vehicle trade-ins and estimate payments while searching listings on its website. "You generally think that if you're researching and sorting through results, you're going to be able to transact."
The evolution is happening at the same time the segment — estimated to be worth around $3 billion — faces disruption from within.
Up-and-comer CarGurus, which analysts say changed the game by allowing dealers to list vehicles for free, has pulled traffic, revenue and influence from the traditional market leaders, led by Autotrader and Cars.com.
CarGurus' surge has led to shuffling within the vehicle listings space as companies jockey for consumers' eyeballs — and dealers' wallets — by trying to provide better returns to dealers pinched by compressed vehicle margins and cooling new-vehicle sales.
For their part, Cars.com and rival listings sites say they're not threatened by what competitors are doing. Rather, they are focusing on growth and carving out different niches to help dealerships adapt to the digital disruption shaking up the car-buying process.
The shift from leads to transactions also is a way for the players to differentiate themselves in an increasingly crowded segment — one some analysts say could shrink over time.
"The marketplaces are evolving into transactional businesses, slowly but surely, and there will come a tipping point where they have to be very actively involved as transaction businesses," said Peter Zollman, founding principal of AIM Group, which provides business intelligence and consulting related to marketplaces. "A classified site with listings in five years won't be much left. If a site is not part of the transaction, it's going to be left out."