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Jared Hamilton
From: Jared Hamilton
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Richard Holland

Richard Holland Managing Director

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The Future Is Now: Google Enters Fixed Ops

In July, I wrote an article that was published in Dealer magazine titled “Beam Me Up! How Service May Look In The Future.” In that article, I discussed how the trend of increasing transparency for consumers would inevitably extend to automotive service. Well, my friends, that day has come.

A new app was just launched named Openbay. While this app was built by a Cambridge start-up, more importantly, Google Ventures funded it. This app allows consumers to request a service quote from nearby service providers who then provide estimates (i.e.: bid) on the work. It’s a completely opt-in service for repair shops so consumers will only see shops that have decided to participate in the program. These listings also include user reviews, so a consumer will not only be making their decision based on price, but also on reputation. The service is free for consumers to use but charges 10 percent of the RO when the app gets a customer to the repair shop. In addition, once the customer chooses where to patronize, they can make the appointment and pay for the service right through the app. The app has been in pilot for the past few months “with about 600 car owners and more than 400 service providers,” according to the article.

Nobody knows whether this app will bomb or become the next OpenTable - which is what it’s being compared to. It’d be interesting to know how large an area this pilot was run in. At this point 400 service providers have decided a new customer is worth 10 percent of the repair order. “It’s a little high but I’m getting a brand-new customer,” said Barry Steinberg, president of Direct Tire and AutoService. Giving up 10 percent of an oil change in exchange for a new customer is one thing, but imagine the cost if you quoted a $3,000 repair.

Google Ventures chose to fund this. It’s only logical to assume that they saw value in offering a service that’s never before been offered. It’s also not a far reach to believe that, should this prove successful, the natural evolution of the service is some type of integration or availability with Google itself. We all know that Google has been aggressively courting and testing an entry into the automotive industry through direct listings pulled straight from dealers’ inventory. Now, it appears as if they are testing the waters in automotive service, albeit indirectly through funding this app.

It’d be interesting to know if any of the 400 service providers that participated in the pilot were franchise dealers. If this app takes off, dealers will have to choose whether to participate and give up 10 percent of their RO revenue or not. Dealer participation means that they acquire a new customer while preventing an independent from gaining one. This is something worth watching. It could be a boon to independents should dealers choose not to participate. If its user base grows large enough, and especially if Google integrates it in some way into the search engine itself, dealers might find themselves forced to defend their bread and butter revenue of fixed ops by actually giving some of it away.

Jeremy Alicandri
Richard, Great piece; I'm glad someone covered this. The implications of OpenBay's model are far reaching. As I said before, from a consumer's standpoint, I LOVE this site. However, I'm not sure if all Dealers will feel the same. Imagine if a customer can instantly “price check” a commoditized wheel alignment during the service write-up process? As Cliff Banks said, "looks like Publics are hovering around 40% margins in service business (includes collision)." I know many dealers that have higher margins. Any economist will tell you that full transparency leads to profit compression. This made sense for the variable side(sales), but the service department is still a sacred cow for most dealerships. Great insights!

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