Back in the early 1990s, the Internet was in its infancy. As a new phenomenon, not every business was sold on its benefits, or even why they should use it. This posed a problem for Cisco, a company whose main product at the time was routers. Cisco needed to prove that, not only would the Internet save companies money, but also Cisco products were the best choice to help them do so.

In the end Cisco created automation and technology which allowed it to manage the travel expenses of 22,000 employees with only 4 auditors, compared to the average 40 auditors at equivalent sized companies. Cisco saved $825 million with this technology. The following year savings grew even further to $1.35 billion and it achieved a market capitalization of $550 billion to become the world’s most valuable company.

The system, in part, relied upon honest employees in exchange for fast reimbursements (mostly next day). This gave employees an incentive to be honest with their expenses while also providing a cost advantage to Cisco by having just a few employees handle expenses for everyone in the organization.

Cisco’s routers became an industry standard and it has been shaping the future of the Internet for more than 30 years. In the end, Cisco was a catalyst for showing businesses the efficiency and cost advantage the Internet could offer -- and we all know the rest of the story as the Internet exploded and is now as integral to our lives as sliced bread.

What has this done for dealerships? Well, I am sure you all use the Internet for a myriad of operations – accessing your CRM, DMS, etc. You probably also have Wi-Fi in your customer waiting areas. And today Wi-Fi is even used to operate the coffee machine.

Wi-Fi is like water. You need plenty of it. Car shoppers these days demand speed and efficiency and that means using the latest technology in your dealership; including tablets and smartphones in the service drive and technician bays. A really good Wi-Fi connection is vital – throughout the dealership. But here’s the problem: dead zones are everywhere in the typical dealership. Because of this, vendors tend to get the brunt of the blame as dealers tell them their products don’t work – when really all that is needed is more bandwidth and a better network.

With the advent of Google Wi-Fi and new mesh networks, it is now a simple process to create a single network, or SSID, throughout the dealership. These type of networks reach all corners of the dealership. They operate in a similar fashion to cell towers; the software switches you to the next access point with the same SSID when the signal weakens. That translates into NO dead spots, anywhere. By the way, the access points are so cheap, that at $75 an access point, if you do find a dead spot, buy a new one and plug it in. When you add it to your mesh network the point “wakes up” flashes a blue light a few times and starts sharing the load. Simple!

The result: a well-connected network that adds efficiency and productivity to all your connected software, giving you happy customers AND employees.

The other advantage is that Google automatically patches the access points whenever there is any known security challenge, so you can rest assured that your network is always updated with the latest software and is safe and secure.

By adopting this inexpensive technology, you can provide the experience today’s customers demand in the service drive. All the providers in this space have very aesthetically pleasing access points (Eero, Samsung, Linksys, and NETGEAR).

Tablets and smartphones are now the order of the day. They speed up and simplify interactions with customers and make inter-dealership communications between service advisors, technicians and the parts department more efficient. Technicians and service advisors can quickly move onto the next customer’s vehicle, increasing shop capacity and service revenue. And -- just like Cisco proved almost 30 years ago when they kick started widespread use of the Internet as a business tool -- this provides a definite cost advantage.

I can’t think of any dealer that wouldn’t want to increase net profit every month while also keeping their customers happy. Can you?

When automobiles were first introduced into society, people didn’t know what to think. For the most part, early automobiles were reserved for the wealthy, while everyone else continued their transportation needs with the use of horse and carriage.

However, people were very curious about this strange new phenomenon of transportation. So curious, in fact, that cars were exhibited not at the car shows we know of today, but rather at circuses alongside elephants, the wolf boy and other curiosities of delight, according to the book, “The Evolution from Horse to Automobile.”

Change can certainly be hard to confront. The mass transition from horse-powered transportation to automobiles took about 50 years, according to the president and managing director of General Motors Canada. In a recent article he shared that horses, while loved by both consumers and industry, caused significant environmental and economic challenges. Their use grew to such an extent that they produced a huge volume of manure, creating flies and traffic congestion on unpaved roads. They also consumed massive quantities of natural resources; five acres each of hay and grain annually.

It was calculated that, if left untouched, horse droppings on the streets in North America alone would rise to the level of a third-story building in Manhattan; that’s about thirty feet! This perfectly illustrates the predicament, and catalyst, that led to the rush development of more gas-powered vehicles. This has continued today into electric, self-driving and autonomous vehicles. Consider the mass expulsion of emissions as the 1920 equivalent of horse-droppings. The only difference being that emissions aren’t right in front of you drawing flies. Emissions do, however, have a similar (or worse) impact on the environment and health in the form of smog.

Change is difficult. I get that. That’s why it took 50 years to migrate from horses to automobiles.

But, in these modern times, technologies develop much faster than in the past. I’d bet you anything that the majority of you have a computer that’s already outdated. Even if you bought it 6 months ago!

The point I am making here is that change is inevitable. It is far better to embrace it then to resist it. In the automotive industry, we do tend to be a bit behind the rest of retail as far as jumping on the technology bandwagon. While there will always be a population of people working to slow progress by making a case for how any new technology will not work, those dealers that embrace and use new technologies see huge benefits and tend to stay ahead of their competition.

One very simple example is texting. Just about everyone has a smartphone these days and that adoption started only eleven years ago with the iPhone launch. Voicemail is now considered very inefficient as it is so much easier to communicate with customers via methods they use frequently, such as text messages. Some dealers have seen dollars per RO increase substantially simply due to better interaction with their customers through the ability to text. It makes economic sense to simply adjust to how consumers prefer to communicate in today’s smartphone world. Remember what it was like when most people didn’t even own a cell phone, let alone a smartphone?

New and developing technologies and the evolution to autonomous vehicles will most certainly benefit society. But there is always someone that argues against any new technology, perhaps believing that SkyNet from the movie “The Terminator” is soon to follow.

 Auto manufacturers are shifting their focuses to low-emissions, electric and autonomous vehicles. Worldwide OEM investment in electric vehicles is expected to be around $90 billion through 2030 and another $61 billion will be spent through 2025, continuing the development of autonomous vehicles. Technology companies, such as Google’s Waymo, etc., are moving forward at a more rapid pace. And, regulators are throwing environmental rules, guidelines and – more telling – strict deadlines at dealers and OEMs.

The transportation industry as we know it is going through a huge evolution similar to that difficult migration from horses to automobiles. Except this time, it won’t take as long, or at least I don’t think it will. But perhaps I am wrong – what do you think and what challenges will this present?

Have any of you had success with QR Codes? By some reports they are making a comeback. But, on the other side of the coin, on an episode of Shark Tank late last year, renowned venture investor Chris Sacca commented that QR codes are “the herpes of mobile technology.”

Yes, pretty harsh, but his words, not mine!

Technology is sometimes a fickle thing. In 1994, a company named Denso Wave created QR codes. Marketers were excited as this was an interactive and easy way to pass information onto the consumer. An interesting aside is that, according to an article on Gizmodo, Denso Wave was owned by Toyota and this technology was initially used to “track vehicles as they were assembled and to scan components at high speed.”

Over the years auto dealers have wavered on the use of QR codes as most consumers disliked the difficult process of scanning them. According to ComScore, by December 2011, seventeen years after their introduction, only 20 percent of Americans, 16 percent of Canadians, and 12 percent of Spanish and UK smartphone owners used QR codes at all, as they were far from user friendly. Cell phones required a QR code reader application and those were also hard to use. To compound the inconvenience, the smartphone needed a data signal. And, it wasn’t that long ago that many cell phone plans limited data usage and consumers were careful with their data. As a result, the QR code promptly lost its popularity with consumers and, if consumers weren’t interested, marketers certainly were not!

But now, it appears, QR codes are making a comeback. The question is “why?”

As smartphone technology and software has evolved, cell phone manufacturers are again looking at the benefits of QR codes. Marketers always need simple and effective ways to quickly and easily convey a lot of information to consumers. As the smartphone is still the best venue for that, phone manufacturers responded.

Two operating systems; Apple’s iOS and Android, account for 99.9% of all cell phones sold last year – a whopping 1.5 billion. As of Apple’s current iOS 11, all iPhones have the capability to scan QR codes simply by pointing the phone’s camera – no app required. And, from the iPhone 5s on up, all iPhones can run iOS 11 and, well, Apple pretty much forces an upgrade.

Each Android phone running Marshmallow and above (which is most of them) has the same ability to simply scan QR codes. So, as of right now, pretty much every phone sold has the native ability to scan QR codes built right into it, making QR codes less of a hassle and easier for consumers to use. Add in the fact that most cell phone providers now offer unlimited data, and that marketers, including dealers and OEMs, still need a way to convey large sums of information in relatively little space, and there is certainly something here to support the possibility that QR codes could make a comeback.

But, as with most technology, all is not golden. Chris Sacca has made it very clear that he sees no future in QR Codes. Perhaps he was referring to them being visually ugly and confusing for most users. He went on to say that: “the user experience sucks … it should be as simple as: buy some stuff, get a ride … period. Please, light the QR codes on fire.” And this is the guy that invested in seed and early-stage technology companies such as Twitter, Uber, Instagram, Twilio, and Kickstarter, investments that resulted in his placement as No. 2 on Forbes' Midas List: Top Tech Investors for 2017, so he seems to be a skilled predictor of trends technology-wise.

This certainly presents an interesting situation. Apple and Android predict a comeback for QR codes as a low-cost way for merchants to interact with the consumer’s device. However, a key thought leader thinks otherwise.

I would be interested in hearing your thoughts on this. Will QR codes make a comeback as mobile providers have simplified the process? Are they now, in fact, an efficient way to provide customers with rich information about a vehicle – new or used – without having to stock hundreds of boxes of brochures? Or, is Sacca right, and consumers have lost interest due to past bad experiences and should the technology be set on fire? Or, lastly, is there perhaps some middle ground where QR code technology needs further improvement before it is truly a useful tool for both dealers and consumers?

The automotive industry is changing with self-driving cars, companies such as Uber entering the field and the decline of oil-dependent vehicles. 

To that point, I am sure many of you are familiar with the shocking stories and downfalls of three highly successful companies: Blockbuster, Kodak and Xerox.

So, what lessons can be learned from these failures that can be applied to dealerships? (my readers have written to me to say that my posts are too long and sometimes the summary may help to see if they want to read on, and hence the bottom line first.)

First, in the case of Blockbuster, you must constantly study and re-evaluate the market and your competition. I keep telling my employees that I wake up worrying more about two guys in a garage with a computer putting us out of business, rather than our current set of competitors!

The moral: Disrupt yourself!

Second, Kodak. Our industry is currently barraged with messages of disruption as new companies and technologies enter the market. Don't let others disrupt your business, do it to yourself. 

The moral: Cannibalize yourself.

And, lastly Xerox. While the company did invent the future, it failed to realize its full potential and produced technology that was ill suited for the needs of the audience it was serving. Their mouse had three buttons, broke every two weeks, the windowing system was far from simple and needed three clicks at times to do an action. Jobs went on to build a mouse for under 15 bucks, it did not break down in two years, his windowing system was simple and easy to use -- with just one click for most actions. 

The moral: It is all about reliability and customer convenience.

Let’s briefly examine – and expand upon – these three stories:

 1.  Blockbuster – In the year 2000, Reed Hastings, the founder of a new company called Netflix, proposed a partnership to Blockbuster CEO John Antioco and his team. Netflix’s idea was to run Blockbuster’s brand online and Blockbuster would promote Netflix in its stores. Hastings was pretty much laughed out of the room. Well, Blockbuster went bankrupt in 2010 and Netflix is now a $28 billion-dollar company, approximately ten times what Blockbuster was worth. Antico was not a bad CEO, yet for all his business expertise he failed to see the opportunity and what could happen in the future.

When Hastings made his original offer, Blockbuster was at the top of the video rental industry. It had literally thousands of retail locations, millions of customers, a massive marketing budget and dominated the competition. So, it would have been a natural reaction for Blockbuster to think that handing over the brand was a bad idea.

Here’s the catch, and something to learn from: Blockbuster’s model had a weakness that wasn’t immediately clear. It earned an enormous amount of money through charging late fees, and this became an important part of Blockbuster’s revenue model. The company’s weakness was that its profits were rather dependent on extracting penalties from its customers.

On the other side of the coin, Netflix had certain advantages. It decided not to have any retail locations and so lowered costs, enabling it to offer customers much better variety. Instead of charging to rent videos, it offered subscriptions, negating late fees. Customers could watch a video for as long as they desired or return it and get a new one. And they loved it and left Blockbuster in the dust.

2.   Kodak – Kodak didn’t ignore digital photography. It created a best-selling line of digital cameras as well as high-quality ways to print them. The problem was that Kodak made most of its money from developing film. This wasn’t an issue of stupidity, or ignoring technology, but rather a financial one. And, they failed to see how their product could be replaced.

3.   Xerox -- One of the most incredible stories in the history of technology is the story of the Xerox mouse and personal computer. In 1979, a very young Steve Jobs made a deal with Xerox. Apple was at that time one of hottest tech firms in the USA. Jobs proposed a deal: he would allow Xerox to buy a hundred thousand shares of his company for a million dollars in exchange for access into Xerox’s Palo Alto Research Center (PARC). An engineer at PARC conducted a demonstration for Jobs, moving the cursor across the screen with the aid of an early design computer mouse.

Job’s was very excited about the technology and how it could make computers much more user friendly. He could not believe that Xerox had no real plans to do much with the technology as he saw that it was revolutionary. One of the main problems was that the Xerox mouse cost three hundred dollars to build and was broken within a couple of weeks. Jobs directed his design team to build a mouse for less than fifteen bucks that could last for a couple of years.

Xerox did continue in the personal computer field and developed the Alto, which went on sale in 1981. However, it was slow and underpowered. So, shortly after that, Xerox withdrew from the personal computer market. Meanwhile, Jobs, who was working on the next generation of personal computers, developed the technology for menus, opening, closing and expanding “windows” to easily move from one task to another, and a better mouse. And the rest is history.

Xerox management failed to correctly provide what the market needed. They should have focused on ease of use and reliability. That is how Jobs and his team at Apple won the market.

From these stories, the takeaways and real lessons aren’t that these businesses were once leaders in their industries and failed. Rather, it is how to constantly innovate, even though in the short term it will cannibalize your business; but in the long term, you will enjoy the spoils when your competitors are out of business.

While we see these stories repeated often, for some unknown reason, we as humans tend to think “this is not going to happen me or my industry.”

As there are several different departments in dealerships, each with their own goals and targets, it is quite common for inter-departmental fighting to occur – a woe of many a manger. This happens because each department attempts to preserve revenue within their own department – other departments be darned!

For example, the used car manager will complain about the cost of reconditioning vehicles because it eats into the potential front-end gross profit they could potentially make– and that’s what their pay plans are based on. Or, the service department is hesitant to refer customers back to sales and/or to F&I for service contracts, preferring instead to keep revenue in their department through higher RO dollars.

A recent article in Automotive News reports how this dynamic only serves to hurt a dealership’s overall bottom line. However, according to the article, there may be a solution – at least one that’s working for several dealerships; and that is sharing the wealth, if you will, by incentivizing service to refer customers to sales and/or to F&I for service contracts when a customer comes in and is presented with a hefty service estimate. In fact, at one dealership, 30 percent of customers referred by service purchased extended service contracts, 10 percent purchased new vehicles and, as a desirable bonus, the retention rate in service was a very healthy 84 percent. All for $25 per service contract!

The key? Creating pay plans that incentivize both sales and service to refer customers to F&I for service contracts. Think about it. Any salesperson or service advisor is eligible to make some extra $ and its great motivation to refer their customers to F&I. 

The result is that, overall, the dealership wins for multiple reasons. First, there is less in-fighting and more teamwork in the dealership which improves the company culture. Second, the employees are happier because they can make additional money every month. Third, customers who purchase a service contract will continue to service at that dealership, rather than any competition. And last, but not least, the profit generated in F&I will increase the dealership’s bottom line.

Seems like a win-win to me. And my guess is that dealers would rather have the profit and service retention gained through the sale of a service contract than the $25 they pay the service advisor or salesperson who referred them.

Help your dealership employees and departments work together by incentivizing them to do so. It has been proven to be extremely successful for other dealerships, so why not yours?

One of the staples for service department is tires, including sales, mounting, balancing and alignments. Tires are a price leader for your dealership and a great way to get customers in, providing you the opportunity for additional service work revenue.

Well, what if your customers no longer need to buy tires from your dealership? What if they could simply go on Amazon and buy them cheaper – just like everything else on Amazon? Cheap doesn’t mean easy though. Who wants tires delivered to their home or office, where they must pack them into their vehicle and get them to a service station to be installed? 

Here’s the deal…Amazon has just solved the EASY part of this equation. Now they own a cheap and EASY way for customers to order tires and get them installed.

How can Amazon, an online retailer with no physical stores, compete with your service department?

Easy, they partnered with Sears Auto Centers! Amazon tested the partnership at 71 Sears Auto Centers this winter/spring and have already expanded it to well over 150 locations nationwide. Now, customers that order parts on Amazon, including tires, can have them shipped directly to their local Sears Auto Center for installation. Not only is it super convenient for customers to order parts, the clear majority of Sears Auto Centers are located right next to a mall. Customers can drop their vehicle off, go shopping at the mall, or have lunch, then pick up their vehicle as part of a convenient day of errands and activity. This is a very different experience to waiting at a dealership or having to get transportation to and from the dealership, which is usually on dealership row, away from easily accessible fun activities for customers.   

Naysayers may discount the importance of this development, but they shouldn’t. With the acquisition of Wholefoods, Amazon has proven it’s no longer happy staying purely in digital e-commerce. And, while Sears was a retail giant last century, they have closed hundreds of stores over the last decade. I read about their financial troubles all the time and Amazon could easily buy Sears, or even just Sears Auto Centers, and create a whole vehicle service network to compete with dealerships.

Amazon is pushing even further into the bricks and mortar retail world. In fact, it recently announced that Amazon Prime members (which account for a whopping one-third of United States citizens at 100 million members) can now enjoy a healthy 10 percent discount on Wholefoods’ purchases.

There’s a reason behind everything Amazon does. It’s calculated, and they don’t care whether they disrupt or destroy a whole industry. And, it appears, it isn’t slowing down on its entry into the automotive industry. From parts, to at-home repair services -- and now tire and parts sales installed at a Sears Auto Center retail location -- the path ahead can only lead to more disruption in the auto service industry.

How are you as a dealer supposed to counteract this? The only way is to ensure customers choose your dealership for service work and tires is by providing a superior customer experience. As dealers, you must start looking at all your services the same way Amazon looks at things - from the customers perspective! You must analyze every step in your service process, remove the friction points and be extremely CONVENIENT for your customers.

The times they are a changin. The time to get ahead of the competition is now – well actually it was yesterday. But, if you act now, you can create your own superior customer experience and avoid the fate so many other retailers have suffered thanks to Amazon’s disruption.

Sales alone will only get your dealership so far. You need to retain your other profit centers to remain viable, both financially as well as in the minds of your customers.

In this video blog, Ujj Nath shares why AI will never completely replace humans and why.

If you have been paying attention to industry trends I am sure you have noticed the ever-increasing gap between the size of smaller dealerships and large auto groups. Groups are swallowing up smaller dealers left and right as they continue to grow.

Of course, size matters when it comes to many things in the dealership world and the consolidation of the industry will end up primarily giving the large dealer groups cost advantages. They can acquire and maintain larger inventories and attract more consumers, decrease the costs of doing business by creating their own brand of bulk OEM parts straight from China and handle more service business simply because they have more bays and more technicians.

How then, are small dealerships supposed to compete?

Well, let’s talk about what can happen as these large groups continue to expand… they risk becoming mediocre. With the volume of vehicles they now need to sell, and the quantity of vehicles that must be serviced, the simple act of juggling this volume of work can quite easily turn them into more of an assembly line.

That’s where the smaller dealerships will find their edge. Smaller dealerships can have a more personal approach and provide more individual attention to their customers which can make them stand out. They can operate in a more agile manner, performing vehicle analysis for free and ranking them “Now” and “Later” so that the customer feels that you are truly looking out for them. The idea is to do something that large structured organizations typically don’t give the advisors or service managers the leeway to do.

I can personally relate to an incident where giving your service advisors more latitude, rather than less, (as large groups tend to do with their controls) would have helped. I had taken my Audi in for service, which was done on Friday, but I went to pick it up on Saturday. It was stored on the roof and, because of construction on a nearby building, there was a layer of sawdust on it. While they had washed the car, they did it right after service and so after the wash it got covered with sawdust. My bill was $3,500. I asked if they could wash it again, but they were thinly staffed, and the replacement advisor told me that it would take 45-minutes to get it done, at which point I left and went to a car wash and got it done myself. 

Wouldn’t it have been very powerful if the service advisor had said - “Sorry for the inconvenience, I am crediting you $25. Please take the car to a car wash as you are in a hurry!”  Simple things ... easy to do ... give every SA a $50 discretionary customer satisfaction discount.  Which is something luxury hotels routinely practice.

There are simple things that can be done in the service department such as improving communication with the customer with a better system of status updates and ETAs. Or offering multiple forms of communication including text messages, along with email and phone based on customer preference, would be a great start.

Smaller dealership can provide that personalized service that customers find satisfying and unexpected.  I have yet to see a dealer that does not discount their services to keep customers. How about offering a pickup and delivery service so that customers can get their cars repaired in the luxury of their home.

Now is the time to start thinking about what your dealership can do to differentiate itself if you want to compete in the future. The large auto groups will only continue to grow larger, so make sure that you don’t find yourself getting smaller at the same time.

In this video blog, Ujj Nath shares more uses for video walkarounds than just inventory merchandising.

Ujj Nath explains why old-school paper multi-point inspections are outdated and shares a better solution for dealers in this video blog.