Cox Automotive Wants to Eliminate the ‘Channel Break’ in Car Buying

Narrator: 0:06

This is Monday Conversation, a PYMNTS podcast. Karen Webster sits down with the visionaries behind the trends for the stories shaping what's next in payments and commerce. In this episode, Cox Automotive senior VP Jessica Stafford tells PYMNTS CEO Karen Webster about how Cox Automotive's omnichannel platform closes the channel break between online research and in-store purchasing.

Karen Webster: 0:31

Hey Jess, nice to see you. Thanks for joining me today. I'm looking forward to talking about the news that Cox Automotive just announced about the launch of its omnichannel digital retailing platform. So excited to get the inside scoop from you and thanks for taking the time.

Jessica Stafford: 0:46

Yeah, thank you for having me.

Karen Webster: 0:48

So just as a way of context for those who may not be familiar, Cox just made the announcement that you will allow full vehicle purchases across multiple online and physical channels with all of the bells and whistles embedded into what is a full stack e-commerce infrastructure for the automotive industry. Sounds pretty breakthrough. You in fact have called it that because you say it is the first really true e-commerce platform across digital and physical channels for the industry. To start us off, what was the pain point in the market that told you the industry was ready for something like this?

Jessica Stafford: 1:25

Yeah, I mean, you know, at the end of the day, this solution is solving for what we have as a channel break problem, if you will. So, you know, over the course of since the beginning of car shopping and buying, people go to a lot of different channels. Um, and so we would call this a multi-channel approach. So, you know, away back when it might have been doing research in the newspaper and then also driving down dealer lane to look at cars. And then, of course, eventually more and more shopping online, different websites, uh, third-party type of classified sites like an auto trader or a Kelly Blue Book, um, dealer websites, manufacturer websites, and they might have done a lot of that work online, uh, shopping, maybe research, maybe even valuing their trade-in or putting some payment information in. And then eventually they walk into the dealership, into the physical showroom to buy the car. And most of the time, that information didn't follow them into the store. And so we call that a channel break problem. And so we went from having multiple channels where a lot of information and work might be done, to again, what, like you mentioned, we believe a first of its kind omni-channel platform where we are connecting all of those channels because on the back end, uh, we're operating a transaction kind of infrastructure and platform that enables the deal itself and all the data and information that goes with that to follow the shopper uh wherever they go. And then on the back end, the dealer, same thing. The dealer can enable this seamless experience for their own staff as well as their customers. And so there was really this breakdown over time that created, you know, typical stuff. Frustration, it takes me too long to buy the car. I don't have confidence buying the car because I'm not sure which price and what numbers is right. And so this seamless integrated platform allows consumers to be confident about their car shopping process, enjoy it even because it is simple and seamless and connected. And then car sellers, the dealers on this side, create uh a much better experience for their their own um their own store as well as their customers, create loyalty, profitable sales in the long run.

Karen Webster: 3:32

It's a big purchase and it does come with a lot of friction. Having purchased every single one of my cars online. It was not, even that wasn't easy because there's a lot of telephone stuff involved. So it's it's it's not really possible to do things in a in a purely digital way. And then there's of course taking possession of the car and all the paperwork that goes along with it. So I mean, creating this full stack infrastructure for dealers to make it easier for consumers is certainly a big advance. But it's really hard to do. I mean, if you look at retail, just you know, brick and mortar retail has been really trying to get to that level with customer history and rewards and all of that for a very long time, decades. How are you overcoming sort of the legacy infrastructure and the culture change that this represents for dealers, even though it's a better outcome for everyone, there's still that change management and tech debt that has to be overcome?

Jessica Stafford: 4:39

Absolutely. And exactly what you said, change management is at the heart of it all. Um, and because we we have an automotive industry that, you know, the legacy version worked really well for a long time. And um, car dealers are doing great business, but consumer expectations have shifted. And so there's a little bit more urgent, uh, I would say a lot more urgency these days that's putting pressure on dealerships, on dealers to truly evolve. And I think we've seen a step change over the last couple of years. Of course, COVID accelerated the need on both sides and in all industries, enabled transparent, digital, seamless type of transactions in retail in general. Um, and so that helped to push kind of push this industry along. Um, but like you said, change management is key. So we've built these platforms, we've built the technology and the tools. But I will tell you what comes along with that is a ton of training and change management done um through uh training and digitized training and virtual training, but also in person, walking through solutions and tools, um, a lot of even just shadowing experiences. Uh, from a Cox Automotive standpoint, we believe the change management part is just so important to adoption of our tools. We measure uh utilization rates as one of the key indicators of is this tool going to work for you and or not? Because if you don't learn the tool and use the tool, you won't get the value that the tool promises. And so we track that utilization and make sure that we're running through not only on you know on paper and through data showing our customers, the dealer side, right? How valuable tools like this will be and how much profitability it will drive. The numbers are great. Um, but at the end of the day, you have to you have to really live it and show them how consumers are expecting these experiences and how much value they'll get out of it. So to your point, change management is key. And then you mentioned tech debt. Um, you know, this is something that is really important in our industry because dealers use a lot of different tools in their stores. Six including like pen and paper. Oh, yeah. Well, yeah. I mean, that's the that's kind of the ultimate tech debt that still exists. Um, not only pen and paper, you know, for from in the in the industry side, of course, from an automotive dealer standpoint, um, a ton of profit is made from FI, from uh consumers adding on options. And the FI manager and workforce in a dealership is super valuable and smart and oftentimes are using pen and paper or are copying and pasting between spreadsheets on their computer in order to kind of figure out what's best for the customer they're sitting in front of, and then also what's best for their dealership. And so part of this tech stack is uh AI um automated and intelligent FI tools that help that FI manager make even smarter, faster decisions. So it's no more pen and paper. It's how I make sure that I am offering the consumer, you know, the dealer's customer, of course, in this case, the very best opportunity for the best deal and what sets them up for success, but also is best for their business. And so um, it's all in the change management. And then, of course, the penetration of this new technology is key. And um from a Cox Automotive standpoint, we have built over the years um a lot of different pieces of software and technology and media platforms that already exist in the vast majority of dealerships out there. And so we use that as a benefit to taking that core technology and then this solution integrates and connects all of that tech that's out there. So it's already somewhat familiar for our dealers, and it's just kind of evolving and getting to know how to use this new tool and really leaning into what customers are looking for.

Karen Webster: 8:29

What are you learning from the early adopters?

Jessica Stafford: 8:32

Well, we're learning, I would say number one is exactly the topic we just talked about. You need to be all in. Um, you need to create the right training and incentive for your workforce and the dealership to want to use these tools in order to see success. Um, our customers that are upwards of 75 to 100% utilization. So using the tool in 75 to 100% of their deals, they see like this amazing outcome. Even those that are just starting off and you know, we take the the utilization up, they see the value. But it's really once you start using the tool to its fullest and get comfortable with it, um, they see a ton of value. The other learnings we're seeing is like I mentioned for dealerships, um, you know, the more that you present a customer with the options for what they might need to add on to their deal, to their transactions, um, the higher the adoption rate. So let me give you an example. For customers who are starting their deal online, whether that's on autotrader.com or on hertzcarsales.com or any of our other customers' websites, they're presented with a menu of options for these add-ons, whatever that may be. Um, that's all data driven and kind of leaning to their behaviors and um what it looks like they might need and lots of ways to explain what these add-ons are, what they cost, what it means for them. They're presented once with them there. And some of them add those menu options onto their deal. What we've seen in this omni-channel experience is once that person does some of their deal online, they submit, they carry that into their in-store experience. And then that FI manager may be able to go back through those options with them, show them a second time. We see two and a half times more attachment rate, two and a half times more add-ons added on to the deal. And so that's a really important point we're looking at. Ultimately, that's gonna drive success for dealer customers, profitability, of course. And ideally, we're getting the right tools on the consumer side as well.

Karen Webster: 10:32

Just what what is the friction point that that that you talk about the um the connection? What what was the term that you used? The connection collapse or the the connection break?

Jessica Stafford: 10:44

The channel break.

Karen Webster: 10:44

Channel break. Channel break. Um what what was what caused the channel break? I mean, what what is the real dependency that that your platform solves? Is it the financing piece? Is it the it's the less hassle piece? Is it the taking delivery piece? Like what is the real killer app, if you will, of your platform?

Jessica Stafford: 11:05

So the the the function behind the scenes that that broke that was broken before is is literally we've spent all this time, I mean decades, optimizing the digital experience. And automotive, we call it a digital retailing widget often, you know. Okay, it's out on the page. And we did all kinds of optimization to that tool and created transparency and pricing and ways for the consumer to pencil their own deal and think about what their monthly payments would be. And what if I put a little bit more money down? That was great, but then it all that information didn't flow into the tools that were in the store. So it was literally a break between two platforms. And so the magic sauce here, um, I would say at its simplest form, is that it's all built on the same digital platform, kind of digital backbone that connects those experiences. Oversimplifying it, it's as simple as that. The pipes are there because it's all connected. Um, but what I would say is truly the magic on top of it that we believe we do differently is adding data-driven automation and intelligence on top of it. Um, given that we operate Auto Trader and Kelly Blue Book, uh, you know, almost 80% of car buyers are going to these sites. And then we also, through another part of our business, we operate over 10,000 dealer websites. And so you see so much data and connectivity and that ability for us to be predictive and to automate the steps that make the consumer's experience better and again the dealer's experience better. And that's just so important these days because dealers are are no longer competing on just price and inventory, which is what it used to be, but on the ease of the experience now. And this technology has not only caught up but enabled this opportunity for dealers to really simplify what was a super complex experience with replay.

Karen Webster: 12:56

Yeah, no, for sure. You you mentioned data and analytics. How do you see, you know, advanced AI and agents becoming a part of the infrastructure that powers this experience for the consumer and the dealer?

Jessica Stafford: 13:12

It's a great question. So we actually just launched an AI shopping assistant on AutoThreader that enables this whole experience in an agentic format. And so um it it I like to talk about it uh as um conversational shopping and buying. And so it's not just yeah, the basics are natural language shopping. And so you can, you know, shop how you would speak to a salesperson. I'm looking for this type of car, I drive my kids around and I need space for equipment and all that stuff. So it's precise, yeah, very precise. Conversational in that way, but it also enables this back and forth between uh the dealer, the content, the car, the the price, the research, the information, and and the buyer. And so uh this is uh this is a full agentic experience that exists today, and and we're seeing a ton of people engage in it so far. They're they're interested. I think overall, I'm sure you're you're hearing and talking to a lot of people about this, you know, overall consumers are all about AI right now and leaning into the possibilities of how it can help their life. And gosh, taking something as complicated as buying a car and seller is great. And so we're embedding AI into all of these tools as it relates to you know data-driven automated practices. So there's AI embedded in each of the pieces of the platform already. But then to your point, I think taking it to the next level is the true agentic experience where the AI is taking some of the steps for you. And so we're being you know careful and intentional in that process. To your point, this is a this is a a huge um purchase for consumers. It's also unique because it's a very individual and unique purchase. In most cases, um, it's a very specific car. Each VIN is very different, of course, on the used car side, but even on the new car side. So it's very rare, besides you know, real estate and automotive, where you're buying something that costs that much money that typically has uh maybe a complex uh payment model, whether it's cash or financing or combination, et cetera. And then also it's a it's a very unique asset that you're buying. And so our industry is prime for AI, not disrupting, but enabling all of this continuous um transaction experience to happen.

Karen Webster: 15:33

But it also means that your infrastructure needs to be synced with the LLM so that when consumers are doing, well, I guess they're doing it on your platform, they're doing these searches like I have three kids, and you know, I'm I'm shuttling them to school and you know, sports practices and you know, all these things. I mean, that's the beauty of I think the the the the the agents in the AI model now, which is to your point conversation, it can be very precise. And then you get a short list of models, and then you can go, well, I really want it to be blue or red or white. Um, it it helps to narrow it down. It also takes the experience that the dealer typically stands in for with the consumer kind of a way. So it's another, you know, it's another enabler, but you have to be prepared for it. I mean, your infrastructure has to obviously support that experience for both the consumer and the dealer.

Jessica Stafford: 16:30

And we have to assume, you know, where you were going with that, that it could happen on these platforms. Yeah, yeah, the enablement, but it also could happen within the LLMs. And so to your point, there's there's a there's building AI into these tools, but then there's also optimizing and enabling uh platforms and the content to be found and to be explored by LLMs. And so there's a lot of work, and I think you know, we're all at the at the forefront of figuring out how this really happens. So for from our perspective, uh, we want our tools and of course the business for our customers to be um open and findable and explorable by um all of those platforms. And I think, you know, at this point you have to assume some of it's gonna happen um in in one spot, some of it's gonna happen in others. The LLM become uh another channel in the omni channel experience. And I think to touch on your point about sometimes those agents are the become the dealer. They're answering questions, it feels like it's a person answering your questions.

Karen Webster: 17:31

Yeah.

Jessica Stafford: 17:31

Um and we're doing a lot of studying around that because our research studies consistently show that uh the vast majority of consumers look, they want to do a lot of their process online. They believe that it needs easier, it's less less scary, they can feel really confident and educated, but ultimately, because it's such a big purchase, they kind of want to look at somebody in the eyes and they want to all that. And so this concept of omnichannel enables that because you can do a little bit online or you can do all of it online. It can be all done from your couch on your phone, should you want. Um, but the key there is how do you find the right mix of enabling a consumer to do as much or as little as they want, talk to a human or not, um, and enable our dealer customers in this case to provide that type of experience for their customers.

Karen Webster: 18:19

Yeah, it's all about the tools that give the choice to both sides of your platform, which which leads me to another question. How does this change your business model? Because this is a this is a different business. You are now a platform that is bringing the dealer, you know, infrastructure, but it's also enabling them to do more things that are transactional as a result.

Jessica Stafford: 18:42

Yes. I mean, you know, at at the you're absolutely right. At the end of the day, this changes everything in our market, in our in our platform. You can look outside of the automotive industry at other industries that have transformed like this. Um, and at the end of the day, we're in the middle of kind of a hybrid evolution. Um, frankly, you know, all of our platforms, all of our tools are meant to be connectors. So our intent is always the way we add value is we bring as many qualified consumers, car buyers to the table, and as many qualified and amazing car dealers to the table with the inventory at the center, and we try to be the very best matchmaker we can. Um simplify and streamline and all that. That being said, you know, look from a commercial strategy standpoint, um, we have products that run everything from transaction-based to subscription-based, uh to hybrid to um to performance-based. And so I at the end of the day, we're kind of ebbing and flowing with this change in how the world works and ultimately looking to drive as much success for um dealers, manufacturers, lenders in our space as we can and um believe that if we enable profitable sales for them, you know, our business model will make sense.

Karen Webster: 19:59

It's it's like you've become this ecosystem. You've always been an ecosystem, you've always brought the ecosystem together. But with this infrastructure now, you're kind of an operating system because you really do enable, you know, the transaction to happen in ways that weren't possible for being a matchmaker is one thing. Enabling a transaction and having all this embedded capability and being their infrastructure is a is a completely different business.

Jessica Stafford: 20:27

Yeah. I think the the word you used with ecosystem and platform, you know, we're we're working through how to really bring those two things together. We do think of it as an ecosystem that is uh fluid and moving and but it works as strong as the connective tissue. Um not only an ecosystem, it really acts as a flywheel as well, as particularly in a lot of these worlds that are more like um marketplace type of platforms. And so um the ecosystem itself gets healthier as these components are connected. And then to your point, that that that's that's absolutely right. We we do believe that this shifts Cox from software tools, media platforms to a true transaction infrastructure that enables um our customers to thrive in this new evolved digital space.

Karen Webster: 21:15

Platforms are highly profitable businesses. Yeah, well you become entrenched, which is which is great. I mean, it's it's it's it's helping to create the experience that both your dealers and the consumers who want to buy cars from them really expect now. You're right, you're you everyone expects efficiency, digital, with the option of getting experts involved at the point in time that they want them to be brought into the conversation or to the to the transaction itself. And I think that's what really makes this such an exciting opportunity because you're you're learning. I mean, this is really new. And I think consumers, as consumers evolve and AI evolves, things, things will change. Um, last question. How do you think this will change the automotive industry when it comes to how consumers and dealers find each other and do business?

Jessica Stafford: 22:09

I I think it will dramatically change over the next couple of years as these tools become that much more uh widely used. You know, like I said, we saw a step change in consumer demand for digital tools over COVID. I mean, we've been in the digital retailing space for a long time before that. Um but it was we were still up against a bit of a wall in our industry for really getting that experience to carry into the store. And so um, you know, we see we study this constantly. We see over 30% or so of people are saying they want to buy a car completely online, completely digitally. But we know from data in the industry, um it's really it's like less than 8% that actually buy that way. And so these two things are are at different ends. And so we believe that consumers will continue to do more and more because the idea of it is great. It's simple, yeah, it's convenient. Um, but once once you get into the nitty-gritty, there's a reason to need multiple channels. And so uh we believe that we're on a spectrum. And um, we believe by creating uh a platform like we've been talking about that enables this ease, we can kind of hold the hands of consumers and of dealers and kind of nudge them along the way, right? Meet them where they where they are today. And I know we all talk about that, meet the customer where they are, but you got to kind of meet them where they are and then kind of help them to see, well, if you took one more step, what would that do? How could that help you from a profitability standpoint on the dealer side, from a value to the consumer? And so I believe this type of connected platform is the future. We have a lot of customers that are using parts of the platform and the whole, the whole platform, and we're seeing it really take off now because our industry has changed. And I believe that dealers see the need for this consistent, uh consistent platform that enables the entire process to be that seamless and intuitive and smart um transaction solution. So I believe we'll continue to see a huge adoption and we'll and we'll see that that wave start to turn on um definitely more people buying cars completely online. But even outside of that, um, I we believe that for the foreseeable future, a lot of folks will still want to go into the store and finish it off there. But this will just make that experience so much better, more efficient.

Karen Webster: 24:27

And Yeah, I agree. It'll it'll make the the the exchange, you know, people always hate to go into the dealer because it's like, well, let me, I have to go ask the manager. We all know the go ask the manager technique, right? Which is like, oh, please. But I do think that you have an informed buyer who's had the experience, who walks into the dealer, you know, who looks at the who inspects the car, who has a different conversation, I think, now with someone at the dealership, which I think is a is a is a better makes for a better um relationship. But also to your point, those who are using the tool see a lift in in the price of the car that's ultimately purchased. So I think it's proof that it does create a better dynamic around the car buying experience.

Jessica Stafford: 25:13

So we talk about the car being buying business being a relationship business. It's still this gives you a chance to build the relationship with your customer way further. The data is coming with them. And to your point, it's a it's a it's an exciting experience in the store. You can spend your time getting to know the vehicle, asking questions instead of operating. And everything from ID verification ahead of time, insurance verification ahead of time, the technology enables um elimination of a lot of fraud and a lot of that work to happen really simply and ahead of time. So to your point, it's a totally different experience in the store itself.

Karen Webster: 25:50

Well, just thanks for your time. Congratulations on such an industry breakthrough. And we look forward to staying in touch as more dealers adopt the technology and everyone sees the results. Thanks again for your time.

Jessica Stafford: 26:02

Wonderful. Thank you for having me.

Narrator: 26:07

That's it for this episode of the PYMNTS Podcast: The Thinking Behind the Doing. Conversations with the leaders transforming payments, commerce, and the digital economy. Be sure to follow us on Spotify and Apple Podcasts. You can also catch every episode on payments.com forward slash podcasts. Thanks for listening.