Auto Dealers Have Seen The Future And It Is Digital

Of all the businesses that have embraced a digital shift during the pandemic, the adaptation of the nation’s auto industry has been one of the most transformational. As much as COVID accelerated trends that were already occurring, said Aaron Krane, CEO of digital auto platform Modal, dealers have seen the future – and they accept it.

“You don’t sell a car in 2020; the customer buys it,” Krane said in a recent chat with PYMNTS. “Because dealers haven’t been given adequate online tools to empower their customers and drive the deal, dealers still have to try to sell, and that’s just not the modern way of operating a retail business – and dealers get this.”

Although digital vehicle sales have made huge strides over the past 10 months, Krane says the overall penetration of eCommerce within the automotive industry is still quite low – especially compared to the digital shifts other verticals have made during the COVID era. As a result, he said there’s still a huge amount of the market that can benefit from basic eCommerce functionality.

“The nice thing about eCommerce is if you can make wise decisions about the tools you use, your buyers do all the work for you. They upsell themselves and you don’t have to try and close them,” Krane noted. “It’s the ultimate weapon.”

100 Different Data Points

Krane noted that when the data-rich Modal platform is seamlessly and invisibly integrated with a dealer’s existing systems, it changes the selling process – as well as the results.

“On a technology level, Modal is not that dissimilar from a vehicle itself,” Krane said. “It’s a complex coordination of a hundred or more moving data parts – and yet on a design level, for the buyer, it has to be utterly simple, elegant and trustworthy, and should appear to be a natural part of the dealer’s own website rather than a competing experience.”

Krane said that when tech is used properly, rather than putting traditional car sales reps out of business, it makes their lives easier. “If I’m a salesperson working at a store using Modal, I don’t have to force a close,” he pointed out. “I can say, ‘Hey, it seems like we found a good car for you. I don’t want to pressure you. How about I just text you a checkout link? You can close yourself on your own device, take it home, think about it,’” Krane said, referencing the ultimate sales weapon.

Back To Basics

While digital sales are gaining share within the auto industry, they’re far from new – but Krane said that in many ways, dealers and manufacturers have gotten ahead of themselves.”

“In the past few years, there’s been a lot of experimentation with not only the car buying experiences, but also car ownership experiences, and I think in a lot of ways, we’ve put the cart before the horse,” Krane said. “And the horse is basic online transactions, and that’s what Modal is trying to offer.”

Krane said that when a dealer – and Modal – manage to pull off the complex coordination and integrations necessary to create a complete transaction in an utterly simple fashion that buyers trust, it bears out in the numbers.

“Dealers routinely report that they exceed their average sale profit by 10, 20, 30, 40 or even 50 percent,” Krane said, noting that return on investment is a critical reason for making the digital shift. “Our goal is not to show up and tear down the dealer’s whole set of operating systems and software stack. Our goal is to show up and complete the car buying experience with an online checkout that actually fits their existing set of operations and their existing set of software,” he explained, adding that a typical installation can be completed in as little as one hour.

A Zero Or A One?

When discussing the digital shift with dealers who have not yet made the change, Krane poses a simple question:

“‘Do you want to be a zero or a one? Do you want to exist or not?’” he asked. “Because if you don’t embrace eCommerce effectively, you simply will not exist in a matter of years.”

When it comes to order volume, conversion rates or profitability, Krane noted that Modal’s online checkout dramatically exceeds dealers’ existing performance metrics. In short, he said, eCommerce in the automotive sector is here to stay.

“Not only does eCommerce address pandemics, but it also addresses the modern retail experience,” he said.  “Whether a dealer is adopting it because they want to modernize or they want to be COVID-friendly or both, I think it’s a mass and permanent migration of the market.”

Post-Funding Plans

Although Modal just completed a $15 million Series A round of funding, Krane is not resting.

“I still view us as under-capitalized relative to the size of our business, our transaction volume and the size of our peers,” he said. “We just closed our Series A, but all of our peers have already done their [Series] Bs, Cs, Ds and beyond. So we’re going to keep doing what we do best, which is to focus on product execution.”

Even though the competition is many times more funded, Krane believes that Modal’s “superior product design” enables it to remain competitive.

“So we’re going to take the Series A capital, and we’re going to invest heavily in engineering and product to further distance ourselves from the pack,” he said.