For any OEM managers tasked with integrating their dealers’ systems, we recommend getting a copy of the Woods & Seaton “Briefing No. 11” and “Update to Briefing No. 11”. Mike Seaton has been a fixture in the automotive retail systems world for many years providing information, analysis and commentary—often highly amusing. In these recent Briefings, Mike provides a clear and concise description of an automotive retail systems integration dilemma facing global automakers today.
The Retail Integration “Dilemma”
The dilemma, as Mike describes it, is that, on one hand there are pressures on OEMs to open their dealer systems integration program to a wide variety of providers:
- “Dealers want to choose freely the DMS provider which meets their requirements.”
- Competition laws in many places require open access to integration programs to protect open competition (paraphrasing)
On the other hand, OEMs are keenly interested in “minimum cost” and “maximum speed”. As a result of this dilemma, OEMs are breaking either toward “open” programs that accommodate large numbers of dealer systems or, more commonly, “closed” programs that focus entirely on one or two dealer systems.
At Motive Retail, we do not believe this dilemma actually exists. Our experience has shown again and again that automotive OEMs can operate retail integration programs that allow certification of many dealer systems quickly and at reasonable cost to the OEM. Our work with Ford (globally), Volkswagen (N America) and Kia (USA) prove this point. 40 DMS systems around the world (and more being added each quarter) have been certified for Ford’s aftersales operations data integration. Volkswagen dealers in the US and Canada enjoy a choice of 19 certified DMS systems with 3 more coming soon. Kia US dealers have a choice of 10 certified DMS. These results have been delivered without OEM support teams at a cost well below what most OEMs invest in dealer systems integration.
The Closed Program Strategy
Believing the “Dilemma” does actually exist, though, some OEMs have developed closed program strategies. The Seaton Briefing describes how certain European OEMs are working aggressively to move their dealers to one or two approved DMS providers despite the complicating factors of dealer preferences, existing market share, and open competition laws.
There are several problems with “closed” programs that OEMs should consider:
- Dealers are generally reluctant to switch DMS due to OEM preferences. Dealers are mostly independent businesses that can be encouraged, even coerced, but usually not compelled to use a particular DMS. Certainly dealers are strongly influenced by the preferences of their OEM partners, but not at the expense of consistent and cost-effective operation of their business.
- High levels of dealer compliance are unachievable. DMS market share realities do not conform to OEM DMS preferences. Even optimistic closed-program OEMs acknowledge they probably cannot achieve more than 70% market share with the preferred DMS in any single market, let alone globally. There are many countries with locally dominant DMS where the preferred DMS has little or no market share. There is no single DMS an OEM might choose that is available in all markets—even the largest global DMS vendors have multiple different products to address the various regions. Moving hundreds or even thousands of independent businesses to a new DMS is sure to be slow, expensive or ineffective, likely all three.
- Limiting DMS Competition creates other problems. Monopolistic markets invariably suffer from higher prices and lower innovation. The Seaton Briefing even argues that the “closed” OEM programs often blow up in the face of their sponsors:
“There have been numerous occasions in the past 25 years when we have heard OEMs (in private) complaining that, when a DSP gains a dominant position it tends to become inflexible and expensive, putting its priorities ahead of those of the OEM.”
- Growing numbers of multi-franchise dealer groups stymie closed programs. Unless all OEMs select the same preferred vendors, multi-franchise dealer groups are forced to choose between the efficiencies of using the same DMS enterprise-wide and accommodating the preferences of each of their OEM partners.
- Open-Competition Regulatory compliance may preclude “closed” programs. We are not lawyers, and would not attempt to comment on the implications of regulatory requirements like the Block Exemption Regulation for OEM retail integration programs. However, some OEMs have been advised by their lawyers that regulatory compliance requires open access to integration programs.
The Open Program Strategy
Seaton points out that Daimler is moving in the other direction, opening its retail integration program to all dealer system providers through its relationship with Motive Retail. While Daimler’s program is in an early stage, initial indications from DSPs from around the world strongly suggest that Daimler will enjoy success similar to other Motive Retail customers.
The surprising, but good, news is the open program strategy allows OEMs to have it both ways: tight integration at the point-of-sale/point-of-service delivered at a reasonable cost to the OEM. Even the strategic relationship with one or two dealer system providers employed by closed program OEMs can be maintained in an open program. Daimler’s ongoing strategic relationship with CDK is unchanged by its open program.
The key to implementing this dilemma-defying solution lies in the design and delivery of the program. Motive Retail’s ability to achieve these results is based on the following key tenets:
- Online delivery: run the retail integration program as an online service with all program information, project management, documentation, specifications, support and testing services delivered online, available 24/7.
- Self-service: provide the testing tools and support in a self-service fashion allowing DSPs to work productively at their own pace, on their own time.
- Automated testing tools: don’t put people between DSP developers and their testing results.
- Consistent delivery: make specifications, testing regimens, support, etc. consistent across all interfaces. (Motive Retail delivers programs that are not only consistent across interfaces, but also across OEMs.)
- Tiered programs: large market share DSPs may require payment to implement and operate an OEM’s interfaces while aspiring DSPs will pay to acquire market access and legitimacy.
The bottom line is that operating an Open retail integration program is both desirable and achievable. It is not disruptive to existing strategic relationships. Moving from closed program to open program, and the associated benefits, is quicker and easier than people think.