Len Short, CEO
The ongoing pandemic has affected every business in some way, shape, or form, with only the degree of impact varying across industries. Although most companies had little option but to lick their wounds and adapt to the new lay of the land, a few blossomed in the wake of COVID-19. The business of car dealership—not necessarily the entire automotive industry—falls under the latter category.
In response to the pandemic, scores of people in the U.S. moved out of cities and bid adieu to ridesharing services, which amplified the demand for cars. However, inventories began to shrink due to automotive manufacturers temporarily shutting down, and consumers unable to visit their dealerships to handover their leased cars.
SO, WHAT EXACTLY DID THE CRISIS LEAD TO?
An environment where sales outpaced that of 2019, which, by all accounts, was an epically good year for the car business. Dealers realized that they could charge premium prices on used inventory and sell new cars at MSRP rather than at discounted prices, which was the norm before the pandemic. However, dealerships that did not have access to LotLinx, the auto industry’s leading Vehicle Identification Number (VIN) Demand Platform, can barely lay claim to capitalize on the unexpected surge of sales in the car business. In other words, car dealers that were using technology solutions based on “trailing data” rather than real-time data and predictive models were unable to forecast how best to react to COVID19’s impact on the market. “Our system picked up data that informed dealers to proactively acquire inventory as well as include more used cars because both demand and sales/purchasing were very high at the start of COVID,” says LotLinx CEO, Len Short.
To bestow dealers with this forecasting ability, LotLinx, leveraged by America’s most successful dealers, uses award-winning AI to match buyer demand to specific vehicles according to each dealer’s inventory sales goals—bringing about higher margins, faster turn, and improved variable ops profitability. As an automotive inventory marketing technology company, LotLinx helps dealers sell cars smarter with unparalleled efficiency and precision while providing several channels to merchandise inventory at the VIN level.
At the root of it all, LotLinx allows dealerships to manage the inventory risk—either at the OEM or dealer level. The solution takes into consideration the market circumstances around particular cars and then allows a dealer or an OEM to execute a balanced pricing and promotion strategy right down to the VIN level.
BREAKING THE VICIOUS CYCLE
For both dealers and OEMs, executing their strategies at the VIN level is the only way to survive calendar-based markdowns, which invariably lead to a disparity in supply and demand.
This is best illustrated through the biggest pain point that the car business has faced for decades; when a dealership’s inventory starts to bunch up due to slow sales, their only real answer is to drop the prices. Worse yet, OEMs and automotive manufacturers spend billions of dollars a year to improve the price point for customers to buy cars.
By adopting such “markdowns,” i.e., dropping prices of cars, dealerships incur heavy losses due to an inefficient method of driving transactions— especially at the retail stage of the car.
Markdowns essentially mean the longer the cars have been in the lot, the lower they are priced at. “To a consumer, two brand new Sonatas sitting next to each other are the same. They both have the same color, build, and features. However, to a dealer, a car that is 60 days old is 60 percent less likely to sell in that month than the one fresh off the lot, and hence the markdown,” elaborates Short.
“Our system picked up data that informed dealers to proactively acquire inventory as well as include more used cars because both demand and sales/ purchasing were very high at the start of COVID”
This invariably leads to purchasers opting for the older inventory, which starves the newer cars of their demand. This causes “a vicious cycle” and hampers the incremental demand at the VIN level. “Every quarter, almost $15 billion is wasted in these kind of markdowns,” informs Short. He adds that dealers are obligated to price a car below what they can command, simply because they cannot variably manage demand for that vehicle.
This is precisely why LotLinx has created a Machine Learning-enabled system that scans terabytes of real-time data—all the way from a specific car, the pricing system at the dealership, their discounting rate versus that of competitors and rest of the marketplace, and the demand in the market for other, similar vehicles.
Amassing all this data—in real-time— gives birth to a massive dataset that enables dealerships to make precise predictions at the VIN level and make necessary adjustments to optimize their outcome. In detailing what influences the “optimal outcome,” Short specifies three points: namely the pace at which dealerships sell vehicles, how long they hold the inventory, the price they sell, and the net margin they retain.
DATA IS THE NAME OF THE GAME
So, how exactly does the LotLinx system gather hordes of data to create predictive models?
The system gathers signals from both the supply and demand sides, enabling dealers to construct strategies to increase demand for their vehicles.
For example, at the supply side, dealerships across the country sell cars specific to each buyer and would appeal to their precise purchasing habits. Dealerships need data to predict their ever-changing preferences brought about by a dynamic market. LotLinx’s technology, wired to take a complete view of the market, has been built over the past eight years to a point where it knows exactly what’s available in the market and customers’ purchasing patterns with respect to various brands, all the way down to the lot level. LotLinx’s unique proprietary technology also focuses on the pricing aspect, which essentially impact what cars are going to sell and how purchasers switch brands. All this real-time data is then pumped into the LotLinx system. It even takes into account weather data, which can affect purchase patterns, sales, and pricing.
Regarding the demand side, LotLinx has spent the last decade wiring into the digital ecosystem, focusing on automotive-specific media and advertising vehicles on different channels that AI determines will attract maximum customers, including Google and Facebook. “We are the only technology partner in automotive for both Google and Facebook across the world,” says a proud Short. LotLinx has “special integrations” with Google and Facebook, which allows it to not only manage data on those platforms but truly understand what’s happening in the marketplace when it comes to identifying demand for a set of cars.
The two finite points, as Short says, remain how many cars are available and how many consumers are going to buy them. “By getting an accurate data picture into those two points, and also predicting the future demand through ML, we enable dealers to make maximum impact on their sales.”
Simply put, dealers don’t have to be shell-shocked midway through a month because they hadn’t anticipated certain eventualities; the LotLinx solution already predicted it for them!
FOCUSED ON THE WATERSHED MOMENT
As the LotLinx system gathers data signals from various places, it focuses a bulk of its attention on the exact moment when a consumer switches from “research mode” to “purchase mode.” According to Short, most buyers spend up to 30 days going through an online process, which entails examining dozens of models, comparing prices, and reading reviews. Yet, chances are they might purchase a car they didn’t research about as much. LotLinx understands the path, signals, and behaviors that lead buyers to make that decision finally. Short explains, “What happens is, when people cross the threshold of research, they are driving their new car within the next 48 hours. Being able to predict that exact ‘influence moment’ is key.”
For example, a purchaser might want a particular Subaru Outback in green color, leather seats, and a specific option package. Several dealers might have this exact combination in stock. “We intercept the influence moment and ensure a purchaser is shopping for that Subaru Outback on your (dealer’s) website, following which they visit your store and follow through with that purchase,” says Short.
In many ways, LotLinx gives dealerships a compelling method to design their advertising and marketing strategies. Typically, in advertising, a brand focuses on the target audience and accordingly buys billboards or ad spaces on digital platforms. In comparison, LotLinx’s technology focuses purely on the VIN to understand, “what does this car need in order to sell?” To crack this proverbial code, LotLinx scores “every path to a digital moment,” and the machine educates the dealer on precisely where and when to place a Google or Facebook ad to generate buyer demand. The system enables dealers to ascertain the inventory they’re holding, the strategy needed to sell the same, and the tactic they must implement—many a time not of their own volition. It’s only after this process that the system employs ML to achieve specific goals.
ENABLING DEALERS TO ADAPT TO THE INTERNET AGE
It’s crucial to highlight that besides helping dealerships better manage their supply and demand, LotLinx simplifies technology adoption. As Short articulates, the digital age has complicated the car business for both retailers and dealerships, forcing them to acquiesce to a new set of tools. LotLinx understands that most dealerships lack the resources to develop the expertise needed to adopt technologies. This is precisely why it has built best-in-class technology purpose-built for the dealer and retailer, with ease of use and accessibility in mind. This means that the UI is very much driven on the fundamentals of how dealers have— historically—made decisions. “What propelled our success is that we speak their language, and have never pushed them into a new set of digital language. We are taking them back to the essentials, the foundations of their business,” Short notes. To put it succinctly, LotLinx ensures a dealer doesn’t bring a knife to a gunfight, giving them a fundamental advantage on the digital front.
As the future beckons, LotLinx will continue to empower its clients to not only leverage the benefits of data-driven technologies but retain the fundamentals of the car business. The company is all set to launch a new product that will equip dealers with instant access – wherever they are – to key pieces of all the information needed to make decisions at the VIN level. This solution will enable different vendors, who already have an embedded relationship with dealers for managing inventory, websites, and pricing, to access a whole new set of information integrated into their already-vast datasets.