Transcript for "Lithia":
Hey, everyone. Welcome back to another EsotoWedge webinar. Today's topic is Lithia's Blueprint, Evaluating and Transitioning to Variable Cost Service Transportation with Uber for Business. Joining us, our guests today are gonna be Trevor Stanko, account executive with Uber, and John Church, the category manager of procurement for Lithia Motors. Do you remember that time when that magician came out and he, like, hit his face and he was telling all the secrets about how the other magicians did the magic? Yes. Oh, that's the best. The behind the scenes magic guy. Well, the point of that being, like, everybody always wants to know how someone is pulling off something that might seem like a magic trick. And the person that tells them in that instance, not this instance, I think he pretty much had to hide for his life for the rest of his life. But I I don't think that's gonna be the case today, as we have Sean Church, in the procurement category manager for Lithia coming in, to tell us all the secrets or at least give us a little bit of the thought process behind the secrets. I don't think we need to wait any longer on this, do we? Bring me No. No Uber rides into this one. We're just jumping right in. You know what I mean? Trevor, John, let's let's begin. Welcome. Thanks for joining us today. Thanks for having us. Absolutely. So, you know, obviously, this conversation is something, that I think shuffles its way to the top of the pile in this day and age when everybody's looking at how do I cut costs and limit my expenses and limit my exposure in the things I can control. There's so many things happening in the environment that we can't control, and this topic is something that everybody controls or everybody can control. John, can you just start off by giving us just a little background of your, experience in the industry? Certainly. Paul, Kyle, nice to meet you guys. Thanks for having me on. My name is John Sturte. Stated, I'm a category manager for Lithia Motors. I've been with the company for four years as of October eleventh of this year. So my automotive industry experience actually only scales four years, but my overall procurement experience, is more around twenty two years. I've seen a little bit of everything from I've been in electronics, contract manufacturing. I've been in the electronics distribution, market as well as, gaming. So I've got a a bit of a varied background, but all in procurement and supply chain. I'm sorry. You said gaming there at the end? Valley Gaming. I was the senior supply chain manager for Valley Gaming in Las Vegas for almost five years. Yep. That's gotta be an interesting one. We'll hear the story some other time. We'll get that to where he a little more. Probably send a few people away in an Uber. The the the question that I have, and and I wanna kinda kick this off because, this is this is a a lot of this conversation is gonna be geared toward the fact that you've really seen this level of procurement, like, how do we procure rides and and and access to our customers to get to and from our stores away from a historically very fixed cost known and known entity of a, you know, a driver, a shuttle van, depreciation, I know what the salary is, to a bit more of a variable cost model, which can be a bit scary. When you started, when when you start to take this kind of thing on, what were some of the, like, the questions that you had on the onset on whether or not this is a viable option? Sure. So, Kyle, I think it's important to note that really a a catalyst a a significant catalyst for this change across the industry, not just Lithia, but, you know, our competitors. COVID really made a big change on business life, on regular life, and, that really is what was part of the springboard that made us look at different models. You know, certainly, we have a focus on SG and A, but that's not at the expense of customer service or customer experience. So we we have to we have to balance the the differences between what's the best customer experience we can provide to retain our customer base, which is a number one focus for us, and then do that in an economic fashion. So with the switch to a more variable model like, ride share, you know, there wasn't really much of a concern with respect to going from a fixed to a to a variable cost. Really, it had more to do with understanding the value proposition, how we best serve the customers. And I think that was really based on you know, customers have a a larger appetite for having their own transportation, whether it be hopping in a cab or renting a car or along those lines. So for the industry and for Lithia specifically, what we wanna do is make sure that when a customer comes in, they get the best experience they can have. And and that, at this point in time, requires that we have some optionality, and, that would place right into the ride share piece of it. The other thing that I would mention is super important about this is scalability. It's a lot easier to scale at a company of our lot of our size when you have a partner like Uber. We don't have to have facilities or personnel or systems for that matter. We can lean on our on our vendor partner to to help support the business. John, you've you all have been watching signals in the market. And what are some of the signals that you're seeing that dealers are starting to lean into this and open up to this idea of rethinking their shuttle expenses, rethinking moving their people around? Fair question, Paul. First of all, we can just look at the overall expense of the matter. So, you know, you have the capital expense of the vehicle. You've got a fully burdened, employee that you have to manage. You have to worry about all of those sorts of things. When you just take the if you just take the raw cost and look at it on a per ride basis, you know, the the variable, the variable model takes a lot better position for our overall needs, not only from a financial standpoint, but, again, from a customer service standpoint. John or Trevor, actually, I you know, as you look across the dealer landscape and when when you're communicating with, dealer groups like Alethea or even smaller dealers or dealer groups, you know, this this kind of known entity of, like, that's a vehicle. I see it, and that's a person. I see them, and and this is what they're doing. It seems like there's probably some kind of, like, sunk costs that are a bit hidden in the business. Where where are dealers of what pieces of this mechanism are dealers overlooking that are actually maybe costing them more money than, like, what actually leaves the bank account? Yeah. I think I think John alluded to a lot of it where it comes down to the cost of having an employee fully staffed and maybe not ride driving customers at all times, the cost of the car and if that car breaks down. But there's a cost to the customer experience where if you're not providing on demand, the customer is going to look elsewhere because the convenience. And that's a major cost savings that or cost, that the dealers are overlooking is the cost that's associated with missing the opportunity the first time and while you have the customer in front of you. You know, how does how do you help I think there's always a hesitancy when someone hands over their customer to somebody else. There's a a measure of what's the brand experience going to be, what are the communication cadences, and what do people see. How, Trevor, is the platform, like, orchestrated to help dealers overcome that fear that may be there? Yeah. So what I love about the Uber platform is it's it's very customizable in the way that you want to do business at the dealership. So no matter where it is in the process, whether it be in the lane or whether it be in front of a computer, you can service your customer at any part of that workflow, and it's really customizable to the way that you wanna communicate to the customer. And they are an extension of of the dealership brand by providing signage and providing transparency and communication from the standpoint of the dealership as well as from Uber, we're making sure that the customer knows exactly where that that driver is and where they and the, employee can see that same transparency of where their customer is. John, Trevor go ahead. Yeah. Trevor, I you know, we're kinda getting into the weeds of, like, okay. We've we've done it already, but a lot of dealers are kind of in this, I'm I'm sure in this, okay, I hear you. There's there's a a little bit there's a cost benefit that that we're analyzing. John's saying there's obviously a a customer benefit where we where we can kind of ensure uptime, is probably one of the leading customer benefits here. But how how do you encourage dealers that are going, okay. I hear you, but how do I test this out? How do I, you know, cross fade and and make make sense of is this actually a viable opportunity within my store or group of stores? Right. And I appreciate that question. I think that it is there's a very low barrier entry for dealerships. What I would say from dealerships in general is they're the most resistant industry. Automotive is the most resistant industry and willing to change. And so the cost of change is very is minimal to nothing with Uber. There's no fees, no setups. And and often times, we see this as a great option for when shuttle drivers are out or when you don't have an afternoon person to to drive your customers to and from, and they wanna try something different. It ends up leading towards a larger larger scope and maybe replacement at many places, But the barrier for entry is no cost and no contracts and no terms. So there's a great opportunity to try with no risk. John, you mentioned customer experience. You kinda started us off on this track. Can you tell us how Lithia protects the customer experience? How are you measuring it? What are you what are you looking at? What are the steps you've taken as you've made this transition? Well, certainly, we rely a lot on the input from the customers as they come in and they give us feedback. You know, I I I think another thing I don't wanna completely divest from your question, but I think another thing that is important to understand for, you know, Trevor made a very valid point about, you know, a lot of stores, we call them stores, retail locations, of being a bit obstinate or wanting to challenge this. You know, the the OEMs have noticed that this this is a this is a trend that's not going anywhere. So they've actually added rideshare to warranty reimbursement. You know, so if we have a, you know, a particular store, and depending on the vendor, a customer comes in and they say they need warranty work, you know, the OEMs will come in and say, hey. You know what? Listen. We'll we'll we'll, coop some of that and pay for some of it. And so the customer wins, the store wins, and the CSI goes up. And so, again, you know, the point I'm making here is that Lithia is not the only one in fitting customer experience. It's the OEMs as well, and they put their their money into it with respect to the co op reimbursement stuff. So I think that's important. That's a very important task because I think a lot of the OEMs realize now with the the emphasis on experience, no matter where you are, in a restaurant or a retail environment, that it translates and tracks back to the OEM. I bought a Ford, and if I'm bringing that Ford in because it needs warranty work, my experience in that, whether I have to wait long or have a bad shuttle experience or have to sit around a dealership and feel like my time is ticking away, that automatically translates to the overall brand experience. So I don't think we talk about that enough. How many OEMs that that you all have have a program similar to that? What percentage do you think? It's it's over half. It's, you know, we're mainly a Stellantis. So if you look at our our, portfolio, we're a big Stellantis brand. Mhmm. They certainly have one. I know some of the, I don't know them off top of my head, but lots of domestic and foreign store, OEMs all have these programs. They're they're getting really heavily based in it. And and I don't again, I don't wanna divest too much, but I think the other thing that's an important to understand about ride share is not only from the customer side, but also from the store side. And what I mean about that specifically is that more people wanna sit at home, and get their car fixed. And so in the past, if you didn't have rideshare, then you'd have to send two employees in one vehicle to come out, get the vehicle, bring it back, and then do that in reverse. With rideshare, you can use one person, and it's, obviously, a lot more cost effective for us. Only use one employee instead of two. And, again, customer experience. We come get the car, we'll drop it off. You know, you need to look at all facets of this thing. That's really important. And then the circle all the way back around to the original question about how we measure this. We look at the business activity to see if if things are going up or down. Trevor and I have a lot of discussion about activity at the store. How can we grow the business? How can we maintain it? How can we make it better? But it's it's really about the the feedback from my internal customer, which is the store GM, and that's that's where Trevor and I are on the same team here is that we're mutually supporting our business. And when we get good feedback from them, that's that's how we move forward. And, you know, another indicator is the amount of money we've spent. If I look at traditional rental versus ride share and the transition over the last two years specifically, significant shift in in the amount of money we're spending with Uber and it's just it just shows in the numbers. You know, I'm I'm gonna give an anecdotal story, and then I have a totally separate question, but I've never thought of this before. I have a buddy that, at the height of, what what was then the the great the best restaurant in the world, Eleven Madison Park, he was able to go. And I've heard him tell the story about this restaurant, like, no less than five times. Every single time he tells this story, the main point of the story is that he was gonna be late to the airport, and they ordered him a rideshare. He never tells me about the food, never tells me about the service, never tells me about the in store experience. The entire story is the fact that they were aware that he was gonna be late, and ordering him a rideshare, like, saved Got him where he needed to go. And so I think, you know, when when we're thinking about this, the the intangible of that feeling that you give people, I think, when you give them this option is so understated at this point, I think. And and it's and it's it's even more than maybe that shuttle driver potentially because there's there is some, like, work. There's a there's a real recognition of cost from the consumer's end. Right? Like, you know how much it costs to order an Uber because you've done it before. And so there's this real transfer of trust and and cost recognition to the customer. It's a it's a it's a thing that I hadn't even, like, connected the dots on. But as as you're talking so deeply about customer experience, John, it it just pulled it back for me. So customer experience, obviously, have you seen lift in, things like lines per RO, dollars per RO, ELR, you know, bay time technician, technician efficiency, any of those metrics that are real downstream effects of leveraging this more in the business? Yeah. You know, it's it's hard to say. I don't know if I could attribute anything directly to it. What I can what I would say is that our overall, you know, success as we move forward is predicated on good business practices, and this is certainly one of those things. Mhmm. You know, your steak story resonates with me because or the house the steakhouse story because, you know, if a if a customer comes in and they're dissatisfied for whatever reason, and you're gonna take care of them and you say, oh, hey. By the way, let me get your ride let me get your Uber back to your hotel or your house or your fill in the blanks. It gives them a feeling of of recognition of special treatment that you care, and it's a small price to pay for a large piece of customer mind. But, yeah, as far as overall, I don't know that I could really tie it to one thing specifically. But what I can tell you is that, you know, what we are looking at is how we retain customers. We're we're doing a lot of data mining on on the customers that that we never see and some that we we wanna try and get back. And as we look at that, you know, how we service them in every way, shape, or form is really important, and certainly, this is one of them. Yeah. And I I've heard, you know, a lot from Brian DeBoer who runs Lithia that, you know, they want a customer for life, and you wanna delight your customer. And while, you know, I I believe it really does increase that bay, usage because you're not limited to only having one shuttle driver. You can you can fill the bays up a little bit more because you have cars always ready for you. There is a there is a definite uplift when it comes down to you don't have to worry about your porters. You don't have to worry about a shuttle driver or a technician having to run to to drop a customer off. You always have something available. Yeah. I I do you know one of the one of the metrics that Kyle mentioned, you know, like, your dollars per RO, we've seen in a lot of scenarios, you know, maybe not ride share specific, but whenever the customer doesn't have to sit and wait and you have the vehicle and they are where they want to be, whether that's home or at the store, They say yes to so much more work because while you have it because it's all like, service is always an inconvenience. Right? No one's excited to do it. No one you know what I mean? When you go especially for warranty work, a lot of the times, there's nothing wrong with the car. Right? It has to recalls, especially, has to come in to do this thing. Right? So we we have seen a lot of that, and I'd be curious to see what the data is there on ride share specific. Because, again, when you get the customer where they wanna be, they they're not stressed. They're not waiting. They're not, you know, in a waiting room next to other people and wanting to be somewhere else. Can you talk us a little bit, John? You know, you've obviously implemented this across a lot of stores. What what are the what did the onboarding and training process look like to get the people used to suggesting this to the customer, making sure they're on their way in a ride share? What what does that curve look like? Well, Paul, I will tell you that, you know, one of the biggest, help in in getting this done is that a lot of people were already aware of, you know, whether it be Uber or fill in the blank, how their how their apps work, how the system works, what to expect as a customer. Mhmm. So there was a lot of that footwork done for us by Uber, beforehand. So when you come in and you have a known commodity well, I say commodity, I mean, known business like Uber. Their platform is understood. It's it's already widely implemented across, you know, everybody. You know, if you have a smartphone and you take rideshare, you're gonna have an app on your phone. So the implementation, quite frankly, was pretty straightforward. There really was more talking about how does it how does it fair out financially, you know, with, again, the difference between a shuttle and and having, you know, basically, an infinite number. You know, if if you have rideshare, I don't if if I need a ride at 01:00 in the morning or 01:00 in the afternoon, you can always get an Uber. Now with with the shuttle, you can't do that kind of a thing. So all of these things together, it really had more to do with, brand recognition within, you know, the rideshare area. Certainly, Uber has a great relationship. They have a great reputation there, and that's why we partnered with them. So I I would see overall, quite frankly, once the once they understood the the value proposition, it it really wasn't that big of a push. Are there are there is there the partnership go across your entire network, or are you in select markets? So it is across I'll have Trevor kick in a little more because he's gonna know. But we we any anywhere Uber's available, they're they're welcome to come and and deal with our stores. But I think they're in they're in quite a few of them. Yeah. We we're a preferred partner for the with the organization, and we're in many stores as an offering. Some some, as we talked about, use us on a daily basis, hourly basis, and some don't use us as much. So it it varies, but every store has the optionality and functionality and and visibility through whether it be, CDK, our partner, or through Uber directly via, our central platform that they can access it and provide rides on demand. So it's it's it's very easy and seamless for them. And if they're not set up, it doesn't take long to get a store set up and, get get their advisers trained. Well, I go ahead, Kyle. Well, I don't think John kinda, like, ran this over, you know, pretty quickly, kind of nonchalantly, but I think I I wanna lean in on the fact that this so much of when we bring in that new software and that new process or something into our stores, there is so much training requirement. It's such a heavy lift to get someone onboarded into a new system, a new new UI, new UX, a a thought process of, like, how, why would I use this. But then the the feeling of, like, you know, you know, if if you if you haven't taken an Uber, I don't know what you do. Yeah. I don't know what you're doing in life. But everybody's had to go from this location to that location, enter address, see price, select car, go. Right? And so maybe there's minor tweaks in the process when you're doing it for someone else. Right? But there's so much of that that is that is super native, to to what, what, you know, they're they're doing there. And so I think I think for for anybody who's going, will my employee be able to do this? The answer is yes. They're just going to be natively able to do that. And that's such a that's such a difference from, like, oh, net new CRM I've never seen before. Net new service thing that I've never seen before. So I I would, like, remove that as a barrier of entry if anybody's kind of considering should I utilize Rideshare in my service lane. Right? Yeah. And I I mean, my background has been in in change inside of automotive. I worked for a large DMS company, and I would say that those changes were a lot tougher to get over, when you're moving the way that people are going to make their money. But what Uber has provided is a simplified way that people are commonly using on a day daily basis in their personal life, and it it's simple to to adapt into their their work life. So it it should actually help their customer experience, their CSI, dollars per RO because of it. It's simple. Do you Trevor, where what other use cases you know, because, obviously, the service pick up drop off, you know, leaving the store. But what other use cases and maybe, John, you've seen other places where once kind of a store has access to this, it's like, oh, and we could. Great question. You know, what are those other places? I'll I'll actually ask John. I can see you nodding. Like, what are those other places where you're seeing dealers go, yeah. I'm gonna use it for that too. Well, Kyle, we're investing so before I answer that, I wanna take a step back to to what we were talking about with the the implementation of the system. I think another really important thing to understand is the optionality that Uber provides to Lithia specifically. You know, they integrate within the DMS, and so, an operator at a store can go into the DMS that they're completely familiar with and order rideshare right out of that. So that's one thing that that, that Uber has done from a technology standpoint. Now for whatever reason that doesn't work, then you can use Uber for business, and it's just as robust, just as capable, does quite frankly more than you would through the integration. So I think that really plays into the training aspect or the potential training challenges that you might encounter. You have options. And then, you know, tertiary is the fact that we're moving to a new DMS. So here in the next two years, we you know, I've already spoken with Trevor in detail about this. We're gonna need them to be a lot more flexible with how we're able to use their system standalone as we transition into the new system and then how Uber is able to to integrate with that system as we move forward. So all of these things together are, in my, in my opinion, super important. As far as other options, the, you know, we're looking at, like I was talking about the valet. You know, we're doing valet service with with rideshare. You know, new car delivery with rideshare. You know, certainly, we take care of take take advantage of some of the other things like Uber Eats at the store and things like that. So we are we've have investigated and utilized it. You know, we're looking at parts delivery moving forward. So so we're looking at other things that are not totally in scope right now, but at some point, they will be. And this model, because it's so scalable, which is another incredibly important thing for Lithia because of our growth you know, we're we're a growth oriented company. We do acquisitions. That's our job right now. And we need folks that can scale. And because we don't have to do that ourselves, we have Uber, and they're already there. So that that's those are all super important things. But I think the the total usage of rideshare, it has yet to be discovered. Trevor, talk us through what setting up and starting looks like. Because I think if you're a single point or a small group, there might be a little intimidation because of Lithia's ability to execute at scale. But what does setup look like for a single point store, a small group? Yeah. I think I think it it the what you just talked around, understanding what what the goals are, understanding what the use case that they wanna fulfill and how they're gonna utilize it. If there is some sort of limitations as far as cost caps or or mileage distances that they wanna to, exclude further customers and and creating the customizations that they want to. You know, from a setup perspective, it's a very quick conversation of understanding that, seeing how the workflow is very similar to what you're already used to in your personal life and how that will translate in inside of the workflow at the dealership. And from the setup standpoint, it could take fifteen minutes to get to get a customer set up, where they can order rides for the customers in the same town. Wait. Fifteen minutes from, like, yeah. I want I want to use this service in my dealership and getting their first ride taken care of? Yes. Yeah. It's that easy. That's they expect fifteen minutes. And you coulda done it on this call. Yeah. Exactly. Oh my gosh. It's so cool. So cool. Well, John, Trevor, I mean, from just the why to how to what you're watching, how you're seeing it, and and how dealers can get involved. I mean, the the the uptick time, the the the fact that people are native to this type of experience and and what it I love, John, the fact that you just leaned in on it doesn't matter what the business outcomes are. This is the right way to treat the customer. That's a big deal. It's a lot more than cars, which is what we're all about. So, Trevor, John, thanks so much for joining us for this Edge webinar, and giving us a little peek behind the curtain. Okay, everyone. That's a wrap. Thank you so much for spending a little bit of time with us today. We hope that you enjoyed it. If you wanna catch this again or share it with a friend, go ahead and head on over to our website, asoti.com. Click on media and drop down to webinars. Thank you so much. We'll see you next time. Bye bye.