Digital Motors wants to be the Shopify of cars
Buying cars online in the U.S. is broken. This startup wants to help dealers fix it.
If you're planning on buying a new car sometime soon, I'd like you to bring a stopwatch with you.
Even if you know exactly what model, packages and color you're after, even if you don't need to take a test-drive, you're likely going to be spending a few hours at the dealership. No one wants to waste time, but especially during a pandemic, standing around with strangers for several hours waiting for paperwork to be filed is something most people would probably like to avoid if possible.
As retail for almost every possible consumer product has moved online, cars have, for the most part, remained parked in the dealership. Consumers are increasingly comfortable with buying products online, and the lockdowns have only accelerated that transition. Small businesses are also turning to ecommerce like never before, and Digital Motors, a startup that launched its first online store at the end of March, wants to help make buying a car online as painless as buying something off Amazon.
The car-buying process has not really changed much in decades, and part of the reason is that, in the U.S. at least, most states have regulations that require cars to be bought through local dealerships. Dealers can operate showrooms for only one brand or automaker, or several, but at the end of the day, they want to get you into one of their cars. For the most part, dealership websites are primarily designed as vehicles (sorry) to get potential customers to come to the dealership, rather than buy a car online, Andy Hinrichs, Digital Motors' founder and CEO told Protocol. "99% of customers dislike it, and the dealers also dislike this process because it's inefficient for them," Hinrichs said.
"Whether you are on a dealer website, a carmaker's website, or anywhere in between, all you can do is look at vehicles, get vague price indications, and submit your name, email and phone," Hinrichs said. "The entire automotive industry is geared around lead capture."
And Hinrichs should know: He spent well over a decade in the financial services wing of Daimler and Mercedes-Benz. He wanted to take away the struggles associated with car buying, while still working within the system, instead of blowing it up like Tesla has (jumping through endless hoops), or working in the used-car market like Carvana.
How a Digital Motors shop looks across devices. Image: Digital Motors
Digital Motors is meant to appear nonexistent, sitting as an invisible layer between the branding of the car company or dealership's website, and the inventory and sales management software it uses. Customers visiting a dealer that uses Digital Motors would be able to see every car the dealer has available, and importantly, all the financing options they'd be eligible to use to buy the car. "For virtually every car buyer, there is no purchase transaction unless there's a leasing and financing commitment attached to it," Hinrichs said.
Beyond the logistical hurdles of linking an inventory management system to a one-size-fits-all ecommerce solution, building in the ability to tap into a network of financiers is something that no dealership or carmaker has really been able to achieve online at mass scale. "We're not just allowing the customer to find the car that they like within the context of the dealer's online store, but we're immediately presenting these vehicles as monthly lease or finance payments so that it becomes a lot more relevant to the car-buying decision," Hinrichs said. "The customer only cares about, 'What is the car of my desire, and does it fit into my monthly budget?'"
Hinrichs said that Digital Motors has reduced a process that can often take around four hours to less than an hour — and hopes to shorten that even further in the future. But the customers see none of this; they just see that the dealer they know from local TV ads and that giant American flag along the highway has finally found a way for them to buy a car from home, where everyone wants (or least has) to be right now. It's not too different a model from how Shopify has moved to dominate much of the small-business ecommerce landscape.
If you've bought something online from a small business in the last few years and the experience was pretty painless, you were probably buying from a site powered by Shopify. Over the last decade, the Canadian company has gone from offering simple websites and payment solutions for businesses to becoming the backbone of commerce for countless small businesses. It generated $1.6 billion in revenue last year, and that's before the pandemic sent everyone home. What Digital Motors brings is deep knowledge in the highly regulated and complex car-buying industry.
Digital Motors sells its services as a monthly fee to dealers, rather than taking some percentage of sales. "Every automaker is clamoring for this type of service," Hinrichs said, adding that the pandemic "exposed the vulnerability of the auto industry across the board by relying 100% on the physical presence." Last month, Jaguar Land Rover announced that it had made Digital Motors a "preferred online sales platform" for its U.S. dealers, and the company works with dealerships from most major automakers, including Honda, Chrysler and Volkswagen.
Longer-term, the goal for Digital Motors is to sell more holistically, whether that's an entire automaker's national inventory, or even as a marketplace for all the cars across all the dealerships it supports. It's a similar strategy Shopify has started to take with its new Shop app, but that took years of building out the company and gaining the trust of local businesses. For Digital Motors, the goal right now is to keep supporting the individual dealerships, because that's how the overwhelming majority of people still buy their new cars, and that's not going to change anytime soon.
"If you look at the U.S. market, it's a strong franchise system well protected by laws and regulations, so the franchise dealer is not going to go away," Hinrichs said. "So the solution is to augment the brick-and-mortar world with a conducive digital storefront that provides a Tesla or Carvana-like experience, but still allows the dealer to control the transaction."
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