Connecting Providers, Administrators and Dealers: e-Commerce - Part 3 of 4

Gaining industry insight from e-Commerce companies PEN, F&I Express and DealerTrack Aftermarket Network

In part 3 of our connectivity series, P&A will be profiling three companies – PEN, F&I Express and DealerTrack Aftermarket Network - that facilitate e-Commerce; e-Commerce defined as the means to rate, contract, and submit aftermarket products electronically.

In our first article, we profiled two systems that provide administration solutions and how they are connecting the industry – F&I Admin and StoneEagle, and in our second article we profiled dealer menu systems - Innovative Aftermarket Systems (IAS), Ristken Software Services, MaximTrak, MenuVantage, and VisionMenu.

PEN (Provider Exchange Network), F&I Express, and DealerTrack stand out as uniquely placed in the industry in that they are not administration systems or menu systems but they do provide a solution that provides benefits to both dealers and administrators alike.

These three companies all share a future vision where the transaction process for the sale and recording of aftermarket products is entirely paperless.

The reasons why an electronic and paperless transaction process is important to the industry has been explored within P&A and at numerous industry functions, in trade journals, and around the water cooler. Beyond the efficiencies, error reductions, and cost savings we strive for in the often dysfunctional technology miasma we operate in, the questions is, which innovators will break through and effect the paradigm shift necessary to bring about change?

Let's first take a look at how these companies are attempting to solve the problems associated with printing multi-part forms, rating contracts, duplicate data entry, as well as how they eliminate the need for an F&I manager to go to multiple websites to sell aftermarket products.

What They Do

PEN enables the dealership software itself to perform e-Commerce functions. PEN recognizes the challenge of getting the dealer to adopt change, so their technology allows the dealer to stay within their primary software, rather than having to login to any special website, whether it is a provider or other commercial portal.

With PEN, the provider “plugs in” to the application itself. There is no intermediary software the dealer has to use. If they use an ADP or R&R DMS for example, there will be no need to “move” the data to some other software application.

The PEN model is provider-centric, where PEN is a managed digital pipeline between the provider and the dealership, supporting a potentially paperless transaction process for any dealer system or menu to request rates and forms directly from the provider.

F&I Express, on the other hand has built its own website and aggregates providers and administrators on this website so the dealer can go to one place to get access to whomever they do business. Since the website houses multiple administrators, this potentially allows the dealer to do one-stop shopping for all of their aftermarket product contracting, regardless of the number of providers a dealership may have.

F&I Express offers e-Commerce options to providers and administrators regardless of their technology. For organizations that do not have an administration system that can provide electronically generated rates and contracts, F&I Express can provide a turn-key solution. For organizations that already have a technology infrastructure to support electronic rating and contracts, F&I Express provides those organizations a solution that leverages their existing IT infrastructure.

Again, the F&I Express model is provider-centric, in that it considers itself a partner with the administrator as opposed to a technology vendor. The company offers different levels of connectivity depending on whether the administrator already has a proprietary e-contracting system or not, and will even private label the site.

The DealerTrack approach is to provide one integrated solution to manage everything an F&I manager needs. Dealers get the benefits and efficiencies of a menu, electronic rating of aftermarket products, e-contracting, and e-remittance from one platform.

DealerTrack’s open architecture allows all providers to connect to the platform, eliminating the need for the dealers to access multiple websites. Because of the integration that DealerTrack offers, double keying is significantly reduced, if not eliminated.

DealerTrack has the capability to support all providers’ rates whether the provider is connected to the DealerTrack Aftermarket Network or not. This provides dealers with the ability to rate all of their products on one system.

The key difference between the competing philosophies is - PEN's solution embeds the e-Commerce functionality within any application the dealer chooses to utilize, F&I Express aggregates a multitude of providers in one easy to use website, and DealerTrack utilizes one platform to house a slew of dealership functions, of which one is the ability to rate and contract F&I products. It will be fascinating to watch which style of e-Commerce gains the most traction in the marketplace.

How They Do It

PEN is exposed to the dealer in the form of enhanced capability in their existing software. The technology is accessible by any electronic menu or DMS software and the interface supports any immediate or future integration points.

A menu or DMS is improved with real-time integration to many providers through PEN. The DMS enjoys a significant change because today it is essentially an input screen to record a sale. With PEN, products, rates and contracts are presented to the dealer in real-time from within the DMS. All the F&I manager needs to do is select products from a list to get accurate rating and then print forms electronically.

In most cases a dealer will never see or hear of Provider Exchange Network, they will only know that their menu or DMS does electronic rating and contracting. According to PEN, other solutions that are based on a separate user interface have the additional challenges of data synchronization and getting dealers who are notoriously resistant to change to learn yet another new system. By working within the dealer software, PEN purports that the negative impact of change and the need for training is almost completely removed.

The F&I Express approach to integration is much like an ATM network. By consolidating as many providers as possible onto the "network", a dealer group with dozens of stores in multiple states with perhaps seven different providers can easily serve up rates and e-contracts specific to each provider.

The network includes lender portals, menu software developers, third party admin systems, DMS, and or course, providers. In fact, according to F&I Express, the best data to rate a service contract comes from DMS. F&I Express can make that data available to a provider or admin system, let them rate the contract accurately, then supply the results back to the dealer in one easy-to-use website.

F&I Express's main focus is on facilitating the e-contracting aspect of a transaction, but is not limited in any way by how the signature is captured or in what form, if any, the provider will accept an electronic contract. The system accommodates printing a contract for a wet ink signature, placing a signature on a contract with signature pads, or even a newly developed iPad signature capture capability where the consumer signs with their finger.

DealerTrack can support web services for e-rating, e-contracting and e-remittance directly to or from providers and third parties, or they can host the rates and contracts internally. Providers are currently utilizing the network via all of these methods. DealerTrack is also open to other means of “connecting” based on the provider or software developer’s system and needs. This gives providers the capacity to configure a solution with some or all of DealerTrack’s services.

DealerTrack supports the e-rating, e-contracting and e-remittance as a function within DealerTrack or as a fully integrated solution with the DealerTrack eMenu. DealerTrack will build out the integration in support of both of these options as part of their connection services to providers and third parties.

Dealers can access the features and functionality through their existing access to DealerTrack. As the dealer or provider is integrated onto the platform, the respective users will be given the rights to utilize the functionality.

The most notable difference between PEN and F&I Express is that while PEN manages the pipeline between the parties to conduct e-Commerce, F&I Express actually supplies the providers that do not have a proprietary e-contracting solution the ability to do so. DealerTrack fills both roles.

From the standpoint of our readers, if your company has developed an in-house e-contracting solution, PEN, F&I Express and DealerTrack can expose your technology to the universe of dealerships and gain the benefits of e-Commerce efficiencies. If a provider or administrator would like to benefit from e-Commerce, but stick to its core business, F&I Express and DealerTrack could be your entrée into the e-contracting realm.

The Benefits

Ok, so all this whiz-bang technology sounds great - but what's in it for the provider, administrator and their clients?

PEN’s training and support services originate with the provider and DMS, not directly with the dealer. Recognizing the importance of the dealer and agent relationships, PEN bridges the partnership between providers and dealer software vendors, without getting in the middle of coveted relationships. Their training and support is imbedded into the provider and dealer system processes so that the dealer experience is branded appropriately.

Rather than having to go to an e-Commerce portal, PEN hopes to support greater flexibility in the dealership process when using more than one application. By making the process seamless, a dealership could rate a product in a menu, work a deal in a desking application, and book the deal in accounting. As long as those systems are PEN-enabled, the dealer and provider are assured of accurate and consistent data flow.

F&I Express contends that there are three main stakeholders for e-Commerce solutions to become the norm: providers and administrators, dealers, and agents. In order for e-Commerce to become relevant to the stakeholders, as many providers and administrators as possible must be on the network. At the end of the day, the provider has to be able to say to a dealer that e-contracting will be easier and faster than printing the multi-part forms in use now.

Another benefit is relieving the burden of F&I having to visit multiple provider websites for e-Commerce when the dealership relies upon a bevy of different providers for its aftermarket products.

Lastly, the agent benefits by the elimination of errors and improved cash flow by promoting the F&I Express platform. We are all aware that at month end, the agent spends valuable selling or development days chasing after misrated contracts. Imagine an agent losing a week of productivity per month fixing problems. Now imagine the same agent gaining that extra week of productivity and it is easy to see why the provider and the agent are stakeholders.

DealerTrack can claim the most widely used network in the automotive industry today. Over 17,000 dealers use the DealerTrack platform to submit credit applications, to stay compliant with state and federal laws, and to manage their overall F&I business. According to DealerTrack, the fact that a dealer can use a single platform to manage such a large portion of their dealership business is a key advantage.

The Business Model

As previously stated, PEN is dedicated to servicing the F&I product provider/administrator. PEN contracts directly with the provider and the fee is transaction based per completed contract. Included are dealer systems support and services to the provider.

Dealership functions are typically provided as an enhancement to the core product of eligible dealer systems. Each dealer system has the discretion to manage its own dealer facing presentation. At the present time, all PEN dealer system partners offer PEN functionality at no charge to the dealer.

F&I Express has a similar transaction based fee, but the company views its business model as a performance based system. The provider/administrator only pays a fee when F&I Express provides value to their organization.

A provider should only expect to pay a fee to F&I Express when the deliverable - the electronic contract and/or pertinent data delivered in the form requested by the administrator - is transmitted. The company does not foresee the likelihood of ever charging a dealership for access to an all-inclusive network of providers.

DealerTrack’s business model is both transactional and subscription based. The eMenu is a subscription based product and includes the menu and a full financial reporting tool (F&I log) included in the monthly fee. Dealers can use the eMenu to e-rate, present, finalize, e-contract, and e-remit aftermarket products.

The DealerTrack Aftermarket Network is a transaction based product and it is free to the dealer. Dealers can use the Aftermarket Network to e-rate, e-contract and e-remit aftermarket products. The aftermarket provider is billed for completed transactions.

DealerTrack offers dealers and providers options and incentives based on volume tiers and in some cases, the dealer can receive a free or discounted eMenu subscription.

The Future

What does the future look like for e-Commerce? Let's take a look at the answers to these questions from the perspective of the companies we are profiling.

PEN's strategy is to support the transaction no matter whose products are represented or what system they use, or even how they use it. PEN focuses on the exchange business and is staying out of the dealership or admin software arenas. The company recognizes that there are a lot of great software applications serving dealers and providers/administrators, and their goal is to make them all work together seamlessly.

The relationship with PEN's founders at ADP and R&R create the opportunity to integrate the vast majority of franchised dealerships, about 80% of the market. The company's measurement of success is to enable an accurate and flexible point of sale process, so each dealership connected to PEN is capable of 100% e-Commerce.

F&I Express believes the future is in making the system easy to use and fast for the operator, i.e. the F&I manager that is resistant to change. The company has no doubt that the marketplace is headed towards the total adoption of electronic processing.

Much of F&I Express's focus is on how to make it easier and faster for the F&I manager while driving other benefits for the dealership to make sure every contract is correct. The company sees no reason why every provider and administrator would not want to be on the platform.

Enrolling as many providers and administrators on the platform as quickly as possible, while continuing to create awareness with agents and dealers about a better way to conduct business is the path forward the company has chosen.

For DealerTrack, and perhaps for the industry as a whole, a look into the future could be the company's recent addition of a major OEM financial arm and product provider joining their platform to conduct e-Commerce. DealerTrack is in the process of training the OEM's dealerships to utilize the functionality as this is written.

Stumbling Blocks To 100% Adoption

One of the key stumbling blocks is human resistance to change. A provider portal is arguably better than paper and pen, but still requires a change in human process. The pain of change must be less than the benefit of the new process. For PEN, working within the dealership software itself, the pain of change is very small.

F&I Express addresses change by identifying the three types of F&I managers that exist today and segmenting them into categories with a strategy to deal with each. First are the F&I managers that are ready to adopt e-Commerce right now and will gladly toss their impact printers and multi-part forms in the trash. The second segment are F&I managers that with greater awareness of their options and education will gladly change their process. This segment most likely represents the largest group. Last are what F&I Express calls the "Hummers", those F&I managers that love to hear the hum of their impact printers and like the way they do business. These are the same folks that resisted the data entry aspect of RouteOne and DealerTrack but now use them every day.

Being relevant - having the greatest number of providers and administrators on the platform - so that the number of products the dealership sells from different providers matches the number on the platform is the key to that relevance.

Another hurdle includes legacy solutions and the cost of change to the provider. In the absence of solutions available today, many providers have resorted to building their own solutions. Discarding that investment or letting go of IT initiatives is not easy.

One must consider and weigh the time factor and expense of a home-grown solution against outsourcing to one of the profiled solutions. Perhaps more importantly, there is still more to be done with each of our profiled solutions.

For example, when is the roll-out date for PEN to realize connectivity with R&R and ADP? Is there a critical mass of providers contracted with PEN so that when it does go live, it will be adopted by dealerships?

F&I Express is in the position where only dealers that have all of their aftermarket providers signed up will be motivated to use it. F&I Express needs providers to convince dealers to use it and needs dealers to use it to convince providers that they should sign up. It seems that they still have some significant work ahead before they can claim to have reached a critical mass.

DealerTrack is in the enviable position, with the recent addition of another major OEM committed to their e-Commerce platform, of a leadership role in the segment. Much like the others, however, their solution will not be in the mainstream until there is wide dealer adoption.

In Conclusion

The subjects of this article all depend upon a certain critical mass of providers integrated on to their platforms for their e-Commerce solutions to be viable. Will a dealer use e-Commerce if his stable of product providers is not 100% represented by an integrator? This remains to be seen.

In Part 2 or our Connectivity Series, it was revealed that the menu developers are exposing providers to e-Commerce directly through the menu at no charge to the dealership. The only money being made by an integrator, beyond start up costs, is when a contract is remitted electronically and the provider is willing to pay a transaction based fee to the integrator for the final contract or data.

One has to wonder if the providers are willing to pay this fee and how the industry can cross the chasm and adopt e-Commerce as the standard. When lender portals were in their infancy, many dealerships resisted becoming data entry clerks for the banks and continued to fax their applications. It was not until lenders demanded electronic application submittal or the dealership would be penalized 25 basis points, then finally stopped taking faxed applications altogether, that the paradigm changed.

We are seeing e-rating and e-contracting becoming a function often accessed through the menu. Will it be possible for providers to demand, much like the lender portals did, that the dealer submit contracts electronically? Will menu systems' e-Commerce functionality supersede third party integrators directly supporting e-Commerce from separate websites? Stay tuned.

If you missed Part 1 or Part 2 of P&A’s connectivity series, click here for Part 1: “Connecting Providers, Administrators and Dealers: Administration Systems” ; click here for Part 2: "Connecting Providers, Administrators and Dealers: Menu Systems"