Interview with CEO of Cars.com Inc on Used Car Dealers Online Presence

In this blog post, we have transcribed the UCDP interview with Alex Vetter in written format. You can listen to the original podcast here.

Zach: Hello, Zach here, and we have a great guest on the podcast today, Alex Vetter, who is the CEO of Cars.com, which is a publicly-traded automotive marketplace company. In addition to their marketplace for used and new cars, Cars.com has also acquired Dealer Inspire, Dealer Rater and recently announced their newest business, FUEL. Prior to becoming CEO in 2014, Alex served in a number of senior management roles for Cars.com. Alex, thank you so much for joining the podcast. How are you doing?

Alex: Zach, it’s good to see you. Happy new year to you.

Zach: Happy new year. So let’s get started. For those of us listening, talk about how you got into Cars.com in the early days and how you eventually became the CEO?

Alex: Well, look, I’ve been in the business for nearly 20 years. We’ve seen multiple forms of ownership that I’ve helped navigate. And as you pointed out, most recently, taking the company public. But really, I’m in love with the business, mostly because I’m in love with the customers.  Small business operators have been my DNA my whole life. I was raised by entrepreneurs. 

Most technology companies, Zach, have done harm to small business by cutting them out, and we aspire to be one of the biggest technology companies that actually help local businesses to fight back and compete against these pure technologists who really don’t care about the role of small business owners in our community.

Zach: 2020 was a rollercoaster of a year for dealers. Talk to me about what you’ve observed from your lens at Cars.com and the way consumers interacted and purchased vehicles from dealerships, especially independents.

Alex: Yeah, look, I think that 2020 was a surreal year on a number of fronts, but I think if I had to step back and look for the silver linings, I think a couple of things came through. 

Number 1, first and foremost, shows the resilience of local dealerships. They are some of the most entrepreneurial people I know. They’re so resilient, and they show their agility by shifting more towards digital platforms, and certainly, we saw that as well. 

We were all being forced to shelter at home, practicing safe social distancing, so digital platforms from users also sky-rocketed, and our traffic had the highest gain ever, in terms of during a pandemic year and that was because people feared public transportation; they wanted to buy cars, they wanted to either get another car for their home or they wanted to find a new one that’s safer than the one that they had. 

And so you know, both sides of our business took off, consumer adoption to these digital platforms took off, and dealer adoption of digital tools to communicate with those from their homes also took off.

Zach: How has Cars.com’s strategy differentiated from other marketplaces like CarGurus or TrueCar?

Alex: Well, look, I don’t like to be compared to those platforms. Ultimately, we’re a different animal with Dealer Inspire, our Dealer Rater business, our FUEL business. All of our technology companies are really designed to do one thing, which is to help dealers differentiate on other dimensions than just price. 

And if you look at some of the marketplaces that are out there, they’re very gimmicky and trying to manipulate users to make you believe that they can get you some secret deal or that they know a good deal or a bad deal. And at the end of the day, we think that dimension of the internet has long passed. Not that price isn’t important, it’s critical, but the disparity in pricing online today is minuscule. Dealers know this; they’re running razor-thin margin businesses. 

So, our platform and all of our technologies and tools are designed to help dealers compete on other dimensions. Why buy attributes? Dealer Rater really communicates the experiences users can get through the dealerships on our platforms. On Cars.com, we don’t withhold dealers’ information. We actually promote it, which is why Cars.com drives three times the amount of traffic directly into the dealers’ website. 

We’re not withholding that information in order to gin-up a lead and tell you we’re number one in leads. And so all of our businesses like Dealer Inspire, right? I mean, it’s about building state-of-the-art websites so independent dealers can stand out. 

All of my businesses share that ethos, which is “enough is enough” from these big platforms sucking profits out of the dealership and giving back pennies. Our businesses are all about helping the dealership differentiate, promote, compete on a level playing field.

Zach: You mentioned something interesting; a lot of dealers would look at how many leads, for instance, they got in a total month but talk about the importance of attribution. Some dealers might not even know what that means and what attribution means for you?

Alex: That’s right. I think most of the early internet businesses have focused on leads as the primary source of value. And dealers obsess about the volume of leads and conversion ratio but if you actually step back and think about the consumer experience, number 1 and then number 2, you think about how dealerships have consistently reported to us where they drive the greatest source of sales, universally. 

What I hear from dealerships from across the country is that traffic or leads that come from their own website converted 4 to 5 times the rate than they can get from other sources. And if you did get a customer on to your own website, dealerships overwhelmingly say that’s the highest closing ratio of any other source, and that goes right at the core of the design of the Cars.com platform. 

Number 1, we don’t run a race to the bottom, right. We get a level playing field. So I don’t care if you’re a 30-car lot or 300 cars. We give you equal footing. And we don’t manipulate our search results based on bogus deal badges to try to get dealers to lower the price of their car to get more volume. 

So when you look at our site, you’ll see that we actually are focused on getting people to the store. And that store, we’re actually indifferent. If they’ll physically come to your lot, or they’ll go into your digital dealership through your website. 

And through Dealer Inspire, we have very visible data about which marketplaces are actually focused on driving traffic into the dealer’s website and again we’re driving three times the amount of people from our marketplace directly into the dealer’s website, which dealers know they convert at a higher rate. 

And too often, dealers, I think, are getting caught up in the lead game, and again we generate tons of leads, phone calls, emails, but increasingly, consumers want to know who they’re doing business with. They do wanna visit your website, they do wanna come to visit your showroom, and we think that we’re not gonna manipulate users to do business the way we want. 

We want to get people to the dealership. However, they wanna do business: email, phone call, or go to your website or go to your storefront. And if you look at the design, you’ll see that Cars.com promotes the dealership a hell of a lot more than those other platforms.

Zach: What have you guys been working on with the Dealer Inspire brand in terms of digital retail and allowing dealers to interface with customers online?

Alex: Well, look I think COVID really has accelerated consumer desire to do more of the process online. And so, our online shopper platform really takes the consumer to a lot more of the workflow online. 

What’s exciting about online shoppers through Dealer Inspire is that digital retail technology can sit on your dealer’s website but it can also be dropped into our marketplace Cars.com so that you’re sourcing traffic and sales through both platforms into a common workflow. 

We don’t think dealers need another widget, and they don't need another process to manage. They’ve gotta focus on selling cars and so part of the beauty of our platform strategy is that we can distribute technology once, and dealers could manage it through a single backend so our technology can reside in any environment. 

And really that’s the genesis of our strategy, that distributed technology, singular use case for dealers make it easier for dealers to operate, with fewer vendors and simplified process.

Zach: Talk to me about the amount of in-market shoppers that visit Cars.com and how a small independent dealership could be competitive and visible through Cars.

Alex:  Well, look, I think, first and foremost, Cars.com has a brand that’s synonymous with the category. So with very little effort, we’re getting 25 to 30 million shoppers on our site every month. Over 85% percent of those shoppers are gonna buy a car within 6 months and over half of those are actually gonna do it within 30 days. So, first and foremost, there’s no more fertile environment to reach car buyers than our platform. 

I think the vast majority of our traffic is used cars, it accounts for over 75% of our search share, and it's trending up, by the way, in January we’ve got tons of shoppers that are looking for used cars. I think the biggest thing that dealers need to know is that we’re the level playing field. We really don’t cater our search results to how much you spend. We don’t cater our search results based on gimmicks or tricks to get users to engage. 

We get your inventory and your brand out there in front of the market, and we let the user control the search results and the search experience.

Zach: Two auto trends that have taken mindshare in 2020, and I wanted to get your thoughts on them, online car dealers like Carvana and Vroom and they’ve taken public markets by storm and then this subscription model for automotive, what are your thoughts on these two kind-of hot topic trends?

Alex: Well, look, I think there’s both a challenge and an opportunity. Certainly, digital-only dealerships do not have physical infrastructure that they have to spend money on. So they can spend more money on marketing and advertising to compete, right? 

They’re running virtual dealerships, and therefore, they’re really running without a brick and mortar operation. I think that’s the challenge, but it’s also the opportunity. What 2020 showed us is that digital platforms are the overwhelming preference for consumers in terms of not only searching for what they buy but doing more of the process online. 

And this is where we come in, and we wanna help digitize dealerships so that they too can compete on these big platforms and these big opportunities because community matters. Local dealerships, we think, are vital parts of our ecosystem in this country. 

Dealerships give back, and they employ a lot of people in the local community. We wanna be an enabler for them and we want them to be able to continue to run their businesses locally but to leverage the strength of our huge national technology investment. 

So there’s no reason why the small dealerships can’t compete with the biggest dealership as long as they're upfront, transparent, honest, and take care of their customers, we can bring the technology and the customers to you.

Zach: I love that, and what is Cars.com doing that uniquely helps independent dealers compete in the used car marketplace?

Alex: Yeah, look, I think Number 1 is we don’t run a race to the bottom. Some of these sites basically will tell you to either spend more money to get more or lower the price of your car to get more, and in both of those cases, when they’re saying the same thing to every dealership, and they’re running a giant race to the bottom. 

I think what’s unique about us is that we actually care about the local dealer keeping them at the center of our communities. We want to give them a level playing field that doesn’t care about how much they spend or their relative size. And I think that’s an advantage, right? 

We’re democratizing vehicle sales so that everybody can compete, and we’re doing it without making the dealer being the bad guy. 

Some of these sites make dealers out to be distrustful; you need their service to get a great deal, and that’s not our ethos. We know that. Look, we let users rate their experience with the dealership, so if they do have a bad experience, they can spout off about that through either dealer radar or Cars.com. 

But what we actually know about dealerships is they run great businesses, they take care of their customers, and as long as they’re doing that they’re gonna get rewarded by positive sentiment and user reviews. And so we let customers rank dealerships, our platform just provides that level playing field, and I think that’s the advantage that independent dealers need.

Zach: What are some of your predictions, Alex, for 2021 and also what’s coming down the pipeline at Cars.com?

Alex:  Well, look, I think there’s definitely a new generation that’s coming into the market that are expecting digital-first experiences. I’ve been in this industry for a long time and had to pull a lot of dealerships into the internet and what I’ll tell you today is we’re done pulling.

If you’re not focused on running a digital-first business, you’re gonna be losing market share. Consumers are overwhelmingly expecting these digital experiences and particularly the newer generations. 

I think dealerships also have gotta learn how to meet customers where they are. The vast majority of customers, because of COVID, are expecting dealers to bring it to them. Home delivery is here to stay. We’ve seen more dealers adopt the value prop of home delivery, mirroring some of these big national dealerships, but they can do it on a hyperlocal basis through same-day home delivery. 

If you’re in a market and someone wants a car on your lot, as long as it’s within a realistic distance, there’s no reason that dealerships can’t deliver cars. And certainly, there are services that can offer out-of-market delivery. So, I think that’s gonna be a trend that’s here to stay.

And certainly the use of mobile. I think dealerships spend a lot of time on desktop computers, but increasingly, I think they’ve got to really focus on where the majority of people are spending their time, and that’s on these mobile devices. And we’re proud that we have got the number 1 app in the category and our mobile platforms have really taken off, and our Dealer Inspire websites are being built with a mobile-first infrastructure behind them so we can help dealers really compete on mobile platforms.

Zach: That’s awesome, and Alex, was there anything that I haven’t mentioned that you’d like to discuss that you think is very timely for independent dealers?

Alex: Well, look, I think you asked a lot of great questions. I think independent dealers have got to be focused not only on how they can stay relevant for users but how they can run their stores profitably. And we see so many dealers running with so many vendors to try to run their digital operation. And I know Cars.com is a name but when you think about our business, our ecosystem with Dealer Rater, Dealer Inspire, Cars.com, and FUEL, we truly do have all the tools that dealers need so they can reduce the number of vendors that they’re working with and ultimately focus more on retail sales. 

It’s fortunate that profitability is up across our industry but we think we can help dealers eliminate duplicate services and consolidate some of their vendors and get more for their money. And so, I think, if there’s a dealer listening out there that wants to talk to us, you can reach out to me directly, Alex@cars.com, happy to connect you with our teams or certainly any of our websites have ways that you can reach out. 

We have partnerships with all the major platforms that can help extend your reach, and we’re here to serve. We really know running a business is not easy, day in and day out. Technology should be an empowering force, not something that taxes you more to run your store, and that’s what we’re all about. We’re here to help.

Zach:  Well said, Alex. And it’s been an absolute pleasure to talk with you and have you on the Used Car Dealer podcast. Thank you so much.

Alex:  Zach, thank you very much, and I look forward to working with you more.