Automotive Retail

Shifting gears in the used cars industry

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Oftentimes, the most effective industry disruptions are born from an unmet consumer need. Without a firm grasp on the needs, desires and problems of their customer, companies will fail to innovate in their industry.

Our most recent guest on Transform It Forward has an intimate awareness of this because he’s witnessed it throughout his own career. Toby Russell is the Co-Founder, Board-Director and Strategic Advisor at Shift, a company that’s on a mission to simplify the process of buying and selling used cars.

Transform It Forward with Toby Russell: Shifting gears in the used cars industry

In the latest episode of the podcast, I sat down with Toby to hear his take on the key ingredients of a successful industry disruption, and why some innovations stick, while others don’t. He also shared his top predictions for the auto industry in the coming years.

Throughout his career, Toby has advised executives and led teams in several major transformations. He says that he typically counsels people to focus on the real consumer needs they’re trying to meet, and let that awareness be their guiding light going forward.

“The disruption is about finding those user needs and then coming up with a novel technical solution to meet those needs… I think the danger that one faces is if you’re not actually homed in on those consumer needs and you’re bringing a novel technical solution that doesn’t solve a need, at which point you’re like, ‘I’m ahead of the market.’ And it’s like, no, you just just don’t have market fit.”

In other words, the key is to fall in love with the problem you’re trying to solve, not necessarily the particular solution you’ve come up with. Stay committed to your goal, while remaining flexible and adaptable about your approach.

Shifting gears to prioritize the customer experience

For Toby and the team at Shift, the problem they initially identified was the entire process of purchasing a car. They noticed that the experience was designed to cater to the needs of the dealer first, not those of the consumer.

Toby explained that when it comes to the process of buying and selling cars, the consumer was generally getting the short end of the stick and gaining very little value from the experience. Not only do consumers have to negotiate to get a fair price, but the second they drive the car off the lot, it decreases in value. 

“Even if you win the negotiation, and it blows me away that we still negotiate for cars, they actively price discriminate…But even if you win that, the second you drive that thing off a lot, you’ve lost $2-5,000 in value simply by the fact that you took a car from being, quote, ‘new’ to used by driving it off that lot. And that is a terrible value prop. It’s a total trap.”

Toby and the team realized that the one area they could focus on to create real value for the customer was in the used space. But of course, tackling the used cars space came with its own unique set of challenges. For one, customers would need assurances that the car was in good enough condition to drive.

Shift circumvented this problem by developing a peer-to-peer platform that would allow people to share information about the car they were selling in real time.

“So the first thing we built to enable that was a peer-to-peer exchange. We would take cars from people to people, and the idea was to cut out the middleman. So that’s the supply side is creating an entire platform which involved the first real time pricing algorithm where you can get a price online just by entering information about your car. We were out ahead on that one.”

The result of this strategy was a cross-nation collection of “hubs,” which enables customers to fulfill all their needs in a one-stop-shop. By taking advantage of the digital technology available now, Shift was able to scale up relatively quickly, instead of having to rely on the acquisition of physical real estate, which would have taken years.

“The idea was that we would look more like Amazon than say, Nordstrom. We wouldn’t have high price retail, real estate and in sort of prime locations. But instead we built out what we call hubs. They’re large storage and reconditioning facilities from which the cars could be moved and run. And the philosophy was that over time we would get to a mix, a full omni-channel experience.”

An end-to-end customer experience

For Toby and the team at Shift, the ultimate goal is to create an end-to-end customer experience that provides support every step of the way.

But as technology continues to evolve, the auto industry won’t look the same even just five years from now. Toby predicts the world will see a shift to electric, self-driving cars functioning similar to the way that Shift is functioning today.

“Much like Airbnb, I think we’re going to see a world where those cars come from individuals. And just like Uber and Lyft today, those cars come from individuals and mini fleets and macro fleets. So I think we’re going to see a world where people are buying individuals and small fleets and then big fleets are buying self-driving vehicles, renting them out on rideshare networks, and oftentimes not renting them out on rideshare networks and using them themselves.”

Learning, earning and serving

When it comes to advice for burgeoning entrepreneurs and leaders, Toby believes there’s value to be found in living your journey on your own terms. He believes in living a life of learning, earning and serving.

In order to do this, it’s important to first understand what it is that matters most to you and the problems you’d like to help solve.

“Once you identify what energizes you and what matters, in my case, it’s the learning and serving, you can live that and you don’t have to wonder.”

Key takeaways:

  1. The successful disruption of an industry requires a thorough understanding of consumer needs. As Toby noted, industry disruptions are typically catalyzed by a novel technical solution that helps to fulfill a real user need in an innovative way. In other words, if the innovation a company is bringing to the table doesn’t solve a specific need, it won’t have staying power in the long run.
  2. The companies that prioritize a seamless, convenient and fast customer experience will win customer loyalty every time. Toby explained that by offering better products, better access, and a better experience overall, Shift is converting more consumers and leaving a lasting impression on its customers.
  3. From its inception, Shift’s strategy has involved creating a recognizable destination that consumers can depend on. By developing regional hubs across the country, Shift is working to unite an industry that has historically been extremely fragmented. Toby believes that in the future, the auto industry will continue to move in the direction of marketplaces like Amazon, which offers a trusted platform and a highly curated experience for both buyers and sellers.
  4. In the auto industry, you’re not really selling cars—you’re selling trust. Anyone can sell or buy a car, but what’s important is the foundation of trust that underscores the buyer-seller relationship. For this reason, it’s important that industry leaders prioritize quality over quantity, and take a careful, intentional approach when it comes to crafting relationships with consumers.
  5. Moving forward, people operating in the auto industry will need to take a multi-faceted approach when it comes to meeting customer needs. By drawing from a varied toolbox of digital technologies, platforms and solutions, companies will be better equipped to serve their customers in a way that’s quick, efficient and personalized. This lesson can be applied to any customer service industry because there’s rarely a one-size-fits-all solution for every problem.

Listen to the full podcast episode here.

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