It is not uncommon for large auto dealership groups to put their stores on a common dealer management system. In fact, it is basically an unwritten rule.
It may be common, but moving every store to one DMS is not necessarily the best business move. The truth is, every DMS has a different cost-benefit ratio and it is not always one-size-fits-all.
So, why do the big guys do it? Simple: Legacy DMS providers tell dealers it is too hard to work with multiple systems. It does not make sense from a cost perspective. It is too time-consuming for dealership management to learn how to access reports. Employees will not be able to easily move from store to store because they will not understand how to use an unfamiliar DMS.
Of course, these providers also have a big stake in a dealer’s actions. If a dealer acquires a new rooftop and chooses to stick with the DMS that the store is currently using, the legacy provider loses out on that store’s business and exposes the group to a competitor’s product. This could ultimately lead to a loss of all of that dealership group’s business.
These messages persuade many owners to move new stores to the legacy provider they already know. But why? Staying with the current DMS provider can make the acquisition easier and more immediately profitable: less employee disruption and no conversion costs.
One large group I know well chose to keep multiple systems. It uses five different platforms for its 62 stores. The group’s steady expansion over the years has been anchored by the willingness to leverage the systems that work for them at each location as opposed to fitting square pegs into round holes.
A key to the large group’s success has been using a third-party management platform that is DMS-agnostic. All stores use the same document management platform so all accounting and scan data can be accessed across any store, regardless of DMS platform. This aids the corporate office with managing centrally.
Sticking with a DMS that is working for a store does mean management will have to learn how to pull reports from a new DMS. And employees may not be able to easily jump from store to store because of unfamiliarity with a system.
But the benefits of multiple providers are persuasive. When a dealer decides to keep a DMS in a store, employees do not have to be trained, so there is no slow-down in the processes taking place. This is a big factor when you consider that training employees with a different system can cost as much as $5,000 per seat because of productivity disruption while they are getting up to speed.
Keeping a system may also help dealers retain key employees. Consider a controller who has been with a store for 30 years. He or she may be very resistant to change and opt to retire in the face of learning a new system. Now a dealer has a new franchise with a gaping hole at the top of the management chain.
Retaining a DMS is also a low-stake, low-cost way to try out a new provider. The unfamiliar DMS may just suit a dealership better. A dealer can monitor and assess it in a real-world situation that is far better than a sales demonstration or a 90-day evaluation period. A dealer can also talk directly with employees who use it day in and day out to get honest feedback about the pros and cons.
This is a big advantage when you consider that sometimes a DMS switch simply does not work, as in the case of Hendrick Automotive. The dealership group announced a switch from Reynolds and Reynolds to CDK Global in 2016 but ended up calling off the deal and returning to Reynolds after converting only a few stores.