Toyota ready for ‘new norm' of online sales

When Toyota Motor North America rolled out its SmartPath online selling tools in September for Toyota and Lexus dealers after years of internal development, the automaker obviously didn't know those tools — aimed at allowing consumers to go through much of the buying process from home — would be needed by so many of its U.S. dealers so quickly.

Add in one pandemic to upend both the industry and the world, and all of that preparation begins to pay off.

Toyota is ramping up its plan to roll out SmartPath to dealerships across the U.S. and has doubled its target for first-year dealer participation now that those dealers have seen how integral online selling will be to their businesses.

At 84,694 vehicles, Toyota and Lexus sales in April were nearly double where the Japanese automaker projected it would finish the month, when roughly one-third of the brands' 1,482 rooftops in the U.S. were closed because of state mandates to stem the rise in COVID-19 cases. The credit for that lies with dealers rapidly learning to transact and interact with home-bound consumers, and with infrastructure put in place to ultimately make such interactions the new standard.

"Sometimes, with a little luck, we're ahead of the market," said Bob Carter, head of sales for Toyota Motor North America, after explaining that the "vast majority" of the just-under 80,000 retail Toyota and Lexus sales in the U.S. in April were transacted online and home-delivered.

"Consumers and our dealers have really, really embraced the movement to online selling and home delivery," Carter said. "When we get into a normalized basis, I still hesitate to say it will be the majority, but it will be the new norm. This has really accelerated the movement over to digital online selling."

SmartPath, which is a software suite developed in-house, enables dealers to promote their new-vehicle inventory in real time — with accurate, dealer-set pricing inclusive of incentives as well as local taxes and fees — across their website as well as inventory on toyota.com and regional portal buyatoyota.com. It lets customers get accurate payment and trade-in estimates online, and it delivers all of the work done at home to the dealership, where a salesperson can access it, by name, on a tablet computer.

Less than a dozen dealerships have so far been fully integrated into SmartPath, but "since COVID-19, overall dealer interest, demand and adoption for SmarthPath has been dramatically increasing every week," spokesman Eric Booth said. Toyota and Lexus dealers were first shown the software suite at a dealer meeting in September in Las Vegas.

"Right now, transacting business online [is highly complex] because you're taking OEM computers, dealer DMS systems, finance computers, and mixing that all together, and particularly in an environment where, to register a car and pay sales tax in many states, it is done at the county level and not at the state level," Carter said.

"It's not like we're selling just any commodity out there, so it's taken some time to get there and do it the right way. But we're getting there, and it's accelerating."

Toyota and Lexus dealers who are selling online may have bigger worries: getting inventory in the next few months.

Production shutdowns and a stronger-than-anticipated selling rate are likely to mean inventory shortages as soon as June or July on some models.

"Most Toyota dealers, their days' supply is low," Asbury Automotive Group CEO David Hult told Automotive News last week. "It's gonna be tough ramping back up. If today's an indicator and it continues at this pace, Asbury is going to be in short supply of Toyotas and Lexus" vehicles by early June.

Carter said inventories are already running lean and that dealers shouldn't think that the economic downturn from the virus will be like what played out in the industry in 2008-09.

"There was a glut of inventory coming out of the financial crisis that put a lot of stress on OEMs and put a lot of stress on dealers. But this is a different animal. The coronavirus actually lowered retail demand and required the industry to shut down manufacturing almost simultaneously," Carter said. "I think you're going to see that our actions need to be a little bit different than before, because when you take six weeks of production out of this industry, it's going to take a little while for that to work its way through to the retail consumer."