If digital retailing works as advertised, do dealers still need to buy leads?

Hundreds of Toyota and Lexus dealerships are now fully immersed in at least part of Toyota Motor North America’s SmartPath and Monogram digital retailing systems, with scores more queued up to begin their transitions.

Yet forget for a moment the added customer convenience and even the real-time inventory management that digital retailing offers to dealers. The thing that fascinates me most about these in-house systems every time I talk to a hooked-up dealer is how much money they save on third-party vendors.

Toyota really doesn’t talk about it much because that’s just not their style. But the dealers who were early adopters — the pilot cases that helped beta-test SmartPath and Lexus’ version Monogram since 2019 — have almost all told me of large cuts in their monthly spend on lead generation after the sales system was turned on.

Logically, that should be the case: If a consumer wanders onto a dealership website directly or is redirected there from Toyota.com or buyaToyota.com, SmartPath itself has eliminated the need for a third-party, top-of-funnel handover. If a consumer is still shopping across brands on a third-party site, that dealership might still end up paying for a lead.

But add to that Toyota’s not-so-secret automotive weapon: an industry-best 60 percent brand retention rate. If consumers already know they want a Toyota, they’ll likely start their online shopping in-house, at zero outside cost to the store.

Is this the new normal for dealers using digital retailing systems? It’s hard to tell because inventory shortages and high demand are likely skewing the sample from which to develop a conclusion.

But one thing’s for sure: There’s an entire ecosystem of businesses that live off promising to deliver at least curious customers to a dealer’s door. If SmartPath and other such systems eliminate dealers’ needs for some of those services, things could get really interesting.