How AutoNation Inc. Is Solving Its Pesky Third-Party Problem

Image source: AutoNation via Wikimedia Commons.

The abrupt end to the partnership between AutoNation and TrueCar definitely attracted a fair amount of attention from the industry. It wasn't the prettiest of endings, to be sure.

As AutoNation's CEO Mike Jackson toldAutomotive News: "That train's left the station. That was not a good ending with TrueCar. Humpty Dumpty is hard to put back together. Endings matter. We don't need them anymore."

Despite being the one to walk away from the partnership with TrueCar, AutoNation definitely lost some business from the decision. However, it's become clear that the company's plan is to win that business back with an online presence of its own -- and so far, all signs point to an AutoNation victory.

Build it, and they will come AutoNation decided to invest roughly $200 million into technology and branding for its own website to sell vehicles online, rather than forfeit that business to third-party shopping sites such as TrueCar. According to Automotive News, a year and a half ago, 20% of AutoNation's vehicle sales were generated from third-party shopping sites. That was a bit worrisome to investors, who saw AutoNation's own website generate only 10% of sales for the company.

AutoNation's injection of capital into its website and technology fueled the company's IT department to grow from a couple dozen employees to roughly 250. AutoNation Express -- a set of transactional tools for vehicle purchases on the company's website -- nowfeatures a strategy called "5 & Drive," which enables the consumer to quickly select a vehicle, negotiate price, value a trade-in vehicle, and arrange paper-signing and vehicle delivery.

With those improvements to the website and its functionality, as well as the team behind the scenes, the momentum has swung in favor of AutoNation's website. AutoNation Express now generates about 20% of the company's vehicle sales, while third parties only generate about 9% of vehicle sales.

But wait, there's more Investors in AutoNation should be thrilled with the swing of the company's sales from third-party shopping websites to its homegrown website, but there is still reason for more optimism going forward. One project will enable customers with a trade-in certificate from AutoNation Express to get a check right away at the dealership instead of waiting between three and seven days, which is a common time frame for such a process. Currently, it's a strategy being piloted at five stores in California, but if successful, it could be a competitive advantage offered by AutoNation's dealerships across the country.

Also, toward the end of 2015, the company aims to roll out My AutoNation Dash, a tool that will enable a consumer to store shopping data over a period of time and multiple website visits. It's a seemingly small move, but the strategy could turn into a competitive advantage if "paused" sales leads are kept with AutoNation during a time when a consumer could be on the fence about purchasing a vehicle and may have wandered elsewhere for a purchase in the meantime.

AutoNation's September new-vehicle retail sales were up 21% compared to the prior year, and for the third quarter, new-vehicle retail sales were up an impressive 7% over last year's third quarter. In addition to rising retail sales, AutoNation has been buying stores, and 2015 will go down in the books as its biggest year of acquisitions since 1999. With all of those positives, it's icing on the cake that AutoNation has also solved one of its most pesky problems: sales generated from less-profitable third-party shopping sites.

The article How AutoNation Inc. Is Solving Its Pesky Third-Party Problem originally appeared on Fool.com.

Daniel Miller has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.