The Internet is changing how auto dealers sell cars—whether they like it or not
By Mark Brohan
If Herb Chambers has learned one valuable lesson about using the Internet
as a tool to boost sales and capture market share, it’s this: Act first and
let the competition follow.
Today, Chambers credits an aggressive Internet strategy with helping his 27
automobile dealerships sell 6,000 new and used vehicles annually for about 20%
of total sales. In the fiercely competitive car business, that volume means
Chambers is using the web to take sales away from other dealers and sell vehicles
in a way his competition can’t.
Chambers, the largest automotive retailer in New England, is ranked consistently
as one of the nation’s top 10 Internet sales leaders by research firm Ward’s
Automotive. Visitors to his web sites can use interactive tools to build their
dream cars, see if vehicles are in stock or click on banners listing Internet-only
deals.
Acting first
Chambers is no stranger to the Internet. He built his first e-commerce site
almost eight years ago and today considers the web his hottest sales channel.
“If I didn’t start selling on the web first, I knew someone else would,” Chambers
says. “In the car business, you can’t be afraid to act first, and I did.”
But in a retailing channel where most new and used car dealers are only now
beginning to figure out how to successfully sell online, Chambers’ web success
is the exception to the rule. Most chain retailers, national catalogers and
Internet merchants have long made electronic commerce and online merchandising
key components of their sales and marketing strategies.
Automotive retailers have yet to adopt the web with much gusto—although their
customers have. A study of 3,000 consumers by J.D. Power and Associates reports
that 88% of new car shoppers use the web to gather information before heading
into the dealership. A typical car buyer visits at least seven automotive sites
before selecting a dealer and starts the information-gathering process two months
before making a final purchase, according to J.D. Power. Clearly the Internet
is changing how customers compare and purchase cars.
Car buyers also are demanding more online purchasing options and research
tools from dealers. A new study from Friedman-Swift Associates, a Cincinnati
automotive industry research firm, says the features buyers want most include
Internet discounts; interactive price quotes and inventory searches; independent
reviews; and applications that let them build and customize their dream car.
With some notable exceptions, however, most of the nation’s nearly 22,000
new car dealers prefer selling cars the old-fashioned way—in the showroom with
general managers and sales representatives controlling the flow of information.
“As a category, car dealers are the caboose on the Internet train,” says Mark
Bunger, senior automotive analyst with Forrester Research Inc. “Their e-commerce
strategies and web sites trail other online segments by a wide margin.”
Fear and misunderstanding
Despite the fact that business-to-consumer e-commerce is clearly established
and that online retail sales will reach almost $61 billion this year, many dealers
aren’t aggressively selling online because they don’t understand, and they even
mistrust, the Internet. “When the Internet boom hit, there was fear that dealers
would be out of business at the touch of a button by manufacturers and third-party
sites,” says Bill Keith, vice president and general manager of Freehold Ford,
Freehold, N.J., and chairman of FordDirect, a joint venture dealer/manufacturer
web portal. “The thinking has changed, but many dealers still run their showrooms
and sales channels in very traditional ways.”
In a different era, bigger inventory, larger sales staff and more aggressive
TV advertising may have been enough for a dealer to outperform the competition.
But lured into the showroom with 0% financing and other incentives, buyers are
on track to purchase 16.5 million new cars and trucks this year—the fifth consecutive
year that new car sales have exceeded 16 million. Experts predict the market
is reaching saturation and dealers face stiff competition from one another for
new customers.
“All dealers know how to sell using the same conventional tactics,” says Belis
Aksoy, automotive analyst with Jupiter Research. “What’s really going to make
a competitive difference is which ones are going to take the time and trouble
to understand the Internet as a new sales channel and which aren’t.”
Today almost every new and used car dealer has a basic web site or at least
lists contact information in dealer locator databases maintained by AutoTrader,
AutoNation, Vehix.com and other third-party automotive research portals. “Third-party
gateways and advertising portals give local or regional dealerships a national
sales channel,” says AutoTrader.com CEO Chip Perry. “Buyers are willing to travel
farther to make a purchase if they know there is a dealer with a vehicle on
the lot at the price they want.”
Shoppers like national third-party sites because they narrow down the selection
process. But having a national online advertising link is also helping more
dealers close sales. South Pointe Chevrolet Hummer in Tulsa, Okla., for instance,
has advertised on AutoTrader for just over a year and credits the additional
exposure with helping the dealership generate and close deals with buyers in
neighboring states such as Texas and from as far away as Alaska.
Each month South Pointe receives between 500 and 600 leads from its AutoTrader
link and uses the collected information, along with follow-up calls and show
room visits, to sell about 30 mostly used vehicles per month.
“Having an affordable national Internet advertising program is getting us
customers from geographical areas we couldn’t have reached before,” says Bruce
Jones, South Pointe’s Internet sales manager. “Many national shoppers, especially
for used cars, already know exactly what they want.”
Finding the money
Dealers who want to use the Internet to sell more cars must commit time and
money to building Internet sites with the features and functions customers expect.
But most don’t have nearly the budget it takes to build such sites; the average
dealer spends $20,000 annually on information technology, including web applications,
according to Jupiter.
Their enterprise software or dealer management systems—by such companies as
ADP Dealer Services, Reynolds and Reynolds, EDS Automotive Retail Group and
Universal Computer Systems—handle core IT functions such as accounting, purchasing,
inventory management, sales and service.
Some higher-end software includes web-enabled customer relationship management
and business intelligence modules or makes them available as an upgrade. ADP
Dealer Services, for example, sells DealerSuite, a software suite that uses
a browser and portal applications to web-enable a dealership’s fixed operations
and business office. The suite includes sales management, finance and insurance
management, and infrastructure applications.
And in September, Reynolds and Reynolds rolled out the Reynolds Generation
Series Suite, a Windows-based system that includes web-enabled CRM tools such
as a lead management tracking system and real-time access to customer demographics,
vehicle service histories and accounting data.
However, Friedman-Swift points out that many dealers operate older information
management systems and aren’t updating their web sites with newer personalization
applications. The result is a web shopping experience that isn’t meeting buyer
expectations.
Each year, in conjunction with the National Automobile Dealers Association,
Friedman-Swift interviews up to 1,000 Internet buyers, asking them to rate their
online shopping experience and rank how helpful they found dealer web sites
in pricing vehicles and checking inventory. Based on what they’ve experienced
at retail sites and exhibiting the phenomenon of expectations outstripping reality,
Internet car shoppers want a lot. They want sophisticated dealer web sites that
allow them to calculate monthly payments, apply for credit, search through available
inventory by make, model or option package and find the most competitive price.
Missing the basics
But the Friedman-Swift study found that only 23% of car buyers in the study
rated their experience as very satisfied. Overall, about a third of those surveyed
ranked the dealer web sites average or below average on such basics as speed
at which pages opened, organization of information and ease of navigation.
Any below-average rating means dealers need to upgrade their web site or risk
losing business to dealers who have, says Judy George, chief operating officer
and lead researcher for Friedman-Swift. “Buyers know that if one dealership
site doesn’t have the data they want, they are only a click away from another
who does,” George says.
Like many dealerships, the Bob Baker Auto Group in San Diego used to get by
with relatively simple web sites that advertised each dealer’s address, phone
number and hours.
But now that the Internet is generating 375 leads per month, and helping Baker
sell more than 1,000 new and used vehicles each year, the dealer is rolling
out a new web strategy with a heavy emphasis on personalization.
Today, customers can visit nine newly redesigned web sites and access a variety
of customized features, including new and used vehicle locators. Through the
web sites, they also can schedule an appointment with an Internet sales representative
or search an interactive version of the Kelley Blue Book to find trade-in values
and compare their trade-in price to those of similar cars with the same age
and mileage.
Also in the works are new applications that will let Bob Baker customers schedule
service appointments, apply for credit, shop for parts and accessories, and
book a rental car when their vehicle is in the service department. “We already
know that 70% of prospective buyers coming to our site are looking for detailed
information such as calculating a trade-in value,” says Michael Baker, Bob Baker’s
vice president of operations. “If they are coming here, we want them staying
here by customizing each and every visit.”
Personalization pays off
Personalizing the online shopping experience is paying off for Baker. The
company says the value of new and used vehicles purchased as a direct result
of Internet leads is just under $20 million a year. These sales place Baker
in the top 50 Internet dealers as ranked by Ward’s.
But while Baker may be doing all the right things to build a successful web
selling strategy, other dealers aren’t following suit. To be effective Internet
merchants—and offer inventory, pricing and customer service that outperforms
the competition—dealers need to understand first how the web is changing the
car-buying process.
With the information playing field now leveled between buyers and dealers,
it’s easier than ever for shoppers to solicit multiple prices and pick the dealer
nearest them with the best available inventory at the lowest price. Dealers
also need to realize that they must be extremely fast in responding to customer
inquiries.
Dismal response
Even compared to other Internet retail segments, where up to 25% of e-mail
queries go unacknowledged and unanswered, dealers’ response to e-mail queries
is dismal. They reply to less than 50% of all incoming correspondence, according
to some mystery shopper tests, and when they do answer, they can take up to
a week to provide an online car shopper with information.
A recent study of 100 car dealers and their e-mail response rates by EDS and
researchers eMarketer Inc. found that only 22% of dealers answer e-mail within
60 minutes, while another 18% take as long as 24 hours. That’s down from 28%
within 60 minutes and 25% within 24 hours in 2001.
“It is not surprising that response times to online customer inquiries have
been worsening,” says Noah Elkin, senior analyst with eMarketer who analyzed
the EDS results in another recently published Internet report. “Many dealers
are still ambivalent about the quantity and quality of leads they receive over
the Internet.”
This despite the fact that dealers are receiving substantial e-mail traffic
that can generate serious leads. For instance, United Auto Group, one of only
two automotive chain retailers listed on the New York Stock Exchange, notes
that e-mail generates up to 1,000 serious leads per month at many of its 200
stores in the United States and overseas. “Upper-range foreign car buyers are
big Internet users and like to make very specific e-mail inquiries,” says Joe
Czarnecki, United’s e-business manager.
And Hendrick Automotive, a Charlotte, N.C., dealer group with 70 retail locations
in several Southern and Mid-Atlantic states, says that its nine Honda web sites
handle 70,000 unique visitors per month who generate 930 serious e-mail leads
and 195 sales. United and Hendrick are adamant about responding to e-mail in
a timely manner. In fact, both companies have a standing policy that all e-mail
requests must be answered in less than eight hours and, in many cases, within
90 minutes.
An effective e-mail response program is only one part of what some dealers
are doing to leverage their Internet sales strategy. Equally important is hiring
and training the right staff.
New training
But selling online means dealers must train their managers and staff in new
and different tactics. Internet reps must be adept at working with web-based
lead generation and CRM applications. They must be skilled in analyzing and
responding to a wide variety of Internet leads and in answering pointed questions
raised by well-informed Internet shoppers. They also must learn how to turn
electronic leads into bricks-and-mortar visits that result in final sales.
Earnhardt’s Auto Centers in Phoenix, for instance, puts all Internet sales
staffers through a weeklong training session before assigning them to a web
sales manager and putting them to work in the e-commerce unit. Internet sales
staffers are trained on the dealer’s web lead generation system, instructed
on how to effectively answer multiple requests for information and coached on
proper phone etiquette.
Once a month, each of Earnhardt’s three full-time Internet sales managers
meets with senior management to review training and refine procedures. For example,
a recent training session helped the Internet sales staff refine their telemarketing
skills. Once the sales representatives were back on the floor, all of their
outgoing Internet sales calls were recorded and then played back, providing
each rep with feedback on individual efforts and steps they could take to improve
their performance and sales closing ratio.
Earnhardt’s credits a dedicated web sales staff and specialized training with
helping the dealer close more than 7,000 web sales per year, or about 25% of
total volume. “Internet sales staffers must know how to stay ahead of the customer,
and ours do,” says Joe Martin, Earnhardt’s group e-commerce manager. “We take
the time to get to know who the Internet customers are and to train our staff
to meet their expectations.”
Taking the guesswork out
Because many Internet buyers have done extensive research on their choice
of a vehicle and, in many cases, the price and monthly note they can afford,
Martin says most web sales begin as higher-quality leads. The e-commerce staff
handles most Internet leads after several phone and e-mail conversations with
the customer, but regular showroom sales reps are also used to buyers coming
in with pages printed off the Internet. They are trained to help buyers find
the vehicle they’re looking for or turn the customer over to an e-commerce specialist
if they need more assistance. “The Internet takes the guesswork out of sales,”
he says. “Informed web buyers just want to come in and make the buying process
as straightforward as possible.”
Attention to web detail and an aggressive Internet strategy are helping some
dealers outsell the competition. The Herb Chambers Cos., for instance, recently
purchased an underperforming Ford dealership in suburban Boston and believes
its aggressive Internet program can help the store increase sales by as much
as 50%.
But unlike other Internet retail channels where the transaction is exclusively
electronic from start to finish, selling cars will always involve a human element.
That’s why Chambers considers the Internet to be a part of his overall sales
program and not a separate channel. “The sale starts on the Internet and ends
in the customer driving the vehicle off the lot,” he says. “Dealers like ours
who think of the web as blending well with their other sales channels are going
to be the ones selling the most cars.”
GM powers up a redesigned web site
General Motors Corp., the first Big Three U.S. automotive manufacturer to
launch a dealer-oriented web selling strategy back in 1997, is enhancing BuyPower,
a vehicle research and dealer location site, and launching an interactive advertising
campaign to make consumers aware of the redesign.
Unveiled in August, the revamped site has simplified navigation and allows
shoppers to customize the features and options they want in a new vehicle. They
also can search for a used car or view online inventory at specific dealerships
by ZIP code.
“Our research told us that dealers want more sales leads from the Internet,
and consumers want to eliminate information overload when they shop online,”
says Leo Drew, general director of strategy, integration and operations for
GM Customer Networks.
BuyPower averages more than 1.5 million visits and more than 3.5 million dealer
inventory searches per month. That traffic generates more than 1 million annual
Internet sales leads for dealers and helped GM sell more than 200,000 vehicles
in 2002.
The online advertising campaign, dubbed “Prepared,” is running on several
major automotive web sites. Banner ads show how BuyPower helps consumers become
better prepared to shop for and purchase a vehicle.
A corresponding sweepstakes ran in September on NetZero.com’s consumer automotive
portal. Shoppers could enter to win a new GM car or truck.
Dealers say they are pleased with GM’s changes to the web site and new interactive
retailing strategy. “There are 25 GM dealers in my metropolitan area. If BuyPower
helps direct leads my way, I consider that to be a great marketing advantage,”
says Bill Krouse, vice president and general manager of Polar Chevrolet in White
Bear Lake, Minn.
A co-operative Ford/dealer web strategy
Many dealers describe their interaction with automotive manufacturers as a
love-hate relationship, but Ford Motor Co. is giving dealers a reason to love
the home office: a national web site that delivers serious sales leads.
Almost three years ago, Ford took its dealer relations council’s advice and
formed a joint venture, FordDirect, to showcase new make and model information
and generate Internet leads for local dealers. The company has a separate administrative
and marketing staff, and uses Ford’s advanced customer relationship management
technology to send detailed Internet sales leads and vehicle purchase summaries
to FordDirect dealers.
Both dealers and Ford consider the joint venture a success. Each month, more
than 3.5 million unique visitors log on to FordDirect.com to research inventory
or prices and find a dealer near them with the vehicle in stock. That traffic
is helping Ford and a network of 3,500 FordDirect dealers sell more than 160,000
new cars each year.
“We are capturing the Internet channel with the help of the dealer,” says
Steve St. Andre, president and chief operating officer of FordDirect. “It’s
a sales win for both sides.”
In the volatile automotive business, dealers often are at odds with manufacturers
on business issues such as the controversy over manufacturers selling cars directly
through factory stores or Internet sites.
But because dealers own 80% of FordDirect and exercise considerable clout
in managing the company, Ford dealers say their joint venture is proof that
retailers and manufacturers can work together.
“This is the first automotive dealer/manufacturer joint venture, and it’s
in everyone’s best interest to make it work,” says Bill Keith, vice president
and general manager of Freehold Ford, Freehold, N.J., and FordDirect chairman.
“The Internet holds great promise to market and sell cars, and FordDirect intends
to build on that promise.”
Chrysler takes the portal route
DaimlerChrysler Corp. may be the smallest of the Big Three automotive manufacturers,
but that isn’t stopping the company from launching big Internet sales lead generation
plans for its Chrysler Group dealers.
Beginning this fall, about 4,300 Chrysler, Jeep and Dodge dealers will be
able to utilize DealerCONNECT, a company web portal, to access all localized
Internet leads from a single online source. Most U.S. dealers are already connected
to the portal, while dealers in Canada and Mexico are to be added by December.
Like other big automotive manufacturers, DaimlerChrysler operates multiple
web sites and external links to third-party research sites such as Edmunds.com
and Yahoo’s vehicle research portal. Previously, dealers had to download the
leads from separate sources.
Now all leads will be sorted, packaged and delivered to individual dealers
through DealerCONNECT. That includes all e-mail and phone inquiries coming into
DaimlerChrysler from toll-free numbers listed on its corporate web site and
others.
The dealers receive more than 2.1 million Internet leads each year from DaimlerChrysler,
so having the leads customized and easily accessible through a company intranet
will help dealers initiate and close more web sales.
Dealers also can use other applications on DealerCONNECT to download marketing,
advertising and promotional materials and to create custom e-mail campaigns.
“E-business solutions at the Chrysler Group are designed to enhance the shopping
and vehicle ownership process between our dealers and customers,” says Christine
MacKenzie, vice president of dealer operations for the Chrysler Group. “DealerCONNECT
improves the speed and effectiveness of factory-to-dealer communications.”
