Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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“Some customers want to shop entirely online because they’re busy, know the vehicle they want and prefer an expedient means to finish the transaction,” says Joe Martin, Earnhardt’s group e-commerce manager. “We built an auction component to our web site to handle that type of customer and a bidding process that gives us, as the dealer, and the consumer, as the buyer, room to negotiate a final price.”
As a way to advertise its new online auction and make potential customers aware of its frequent Internet specials, Earnhardt conducts frequent e-mail marketing campaigns to a database of more than 1,000 names, including vehicle owners who have bought in the past from Earnhardt and shoppers who come into the showroom and ask to be placed on the dealer’s e-newsletter lists. The dealer credits constant Internet promotion and an interactive bidding program with generating and closing several sales each month. “For a certain type of car buyer, this process gets them into a new car without having to come into the showroom and generates a new kind of sale for us,” Martin says. “It’s a sales model I think will catch on.”
Unlike Earnhardt, most dealers still stop short of offering customers Internet payment, financing or delivery options. Nearly all of the nation’s nearly 20,000 new car dealers have their own web sites, but only about 60% have updated that site with the advanced navigation and research tools that let web shoppers conduct a vehicle search, build an interactive version of the vehicle, view manufacturers’ suggested retail prices or schedule a service appointment, according to the National Automobile Dealers Association.
And while other web-savvy chain retailers, catalogers and Internet pure-plays have spent years building e-commerce sites with deep content or innovative merchandising as well as marketing programs that generate sales, most car dealerships are still wrestling with basic web site management such as responding to e-mail inquires in a timely manner.
In a recent mystery shopping survey of more than 1,600 dealers nationwide, only 58% responded to e-mail inquiries, compared to 42% three years ago, according to The Cobalt Group Inc., an automotive retailing research and applications development company. “Dealers are still learning how the web should and could be used to impact their sales and marketing,” says Kevin Root, vice president and general manager of Cobalt’s dealer advisory services. “Many automobile dealers focus primarily on today and aren’t thinking more long range about what’s happening six or 12 months out.”
The trade-in issue
Many dealers aren’t convinced that customers will buy entirely online because most transactions involve a trade-in or lease expiration that requires a physical inspection and valuation of the vehicle by the dealer. “The Internet is a very cost-effective advertising medium and a great marketing tool if used properly, but we use it to drive traffic to the showroom,” says Wes Lutz, dealer principal of Extreme Dodge/Hyundai Inc. in Jackson, Mich., and a former chairman of the National Automobile Dealers Association’s information technology committee. “Most buyers have a trade-in involved or won’t buy something as important as a car sight unseen, so we use the web to motivate people to visit the lot.”
But not all sales involve a trade-in, and many new car deals can be consummated completely online, a fact not lost on Freehold Ford in Freehold, N.J., which is expanding its e-commerce program for Internet-only buyers.
As a participant in Ford Direct, a joint-venture Internet marketing company that Ford operates with about 3,900 Ford and Lincoln Mercury dealers, Freehold Ford often gets Internet leads or referrals from customers who know precisely what they want, such as a new F-150 pickup truck in a specific color with individualized options.
Such customers are particularly motivated to buy and use the Internet and manufacturer or third-party automotive research sites to locate which dealer has the vehicle in stock and at the right price.
To retain such shoppers, through leads fed directly into the dealer’s information management system from FordDirect.com or through toll-free phone numbers Ford Direct embeds on its dealer locater pages, Freehold Ford has upgraded its e-commerce platform with features offering ways the customer can complete the transaction entirely online.
FreeholdFord.com now includes an improved vehicle locater with sharper graphics, faster navigation and the ability to e-mail the dealer for a specific quote, as well as a link to an online finance center at Ford Finance Co., where customers can use secure electronic forms to seek financing and pre-qualify for loans. The site also features Internet-only specials such as 50% off the MSRP on a Taurus and personalized pages where Ford owners can schedule a maintenance visit, maintain a service expense log, or download an online owner’s manual and warranty information.
Since Freehold Ford implemented online financing and other upgrades about a year ago, the Internet has come to account for about 10% of all sales and closes between three and five purely e-commerce deals per month. “Pure Internet sales are actually easier for us because the negotiations are much more straightforward and don’t involve a trade-in,” says Bill Keith, president of Freehold Ford and chairman of Ford Direct. “We quickly agree on a price, help the Internet customer with finance options and arrange a pickup.”
Keith says most Internet-only buyers tend to be repeat shoppers who start their car research on a manufacturer’s site or any one of several third-party research and vehicle locator sites-such as Autobytel.com, AutoNation.com, Cars.com, CarsDirect.com and AutoTrader.com-and then find the dealer closest to them with the car they want. “Internet-only shoppers can be very brand loyal, and they’ve done extensive research on the vehicle they want and the price they are willing to pay,” he says. “They come to us when they’re ready to negotiate, finance and take delivery.”