e-Dealer 100

Despite being almost 10 years old, the world of selling cars online, in many ways, is immature and volatile.

Many dealers still have not seized the revolutionary change occurring around them, and leveraged it to their advantage. A web site and psuedo-Internet departments is not enough.

When more than 80% of all car shoppers are going online at some point in the buying process, Internet marketing and selling stops being a novelty or a hare-brained scheme of an overly enthusiastic Internet manager. Instead, having a viable Internet department becomes a necessity. Because that's where the customers are.

“Believe me, we make mistakes every day,” says Jay Gubala, Internet director for the Herb Chambers dealerships in the Northeast. “But it's amazing how much business we capture just because we're responding to customers online.” Many of Chambers' Internet customers are from outside the dealerships' marketing areas.

Consider that when Ward's Dealer Business began its annual e-Dealer 100 in 2001, the dealers on the top-100 list sold 61,356 vehicles online. This year it's 125,198 units.

The dealerships that are aggressively going after the business are finding the Internet sales are taking a much bigger slice of the pie.

“E-Commerce is 25% of our business,” says Gary Marcotte, vice president of new vehicles and e-commerce for AutoNation Inc., the nation's largest dealership chain. “It's a powerful way for us to gain market share and do it at a reasonable cost.”

Other dealer groups are starting to make some headway.

“It is going to be common next year for dealer groups to be averaging 20-25% of their total new retail sales coming from Internet leads,” says Dean Evans, vice president of marketing for Dealix Corp.

A Hendrick Automotive Group's Honda store now has 47% of its sales generated by the Internet, according to Matthew Belk, e-Business director for the group.

Dealer Ken Smith of Dave Smith Motors in Kellogg, ID, is far ahead of the rest of the pack and with his 5,300 Internet transactions, is in no danger of relinquishing that top spot on the Ward's e-Dealer 100. In fact he's putting distance between himself and the others.

But it's still only a few dealerships that are making it work. For a store to become successful selling cars online, the dealer needs to get a vision of what's possible. A lot of dealer principals have embraced the Internet in word but not necessarily actions. There are many stories of people getting the position of Internet manager thrust upon them, only to be given little resources or money to make it work.

It's not long before that employee is working somewhere else. The average time an Internet manager stays in one store is short, seven months by one estimate.

Success starts at the top. The sheer technology may be hard to grasp, but the dealer doesn't need to become a wizard in technology. How many dealers fully understand the parts business or the service business?

Holding the people in the store accountable and giving them the tools to succeed is critical. Otherwise, potential sales will be lost to the dealerships that are doing it right.

One year a dealership can burst on to the Ward's e-Dealer 100 ranking with great numbers, then be gone the next. More often than not, the fluctuation can be attributed to a savvy Internet manager who is no longer at that the store.

There are other dealers who are frustrated by the lack of a standardized process for determining what actually is an Internet sale. Much about this industry still needs to be defined and standardized.

The processes for handling Internet customers are starting to be standardized. But when almost all customers are Internet customers at some point during the process, it becomes difficult to discriminate between them and regular customers.

Steve Henson, executive vice president-sales and marketing for Kelley Blue Book, suggests industry discussion on standardizing what are good quality leads. There still is disagreement among all of the industry parties as to what constitutes a good lead.

Henson points to manufacturers who say that if a lead doesn't close in two weeks, it's not a good lead, even if it closed within 15 days. That's unrealistic to hold Internet leads to such high standards, he says.

“We need the online world to mimic the offline world as much as possible,” Henson says.

The best practices and processes are being developed by those dealers and Internet managers who are pioneers into the cyber world. Now, other dealers are beginning to pay attention. Gubala says a week doesn't go by when he doesn't take a phone call from a another dealership asking for advice on how to set up an Internet department.

The dealers on the ranking are figuring it out and they're the ones who are defining how the industry will take part in the cyber age.

Top 100 Dealers

Third-Party Sites Strong

‘He who has the most customers wins in this business’

By Cliff Banks

Many people once predicted that auto makers' web sites would put third-party lead generators out of business.

The OEMs have a long way to go before that happens. The industry is realizing that the lead generators are here to stay.

The much predicted consolidation among the players has yet to take place.

“I've been predicting it for three years and it hasn't happened yet,” says Andrew Donchak, executive vice president and chief marketing officer for Autobytel Inc.

Industry surveys indicate that the majority of car shoppers visit third-party sites. Data from the Ward's e-Dealer 100 indicate third-party sites are still creating the majority of the leads.

They did generate less leads this year, however, 48% compared to 57% last year. But the closing ratios for those leads increased 4% from 12% to 17%.

Closing ratios for leads coming from all three channels — OEM sites, third-party sites and dealership web sites all increased this year. More dealerships are learning how to properly handle web leads and the lead generators are doing a better job of funneling better quality leads to the dealers.

Autobytel, Inc. says that 60% of the consumers that send a lead through its site buy a car within 90-100 days. Whether they buy from the dealership that received the original lead is another story. Still, these are real customers who are sending leads through the web.

“Dealer redistribution systems are more efficient and the ones that have to deal with dealers everyday — the Dealixes, Autobytels, autoUSAs — those kinds of systems are more efficient,” says Gary Marcotte, vice president of new vehicles and e-commerce for AutoNation, Inc.

“They're crisper about how they do it. If you want to get into this business, my recommendation is to partner with one of these companies.”

The industry did not hear talk like that from a dealer a few years ago. Yet, in some cases, dealers still resent the third-party presence. A prominent dealer in California says his dealerships do not use third parties. He still remembers the days not long ago, when zealous third parties bragged of how they would put dealers out of business.

Dealers, though, are starting to see that partnering with third parties can be beneficial. It's about being where the customer is, and these lead aggregators typically have relationships with the larger portal-type sites, such as MSN and AOL.

Mitch Golub, general manager for Cars.com, says one of his goals this year is to be everywhere the customer is. “He who has the most customers wins in this business,” he says.

Part of his strategy is an aggressive national advertising strategy the company will be rolling out this year. AutoTrader.com did that a couple of years and it worked fairly well for th that company.

Much of the traffic from lead providers consists of shoppers who may not have even considered that dealership. In contrast, dealership web sites are doing a better job retaining existing customers.

“Leads into the dealership web site are most likely repeat customers,” says Christine Bucklin, chief operating officer for CarsDirect.

AutoUSA, a third party of sorts, created by AutoNation, generates a million leads a year for AutoNation dealerships and another 2 million for 3,000 dealerships not part of the AutoNation family.

“We want to be where ever the customer is,” says Marcotte. “We want to have the opportunity to get that relationship started and direct that customer to one of our dealerships.”

Dealers on the Ward's e-Dealer 100 ranking reported using 447 third parties in 2001. That number increased to 528 in 2002. In 2003, the number exploded, with dealers using 860 third party sites. Dealerships aren't just relying on one or two companies to help them generate leads, instead, they are reporting using seven or eight.

Still, playing in that lead-generation arena brings its lumps. For one, the nature of the data means there is transparent accountability. The numbers don't lie. “We've created this environment with the tracking mechanisms we've developed,” says Golub. That's a reason third parties have seen high dealer turnovers.

But that is changing. Cars.com increased its dealer base more than 37% and it was able to retain 80% of its dealers in 2003. Dealix, likewise, tripled its dealership base.

The companies have to take it up notch, Golub says. “We need to get better products out there in the marketplace.”

High-Tech Tool Powerful

It's credited with boosting used-car sales and profits

By Cliff Banks

A new inventory-management tool reduces the time it takes to book-in and market a used vehicle from 25 to five minutes, according to dealers using the product.

Showcased at this year's National Automobile Dealers Assn. convention, the DigitalLot Solution was developed by CDM CDMdata and CDM Dealer Services which Kelley Blue Book acquired in January.

Dealers using the DigitalLot Solution say they are on average selling 10-20 more used cars a month and increasing profits by $10,000-18,000 a month.

Included with the DigitalLot Solution is the iTab, a handheld pen tablet that collects and manages used-vehicle data. It is the only all-in-one tablet that includes a detailed software program, a VIN scanner and digital camera with the ability to store more than 150,000 vehicle records and 32 photos per vehicle. iTab's software automatically matches photos to corresponding vehicle information, eliminating data entry errors and mismatched photos.

The photos can be uploaded to the dealership web site and any third party site it is partnering with.

DigitalLot software within the iTab captures extensive vehicle information, including VIN information; used vehicle values; standard, optional and dealer installed equipment, as well as photos.

Currently, DigitalLot includes vehicle pricing and data from Kelley Blue Book, NADA, Polk and Chrome, that is updated regularly. DigitalLot also has the ability to create numerous reports, customized buyers' guides and window stickers compatible with most manufacturer and certified pre-owned program guidelines.

“DigitalLot helped us sell 55 more used cars the first month, increasing our profit by about $130,000. In 2003 we increased our profit by well over $1.5 million,” says Mark Kanter, Internet manager at Bill Jacobs Automotive Group in Chicago. “Our dealer group was struggling to keep our online inventory accurate. The service company we were using was not providing a service that allowed us to keep our Web site and other retailing Web sites up to date.”

More Than Advertising

Web Sites Should Be Extensions of Their Dealerships

By Cliff Banks

Many dealers today consider their web sites to be only an advertising medium. Even some third party lead generators refer to dealership web sites as simply another way to advertise.

The thought process goes like this:

Sure, the Internet can generate sales, but people really can't buy cars online (when was the last time you've seen a car delivered over the Internet?). Until people can take delivery online, the Internet will be nothing more than the equivalent of a newspaper, radio or television ad, albeit, ads with greater accountability.

The reality, though, is that the web site is more than another medium to advertise — it is an extension of the dealership showroom. Research indicates that almost 70% of a customers' first experience with a dealership is through the web site.

Dealerships succeeding online use their web sites to create virtual showrooms that make it easy for shoppers to become prospective buyers.

The fundamental objective of a dealership web site should be converting lookers into leads. “Transaction is the primary key for us — getting the customer to raise a hand and say, ‘Here I am,’” says Gary Marcotte, vice president-new vechicles and e-commerce for AutoNation Inc.

Those dealerships that view the web site as being more advertising are throwing a lot of cool things up on their sites but have little focus as to what the site can accomplish, Sean Wolfington, co-owner of BZResults.com contends.

“Dealers need to recognize that the web site is not the most important part of the equation,” says Wolfington. ‘There's a mistaken assumption that ‘if you build, they will come.’ But that isn't always the case.”

Instead, the key is having a simple web site that fosters leads and a process to follow up on those leads.

Have you seen the AutoNation web sites lately? “I'll tell you this, our sites are not the slickest ones you've ever seen,” Marcotte says with no apology. “Frankly, we don't care. What we're trying to do is sell cars. We've done a lot of research with a lot of people and when they come to a dealership web site they either want to find a car or find a location. They don't want to enrich their lives.”

It's all about converting traffic into leads. But it's not rare to see a dealership's conversion rate to be as low as 1%. There are a couple, though, that are converting almost 25% of their traffic into hand raisers, says Wolfington. Most fall into that 2%-5% range, according to AutoNation's research.

Even after being a pioneer in retailing cars online and being an organization that gets it, AutoNation still is looking for answers. It has a conversion ratio of only 7 1/2 %, according to Marcotte. It's a statistic that the company agonizes over, he admits.

Great Web Site Tips

Stuart Lloyd of Reynolds Web Solutions and Sean Wolfington of BZResults.com offer these collective tips for web site success:

How to Lose It

Turned off by Internet Ineptitude

By Cliff Banks

This is not a success story — unlike other stories in this Ward's e-Dealer 100 package. Instead, this story is about failure — how one dealership's dismal approach to the Internet cost it a vehicle sale and what would have been a valuable customer.

Looking for a minivan for my wife this year, I decided to conduct my entire search online. It gets cold in Detroit in January and I didn't fancy spending a lot of time and energy driving to several dealerships. Besides, I cover the space, so I should know how it works.

After doing all of my research and narrowing down the brand and vehicle my wife wanted, I began to send out leads. I used all of the third-party lead generators and had good response. Each request received a quick response and even resulted in some phone calls and serious conversations.

I also sent leads to various dealerships directly and through the OEM sites. This is where the experience took a turn.

Some dealerships responded quickly, but one particular dealership and its OEM failed miserably. I sent a lead to a dealership down the street. It had the type of vehicles I wanted and it was close.

In the e-mail, I explained what I wanted, told them I would put half down on the van and would buy the extended service plan. I lived close by and probably would service the van there. I explained that, if they had what I wanted, we could close a deal immediately.

I got an automatic response asking me for the same information I had just provided. I thought, “No problem, as soon as the Internet department comes in, they'll see it and respond.”

I heard nothing for a couple of days. So I sent a lead through the OEM-sponsored lead generator. This time I received 12 dealerships' automatic responses that were similar to the one I received from the dealership down the street.

The e-mails were so similar. They had the same Internet manager's name on all of them. Right away, I knew I wasn't dealing with someone at the dealership.

Apparently, an outside company handles the automatic response e-mails and fails to include the true Internet managers' names from the specific stores.

I was agitated. The dealership didn't want to do business with me the way I wanted as an Internet customer. It wasn't helping, it was making it difficult for me.

I ended up buying a different brand from a dealership several miles away.

Dealerships who do a poor job of handling online prospects lose them to other stores. For me it was like walking into the showroom and asking a question only to have everybody ignore me.

The Internet is more than another way to advertise. It's a medium to communicate with prospective customers. Dealers on the Ward's e-Dealer 100 understand that. That's why they're on the list.

Cliff Banks is the Associate Editor of Ward's Dealer Business.

Fast e-100 Facts

125,198
Internet sales in 2003

19,972
more vehicles than in 2002

16%
increase over 2002

92,314
new vehicles

32,063
used vehicles

3rd Party Sites Used

528 in 2002 860 in 2003

Dealer Sites Look Better

Enhancements include sharp photos, 360-degree views

By Cliff Banks

What's new for dealership web sites? People who build them say “rich media,” meaning assorted enhancements.

“Sites are beginning to get more rich today. Before long dealership sites will be giving the OEM sites a run for their money,” says Gabriel Krajicek president of Dealerskins.

Advanced photography and video capabilities are starting to find their way onto dealership web sites. BZResults.com has a remote-controlled device that can take a 360 degree image of a vehicle's interior.

Instead of having to click on several different pictures to see various parts, customers will be able to drag the mouse and view the interior just as if they were inside the car and looking around.

It's already common on hotel web sites and should be just as prevalent on dealership sites in the next year.

Another enhancement is the development of point and roll technology — a vast improvement over the point and click method used today. Imagine a picture of a vehicle with a list of potential colors along side the picture. As the mouse scrolls over the colors in the list, the vehicle in the picture changes to the corresponding color. No clicks needed.

More sophisticated features are showing up on dealer web sites.

An example is the Cerritos Infiniti web site, www.cerritosinfiniti.com, built by Dealerskins.

The Koons Automotive Group web site, powered by Izmo Cars, has videos built into its vehicle library, in addition to point and roll technology.

Intriguing stuff, but how does it help to convert web site traffic into leads and ultimately into buyers?

For starters, web site design companies are starting to package these technology enhancements into their e-mail tools in addition to the web sites.

E-mail campaigns and auto responders already have somewhat intelligent capabilities. Sales managers can design e-mail campaigns and auto responder e-mails that are model-specific. The e-mails can include photos of the vehicle and window stickers, for example.

“The people who are doing this are doing it moderately well,” says Krajicek. But he says the technology now is much more robust.

Dealerships can take all of the above technology and package it into their e-mails today,” he says. “It's like having a micro-site within the e-mail.”

An auto responder e-mail can pull up information about a vehicle, for which the prospective buyer has sent a lead, and place it in the e-mail response — this includes all of the reviews, media-rich photos, videos and anything else an Internet manager can include. This can be done automatically.

Dealers shouldn't stop there, Krajicek advises. The e-mail should have calls to action directing the shopper back to the web site. The calls to action can be vehicle-specific such as providing the shopper with an opportunity to complete a financing application or trade in appraisal information. All this can be done before the Internet department even sees the lead.

Another development is the growing popularity of dealership web sites having their own auctions. It's something BZResults.com is working on, says co-owner Sean Wolfington.

Web sites allow dealerships to place as much information about the vehicle as they deem necessary. They're not constrained by space limitations as they are in print classifieds, Wolfington notes.

Having more information can help increase sales on the auction site. “Not all used cars are the same,” he says. “But dealers forget to inform their customers of that.”

The web site is a great place to differentiate those vehicles, he says.

Matthew Belk, the Hendrick Automotive Group's e-business director, is building an online auction micro-site on the Hendrick web site. Belk is taking it one step further. He's going to start running Hendrick-branded auctions on eBay Motors.

“We're starting to experiment with that,” he says.

Making It Click, Click

Hendrick Group eyes goal of 15,000 online sales

By Cliff Banks

The Hendrick Automotive Group sold 11,154 vehicles online in 2003. Matthew Belk, e-business director of the 43-dealership chain, thinks they can exceed the 15,000 mark this year.

He's one of the more technologically savvy people in the business.

To help him better keep track of what he was spending per unit sold, Belk developed an in-house revenue finder system. Basically, it's a daily log of all of the leads that come into the Hendrick stores — walk-in traffic, phone calls and e-mails.

Sales people are supposed to log all of the information, then Hendrick-built software analyzes it.

It lets him know which third parties are pulling their weight.

He's also experimenting with eBay Motors.

“Certain stores do real well with it, but it is a real labor of love because there is so much time involved,” he says. “It silently has become a monster for us, though.”

He only pushes units that may not turn as fast (ranging from expensive to cheap vehicles) through eBay. The margins aren't as good, but the dealer group is saving money by turning the vehicles faster, says Belk.

The group will be launching a Hendrick-branded auction on eBay Motors. It's just another idea he's playing around with.

But the labor of love may be the web site. While he's making sure customers click to inventory, he's working to showcase the dealerships. Several of them are high-end buildings that provide a lot of comfort for customers.

‘We're just trying to show off the facilities and our people and the culture,” says Belk. That culture gets a big boost from the Hendrick racing team, something promoted on the site.

500 Dealers Set To Go Live

The Reynolds and Reynolds Co. acquired Third Coast Media, a web site design company, in October of last year.

The deal left everyone wondering what Reynolds was going to do with its current web site product, Automark.

Both Automark and Third Coast Media names are going away. The new moniker will be Reynolds Web Solutions.

“We took the best features from both,” says solutions executive, Stuart Lloyd. The development and hosting services of the newly created group will be housed in Dallas.

Ever since the deal was announced, Reynolds has been rewriting the software for the new web sites. While Automark was based on the Java language, the new web site will be based entirely on Windows .Net platform.

Already the dealer pilots are live and Reynolds has 500 dealers signed and ready to go live this month.
— Cliff Banks