E for e-commerce effort

Today's latest and greatest Internet products may not be around tomorrow. Same for the companies hawking them. The trick for dealers is to pick what has staying power and then operate accordingly.

Not an easy task. Especially with all of the hype that comes with the Internet. But the Internet itself is here to stay. So, let's take a look at some of today's e-business trends occurring at the dealership level.

More than just a sales tool

The Internet is proving to be more than just a sales tool.

“The Internet is becoming more pervasive and more incorporated throughout the entire dealership,” says Donna Colarito, vice president of IT and E-commerce for the Asbury Automotive Group, Stamford, CT.

Mark Rikess, president of The Rikess Group, a Los Angeles dealership consulting firm, agrees.

“Dealers who got in early and embraced the technology are seeing applications beyond the sales lead. They are developing a holistic approach by applying the Internet throughout all dealership departments,” he says.

Some of these applications, says Mr. Rikess, include:

But only a few dealers are integrating their dealerships, according to Steve Nickelsen, president of a dealership consulting firm.

There are some obstacles to incorporating the Internet throughout the store. In addition to running a complicated business, dealers have to learn and change on the fly. It is a difficult process to get a handle on.

Another is investment. It takes a lot of money to add information technology infrastructure to the dealership. More than likely, the dealership will have to hire a full-time information technology manager — and they don't come cheap.

Perhaps the biggest obstacle is that one system doesn't exist yet that can be incorporated into the entire dealership. Dealers right now have to mix and match several systems.

“Dealers are all in the same spot, and this is unfortunate,” says Tom Vann, owner of Team Hillsdale (MI). “We need a total solution in the store.”

The move is on toward developing one system. Vendors and manufacturers are looking at ways to migrate the dealer communication systems to a Web-based model. But that will take time and money. For now, dealers will have to continue using various systems.

Web sites getting better

Dealers are moving quickly past merely posting inventory and some prices on a web site.

Internet-savvy dealers are developing web sites that are sophisticated and interactive Ms. Colarito says. “That can help create a more personalized experience for the customer.”

According to Mr. Rikess, effective web sites allow customers to save information, communicate real time with dealership personnel and offer rich content. Some of the tools act as customer relationship manager. Others enable the customer to complete the entire buying process on-line.

One new tool is providing the customer with a personal web page for automotive needs. Customers can save personal vehicle information such as service and repair records. It's sort of a CRM tool, bringing customers back to the web site.

Message boards and forums also are starting to appear on dealer web sites, allowing customers to communicate with each other about vehicle issues. Burt Automotive, a dealership group in Denver, CO has a message board on its web site that is quite popular with visitors.

Chatting on-line with an Internet salesperson is effective, according to dealers who employ it. Mr. Vann says his chat room receives more hits than anything else on his web site. Not many dealers provide chat tools on their web sites but the ones that do report when customers chat in real time with an Internet facilitator, closing ratios jump dramatically.

Several dealers find on-line trade-ins difficult, if not impossible. On many web sites, the trade-in appraisal button takes customers to the Kelley Blue Book site. This service only gives the customer an idea of what the vehicle is worth — it doesn't provide a firm price.

It does offer an independent third-party appraisal. They theory is that, if customers are miffed that their trade-ins aren't worth as much as expected, at least they're not miffed at the dealership.

Some dealers, such as Mr. Vann and Peter Brandow, developed their own processes for appraising trades on-line and providing firm prices to the customer. Fleet Lease Disposal offers another such system. The Florida remarketing firm uses auction data to give customers a guaranteed trade-in price.

Setting service appointments on-line is on the verge of being revised. Customers haven't bought into the idea of using e-mail to set up service appointments.

Mr. Nickelsen tells of a Canadian dealer who invested heavily in developing a process where customers could set up appointments on-line. Only three people used it in a year.

Alan Stejskal, AutoNation Inc.'s senior vice president of e-commerce, likewise says his company hasn't seen customers make use of the service, possibly because customers must wait for an e-mail confirmation. It's easier to pick up the phone.

Mark Ziehr, Internet sales manager for Howdy Honda in Austin, TX, says he is developing a real time system too, because customers haven't used the e-mail-based system.

Applying for financing on-line is a service most dealership web sites offer now. Not surprisingly, when a credit application is submitted, the closing ratios increase, says, Mr. Stejskal.

Because of the new privacy laws, dealers need to make sure they are compliant, and have the proper security in place before collecting financial information on-line.

3rd-party web sites help, sort of

Despite all the negative talk surrounding the third-party on-line buying services, the number of dealers who signed up with at least one independent buying service increased from 55% last year to 61% this year, according to a J.D. Power & Associates survey.

But many dealers complain about the quality of leads coming from the third-parties. Dealers closed only 10.4% of those leads, according to the survey.

Most dealers claim closing ratios are higher with leads from their own web sites. Mr. Ziehr says Howdy Honda had been signed up with several third-party lead generators but he trimmed the number to two this year. His on-line sales haven't dropped, and it saved the dealership about $5,000.

The J.D. Power survey also indicates the manufacturer web sites are improving. The OEM sites drive approximately 30% of all on-line buying service sales, up from 20% last year. Dealers are happier with the sites. About 75% of them ranked above the industry average in 2001 in dealer satisfaction. That compares to 25% in 2000.

Improved dealership and manufacturer web sites are not necessarily good news for the third-party site companies which had vastly superior sites earlier on. Ms. Colarito reports Asbury is finding that more customers are going directly to the dealership web site.

Third parties are developing alliances with the manufacturers. General Motors and Autobytel concluded a four-month pilot last month testing a locate-to-order model in Washington D.C. Autotrader.com recently announced a partnership with Forddirect.com. Autotrader.com is interesting because unlike most third parties, dealers seem to love it. With its focus on used cars, it is positioned this year as record numbers of vehicles come off lease.

Selling on line

Approximately 5% of people car-shopping on the Internet in 2000 completed the transaction online. That number will probably increase this year.

AutoNation reports sales are up 12% this year over last. Studies show as many as 70% of car-shoppers go online for at least part of the process, mostly researching and inventory checking.

Of that group of e-shoppers, 15%-20% will submit a purchase request, Mr. Stejskal estimates. The rest will fairly early on go off line and into the dealership.