How to Create Digital Storefronts

AutoNation recently announced the creation of its first digital storefront that allows its website to transition from purely informational to transactional.

It will let customers do the majority of their auto sales transactions from the comfort of their home or office. I don’t see any reason why any dealer can’t transform the purchase process by creating his or her own digital storefront.

Probably the biggest hurdle most dealers face is the reluctance of sales management to embrace a more transparent and efficient method of auto retailing.  

Two of the key factors that need to be addressed when establishing a digital storefront are vehicle pricing and salesperson empowerment.

As for the first, about 80% of dealers don’t put a new vehicle price online, even though this is a primary reason prospects visit your website.

The reason most dealers don’t put a competitive price online is the fear of customers using their price as a shopping tool.

This somewhat convoluted logic is “I will cost myself leads in order to protect potential gross.”

An old mentor once said, “When you try to protect something you don’t already have you’re likely to wind up with nothing at all!”

Representatives of virtually all of the third-party website providers have told me that most often their customers don’t select the lowest price.

Their primary purchase drivers are convenience (i.e. proximity to their home) and what appears to be an excellent and transparent sales process.

The second issue, salesperson empowerment, is a real thorn that sticks in many sales managers’ craws.

They want to control pricing and “desking” the deal. So they often are loathe to empower salespeople with the ability to provide price quotes for customers that aren’t at the dealership.

Think about it. Everyone is used to shopping online and when they do, they expect to see prices. If they don’t see prices, they will shop elsewhere.

So, if you see the logic of a digital storefront, you are ready to create one. Here is how

First, create a separate digital-sales team. Hire people with the skill sets to handle incoming phone calls and internet leads. 

A bonus is that this will reduce transaction costs. You don’t need a business- development center when you have a dedicated digital sales team.

And you don’t need the same level of management supervision with this model. The salespeople are empowered to discuss all aspects of the transaction including payment and trade-in estimates.

Depending on the size of your store you’ll need one team leader for every six to eight digital sales associates. Most traditional stores today have around one manager (including BDC) for every 3.5 to four sales associates.

The next step is to establish a clear vehicle-pricing strategy. For new cars, I’d suggest either a pure 1-price or limited-negotiations model.

If you use a limited-negotiations model you need to determine how much you will come down from the quoted price. I’d recommend no more than $200. You’ll need a third-party reference to share with the prospect. A word track is, “We get our prices the same way you do: using third-party websites.”

There needs to be a financial penalty if sales associates or management negotiates the $200 of “wiggle room.” You’re going to post competitive prices and you need to train your people to overcome a $200 objection (about four dollars a month) rather than cave on the pricing.

Before launching a digital store, there are other factors to consider:

You should recruit a younger, well-educated sales force that has high levels of empowerment and training. The minimum performance standard should be 12 units a month. Twelve to 14 unit sales should create an annual compensation of between $40,000-$50,000. If I’m a Gen Y’er and making this kind of money I’m the “richest kid on my block.”

Due to a transparent, time-efficient and customer-centered sales process you should receive a significant amount of 5-Star reviews online. Those generate more leads. Research tells us many customers will drive 20 miles (32 km) or more to get what they perceive to be a great sales experience.

The digital-sales department works solely off of appointments. No more sitting around or standing out front of the dealerships waiting for something to happen.

And arguably the biggest customer complaint is the time it takes to buy a car. Due to the transparent nature of this sales process, a significant amount of information has been shared or gathered during the process. Most often a firm purchase price has been established.

By the time a customer arrives, you should have collected trade-in data, customer information, determined if the vehicle is affordable and have the vehicle ready for a test drive. That cuts out a lot of time spent at the dealership.

Dealers who develop a digital storefront will have all kinds of competitive advantages and will no longer compete on price alone.

Former dealer Mark Rikess is founder of The Rikess Group, a consulting and training firm. He is one of the original advocates of one-price selling. He is at markrikess@gmailcom and 916-715-8129.