Dealers Dealt New Hand

A lot of automotive conferences have been held in the last few months, with excellent attendance. I take that as a sign of the economy recovering.

From some of the discussions at conferences in Las Vegas, there seems to be a renewed interest in leasing on the part of the “captives” and even some independent banks.

All the talk in the automotive digital world centers on new mobile applications, Search Engine Optimization, Search Engine Marketing, chat, web site video, and text marketing.

Yet, even with the buzz about new technology, auto retailing still is stuck in its original thinking regarding Internet lead generation. Dealers continue to generate Internet leads with the intention of bringing the consumer to the showroom for a conventional closing scenario. That's where dealers believe they retain an advantage.

In conversation with dealers, and from the queries at conference Q&A sessions, most seem overwhelmed by the quantity of Internet leads available. They are frustrated by the difficulty of separating the wheat from the chaff.

At a J. D. Power and Associates conference, a discussion on ranking and prioritizing Internet leads framed the issue well, but provided no real solutions.

At the DrivingSales Executive Summit presented with WardsAuto, there was some discussion of auto makers pressing dealers to invest substantially to upgrade facilities.

To many dealers, this seems counterproductive, coming at a time when consumers relying heavily on the Internet care less about how great the dealership looks.

Today, consumers view their computer monitors as their showroom of choice. As vAuto's Dale Pollak has observed, “The Internet has commoditized both new and used vehicles.” Buyers and sellers have nearly equal information, giving neither party any real advantage.

Pollak has written a book on the subject, “Velocity, from the Front Line to the Bottom Line.” It is widely read in the industry.

It seems obvious that the dealer who can best control costs, and is bright and imaginative enough to recognize and capitalize on opportunities is poised to win in this new marketplace.

Dealers who stubbornly adhere to traditional business models could be in trouble, especially if they are pressured into dramatically increasing their cost structure.

Increasingly, more consumers prefer to use the Internet not only to gather information but also to negotiate price.

A survey by AutoBidsOnline.com says 94% of car buyers prefer to keep their contact information private when shopping online. They feel entitled to get the pricing information they want without providing personal information or going into the dealership.

These new consumers are increasingly resistant when dealers continue to lure them to the showroom for a traditional close.

Consumers today tend to come to the showroom, take up a salesperson's time, take a demo drive, gather information, and then go home to use the Internet to work for the best price.

Often the salesperson is negotiating against another dealer many miles away or even against his or her own Internet department!

To a degree, this seems to be a generational trend. Previous generations were more receptive to the traditional approach because that's all they knew.

They weren't as well armed to negotiate and were relegated to long-established negotiating. It seems younger generations just don't care about these things.

From my conversations with younger consumers and exchanges with college economics students, they seem to think the dealer distribution channel is unnecessary.

In their mind, the Internet was created to facilitate their being able to get what they want for the absolute best price.

This trend disturbs dealers. But it is what it is. Dealers need to prepare for this. And auto makers need to get real.

David Ruggles is an automotive consultant and former dealership general manager. He can be reached at [email protected].