INTERNET PICTURE KEEPS GROWING

The growth of the auto-motive Internet, in terms of reach, number of service providers, and variety of services offered, has been exp-losive. An array of new capabilities looms on the horizon.

As recently as three years ago, it was easy to label the Internet as just another advertising medium. Such a portrait was neither inaccurate nor dismissive back then.

But the Internet of 2000 is much more than part of the dealership's ad mix, and dealers should not refuse to take Internet capabilities seriously.

Today, dealers can conduct a larger part of their business on the Internet. That includes selling cars, parts and service; checking used-vehicle titles, accident and service histories; deciding car loans; pricing used vehicles; configuring fleets; virtually visiting auctions and, in the case of Saab's IRIS system, communicating with the factories.

Equally important, Internet companies continue to refine their product offerings by making the information generated more timely and useful - updating the used vehicle inventory daily rather than weekly, for instance, or using the customer data captured from Internet inquiries to help the dealership fine-tune its vehicle ordering practices to better conform to customer preferences.

The growth of Internet capability has only begun, most industry observers agree. For one thing, the Internet car-shopping audience has grown by 12% in the last year. Today, 40% of all car shoppers (up from 28% a year ago) consult the Internet at some point in the purchase process, usually at the outset.

Internet users constitute an increasingly broader sampling of the population, according to John Holt, co-CEO of the Cobalt Group, a Seattle-based Web site design firm.

"It's not just the affluent, white suburbanite using the Internet to shop for cars anymore," observes Mr. Holt. "Thirty percent of first-time Internet car shoppers make a household income of less than $28,000."

Another reason that dealers are getting more bang for the buck from the Internet is the growing number of partnerships between various Internet-based service providers. A service company that lists dealership used-car inventories may partner with a vehicle pricing guide, such as Kelley Blue Book, for example.

Or the dealership's F&I system might interface with an Internet-based loan shopping system that can decision a customer's application within minutes.

Manufacturers' web sites are also partnering with third-party providers. Carfax used car reports, for instance, are now available as a menu pick to Chrysler and Ford dealers on their Dial 2000 and Ford Star DCS systems.

"We're partnered with all the major car-buying Internet services - Auto-by-tel, CarPoint, Auto Trader/AutoConnect, Cars.com and others," says Scott Fredericks, vice president of marketing at Carfax.

He adds, "We're also connected to the major Internet portals, such as Yahoo!, AOL and Excite. About 10 million con-sumers visit our service each year, and a number of dealers advertise their Carfax reporting capability as a way to distinguish themselves from the competition."

The net result of the recent flurry of partnering initiatives is to keep the customer at the dealer's or manufacturer's site, rather than allow that consumer to wander off to other sites in quest of more information, such as vehicle pricing, invoice prices as well as MSRP, or financing options.

Several Internet sources, including Edmunds.com and Palo Alto, CA-based InvoiceDealers.com, provide invoice pricing and model-to-model comparison pricing. But few car-buying sites presently include all available pricing information. That deficiency is likely to be remedied in the near future, however.

"We provide Kelley Blue Book pricing information on our dealer sites," says Mr. Holt. "And pretty soon, I hope we'll have invoice prices as well. Consumers can already get invoice prices from Edmunds, so why take a chance on letting that customer wander off to a different site to get information the dealer or OEM site could provide?"

The future looks bright for the Internet in terms of expanded reach and capability. Mr. Holt sees the day when parts managers will be able to use parts locator systems, such as PartsVoice, to access each others' inventories and cross-stock parts that they can exchange with each other locally rather than each dealership trying to stock nearly every part at every store.

Such a capability will help dealers reduce the stock of obsolete parts - which can total up to 40% of a dealership's inventory - by making them more readily available to consumers and other dealers.

The service department of the near future will also be more Internet-driven, not only in terms of customers making appointments online, but also in dealership ability to issue timely service reminders and offer discounted services.

The dealership will also be able to create a "personal page" that details service work on its web site for each customer - information the customer will be able to access electronically at any time.

The "wireless Internet" will likely play a role in the near future. It's not hard to imagine the day when dealers and consumers may be able to run a VIN through the key pad of a cell phone to access a vehicle history report or run a title search on a used vehicle. This capability will be of obvious benefit to dealers, especially when they are attending auctions.

CarPoint, in a new joint venture with Ford Motor Company, plans to introduce technology that will allow a consumer to log onto the Internet (at any number of sites, including CarPoint's or a local dealer's) to configure a vehicle and order it electronically. The vehicle would then be delivered to a customer-selected dealership for pick up.

"A really big area of improvement in our web site design efforts will be in customer relationship management," says Mr. Holt. "There's a lot of competition for ownership of the customer and that customer's loyalty - the dealership, the car-buying service, the manufacturer.

"The Internet provides dealers with a direct link to many of its customers. But to use the Internet most effectively, three things have to happen.

"First, the dealer must advertise his Web site in all traditional ad media, print and electronic.

"Second, dealers must respond to e-mail inquiried immediately, within an hour or less. A J.D. Power study says that 40% of e-mail inquiries never get answered.

"And third, dealers need to be up-front when Internet consumers ask about vehicle prices. If the customer senses that he's getting the runaround about prices, he's gone. Probably forever."

Jim Maguire, director of marketing for Chicago-based cars.com, agrees that the immediate future of the Internet lies in the area of improving customer relations.

"The Internet allows a dealership to build a relationship with a customer before that customer even walks in the door," says Mr. Maguire. "Communication between dealership and customer can extend beyond just service reminders and vehicle sales ads to include things like articles about the vehicle that customer has recently purchased that the dealership can e-mail to that customer.

He adds, "We'll be able to help the dealer use information captured on the Internet more effectively to maintain regular contact with customers through e-mail. It also will help dealers analyze their inventory mix to make sure he or she is ordering the vehicles that are most interesting to the buyers, based on Internet inquiries.

"At the end of the day, all the tools available on the automotive web have only one purpose, and that's to drive the consumer into the dealership."

Angie Brown, director of dealer programs at CarPoint, adds one more benefit to the Internet's evolving and proven capabilities.

She explains, "We not only want to drive customers into the dealership, we also want to enhance the car-buying experience and to create the most positive and enjoyable shopping experience for the consumer. "The Internet is already doing that for a growing number of consumers."

A survey says dealers are recognizing the positive impact of information technology on their relationships with consumers.

The survey also contends dealers see efficiencies IT offers to the operation of their various departments.

EDS Automotive Retail Group conducted the national survey of dealers. They were asked to rate IT's impact on their businesses between 1 and 5. One meant no impact at all and five indicated a very positive impact.

Customer loyalty garnered a mean rating of 4.65. Customer service received a 4.57, repair/service got a 4.57 and parts sales rated 4.47. Other areas asked about were new-vehicle sales (4.45) and used-vehicle sales (4.43).

"More and more auto dealers are understanding that information technology can be extremely valuable in providing targeted and timely data, which will enable them to improve customer service and loyalty, as well as other dealership functions," says Linda Judd, vice president of the EDS Automotive Retail Group.

The Internet, which has been getting most of the attention in the automotive industry, is just part of the IT picture, Ms. Judd notes. "Dealers have the capability to understand their customers and their markets better than ever before," she explains. "But, it's a relatively new development and most dealers need to make the mental commitment to better utilize their computer and IT capabilities."

Manufacturers also want to learn more about customers. And the question of who should own the information gathered from customers and prospects at the dealership has been somewhat controversial over the years.

More than half of those surveyed (54%) say the information should remain the property of the retailers. Another 41% say the information should be shared. Only 2% of the dealers said they should turn over this valuable information to the automakers.

"It seems to us - and almost half of the dealers we surveyed - that some type of sharing of this information would be most equitable," says Ms. Judd.