Internet's full impact will be on the management of dealerships

The Internet's full impact on the automotive retail industry may not be on the actual sale of automobiles, but on management of dealerships, says Maryann Keller, a noted industry analyst.

NADA, manufacturers and dealers seem to agree as they all are working together to standardize Web-based communications and data transfers.

Ms. Keller, who spent some time with Priceline.com's dismal effort to sell cars online, says the Internet's biggest impact — particularly on the Megadealers — will be on the business side rather than on sales.

“One of the things that I absolutely learned at Priceline is that the Internet is an incredibly powerful tool,” says Ms. Keller. “I think in the auto retail system we're only beginning to scratch the surface of what it can do. It's going to bring a level of sophistication to the way these businesses are run. I think it's going to be fundamental to managing costs much more effectively in this business.

“We were going to point, click and buy a car,” she adds, explaining that most everyone was looking at the Internet as a sales tool. “That's sexy. But the real thing about the Internet is that it's going to become a workhorse in how these businesses are run. And it's going to make managers much more efficient about how they run their businesses, about how they measure productivity.”

One step in that direction is the publication of the Olympus document by General Motors Corp., Ford Motor Co., and DaimlerChrysler AG. This 70-page document is a blueprint for the hardware needed for future Web-based factory-dealer communications.

“It's a great step,” says Wesley Lutz, president of Extreme Dodge in Jackson, MI. “They put an incredible document together.”

Mr. Lutz, who is chairman of NADA's Technical Committee and a member of DaimlerChrysler's National Technical Council, says Olympus is monumental.

“It will improve the customer-to-customer connection and the business-to-business connection,” he says.

The Big Three now have turned Olympus over to the NADA, which will take the document to the world's other automakers for their imprimatur. Mr. Lutz expects this to be accomplished by the end of the year.

“We were going to point, click and buy a car. That's sexy. But the real thing about the Internet is that it's going to become a workhorse in how these businesses are run.”
— Maryann Keller

“Within five years, everyone should be compliant with the standards, and it'll probably happen sooner, depending on the manufacturer,” says Mr. Lutz. “DaimlerChrysler, for example, will stop supporting its satellite communications after 2003.”

With a standard of Internet communications, dealers — especially those with multiple franchises — are expected to save $600-$2,000 monthly, per franchise on communications costs alone.

Dealer service providers also will benefit from standardized communications since they'll only have to prepare one version of their product rather than 22.

Mr. Lutz, whose operation already is Olympus compliant, says these standards also will give dealers and their employees more capability than they have now.

“Eighty percent of dealers do not have LANs (local area networks), so they can't get the Internet to the desks of their people,” he explains.

Another NADA standardization project, which will streamline the business, is STAR, the Standard for Automotive Retail. This is a collaboration of manufacturers, service providers and dealers to standardize data elements for the industry.

Mr. Lutz says this effort is benchmarking the health care and banking industries. “They all use the same communications and the same descriptions for transactions and procedures.”