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Scion to dealers: Online sales may click for you

Automotive News reports on how Scion is encouraging dealers to sell cars online.

SAN FRANCISCO--Toyota's Scion division wants dealers to consider adopting online retailing tactics that would appeal to the brand's youthful customers.

The idea is for a shopper to configure the vehicle, find it in the regional inventory, get credit approved, and make the purchase at a no-haggle price--all without setting foot in a dealership.

The vehicle could even be delivered to the customer's house.

Scion Vice President Jack Hollis said he has had several conversations with the Scion dealer council about how to implement the plan, which is still in the concept phase.

The plan would not require dealers to sell exclusively online. But Hollis said he believes the Gen Y customers targeted by Toyota's youth brand use the Internet to such an extent that finding and buying a car online is not far-fetched.

"People shop for homes online when they are moving. People buy boats online. So why not a car?" Hollis said in an interview at the press introduction of the Scion iQ subcompact.

Incubator for ideas
"It isn't a large percentage [of the total market], but it's our percentage," he said. "Gen Y kids have been connected their whole lives with Amazon. Youths are not buying cars the same way or [at the same] speed as other generations."

The Gen Y designation generally applies to consumers born between the early 1980s and the early 1990s.

In the past three years, the average age of the Scion xB buyer has dropped from 42 to 39; the xD buyer, from 43 to 40; and the tC buyer has held at 28, according to Toyota data.

Scion has been an incubator for ideas at Toyota. Hollis often says that the youth brand is more about "Who and how?" than "How many?" in terms of retail sales.

And the Amazon-style approach fits Scion. The narrow product lineup means that keeping track of dealer inventories would be easier than it would be for the Toyota brand. What's more, Scion's "pure price" strategy, which is basically a one-price strategy, would simplify online retailing. The biggest logistical problem would be outfitting vehicles with accessories that the dealer would have to have in stock.

Some dealers have already put some aspects of the approach into practice. Some have begun listing current inventories with "click to contact Internet sales department" links, for instance.

Dealership as concierge
Scion cannot go to a build-to-order system because all its vehicles are made in Japan, which is too long a pipeline. That means shoppers would have to search Scion inventories, whether at a specific dealership or at a port processing center.

For car shoppers who still want a test drive, the dealership becomes more of a concierge than a sales point, Hollis said.

Some studies suggest such a retail concept could have a narrow appeal.

Car shoppers on average spend 11 hours online vs. 7 hours test driving or in a dealership. But separate surveys by R.L. Polk & Co. and Northwood University showed that 65 percent to 70 percent of car buyers never contacted the dealer they bought the car from before entering the showroom.

"Most people did not electronically interact" with a dealership, said CEO Chip Perry. "The assumption is that the general trends in e-commerce evolution are impacting the auto industry just like every other industry, but they are not."

In a speech at the company's Interactive Marketing conference, Perry said automotive online marketing "is an influencing medium, not a direct-response medium."

Dealers, he said, "are not selling out of a warehouse. People are not buying cars online."

Scion's U.S. sales are coming back as credit standards for young buyers have loosened. After tumbling for four straight years, sales rose 27 percent to 26,621 in the first half of 2011. Scion's sales peaked in 2006 at 173,034 but fell to 45,678 last year.

(Source: Automotive News)