Car dealers struggle to keep pace online

Though auto shoppers are embracing online shopping and auto manufacturers are plotting Web strategies, Net euphoria has yet to hit the car dealers.

3 min read
Though auto shoppers are embracing online shopping and manufacturers are plotting Web strategies, Net euphoria has yet to hit the car dealers.

While some are excited about new sales leads trickling in through email, others worry those leads are more trouble than they are worth. To tap potential sales from the Net, dealerships--never recognized as technology-driven businesses--need to set up a system for handling the email inquiries quickly. Dealers must also train employees assigned to track email leads and maintain a computer system to support the effort.

"Everybody has the mindset that they're not going to make any money, so why bother?" said Ray Knotts, sales manager at Capital Pontiac GMC Truck in Richmond, Virginia.

Manufacturers push Net efforts
But dealers and car sales associates may have to change their tunes soon. Ford announced earlier this week that it would push its dealers to set up Web sites and aggressively pursue Internet-generated sales leads. And earlier this month, General Motors and DaimlerChrysler announced separately they would step up efforts to connect dealers and consumers online.

Manufacturers say they are trying to give consumers what they want. They are being driven by polls that say 40 percent of new car buyers are using the Internet to shop for a car, according to Chris Denove, director of consulting operations for J.D. Power and Associates. And a growing number of consumers are using the Net to initiate the buying process.

"Dealers need to understand that the Internet is the way of the future, and if they don't begin marketing to these customers, they'll be left with a rapidly shrinking customer base," Denove said.

Still, Denove recognized the dilemma that dealers face. Using the Net, consumers can uncover what dealers pay for a car so they can know how much a dealer marks up prices in the lot. They use that information to bargain for better deals on a lease or buy.

"Better informed consumers contribute to shrinking margins," Denove said.

But it's not just shrinking margins that concern dealers.

The challenge for dealers
Chuck Cortesi, general sales manager at Broadway Ford in Oakland, said it's hard to get his employees "up to speed" on the Net. Broadway Ford has had a Web site for about a year and is affiliated with Autobytel. Cortesi said they outsourced management of the Web site several months ago because it was difficult to maintain.

Cortesi added that it's been difficult to deal with sales leads that come in through email, and provide senders with quick responses. Within the last six months, Broadway Ford has dedicated two sales people to follow up on Internet leads.

"It's a whole different challenge from anything we've known about the car business," Cortesi said.

Other dealers say they have yet to see profits for all of their effort. Knotts estimates that only 5 percent to 10 percent of his customers have resulted from Internet leads. Curtis Gunn, chairman of the board of San Antonio-based Gunn Automotive Group, said his company sells about 30 to 50 cars a month to customers using the Net across its nine dealerships.

"It's nowhere near as big a deal as the noise you hear about it," Gunn said.

Gunn said his company has at least one person devoted to Internet sales per car dealership, and his sales clerks try to respond to Net sales leads within an hour. Gunn also has Internet kiosks at each of his dealerships and at a local mall.

"I think [the Internet] is positive," Gunn said. "We sell a few more cars. If I don't do it, somebody else will."

Most dealers seem to agree with Gunn. As Wendall Lawrence, sales manager at Al Eames Ford Sales in Antioch, California, put it, being online is "essential" to his company's business.

"It's part of the constantly changing automobile business," Lawrence said. "If you're not out there, you're not going to keep pace with the changes."