Ultimately, the only winners will be the local dealerships and car makers who use the Internet to get more customers and strengthen their customer relationships by providing additional services after the vehicle is sold.
I'M NOT THE KIND OF PERSON TO SAY “I TOLD YOU so,” but sometimes the urge is too strong to resist. This is one of those times.
A few years ago, a lot of people were saying that the Internet would put franchised auto dealers into history with the dinosaurs. Third-party lead referral and buying sites were spending wads of cash on advertising that made the public think their ideas were actually the wave of the future.
Money from Wall Street poured into this new automotive retail adventure. The only problem was that people didn't really buy cars on the Internet. They didn't for a variety of reasons, including franchise law restrictions as well as a basic uneasiness about making such a major and emotional purchase that way.
At that time, I was of the opinion — and told anyone who would listen — that these third-parties were mere gap fillers. I said that when dealers and manufacturers got their Internet act together, the need for these companies would dissipate. That is happening.
These third parties did, however, serve notice that the Internet was a medium with which to be reckoned. Eventually the dealers and the automakers woke up and started their own Internet sites. Now, many dealers get more actual buyers from their own web sites and manufacturer sites than from these other companies.
So, while I'm practically breaking my arm patting myself on the back for being such a pundit, I read something that caused me to pause and reflect.
An article in the February issue of Playboy magazine (proof that I read the articles) details the writer's experience using Greenlight.com to purchase a Volkswagen Beetle.
Mark Frauenfelder, editor of Playboy's “Living Online” section, explained that Greenlight was easy to use, gave him the price, the MSRP and the invoice price. It allowed him to pick his colors and put a $200 deposit on a credit card.
Greenlight found the Frauenfelder's car in San Diego, south of Mr. Frauenfelder's base in Los Angeles. Two days later, he went to the dealership with cashier's check and paperwork from Greenlight in hand. The deal was signed in a matter of minutes.
Despite Mr. Frauenfelder's experience, he seems to be in a small minority of car buyers.
Only 13% of consumers would commit to a sales contract with a non-refundable, good-faith deposit given over the Internet, according to a study by Gomez Advisors Inc.
Because of that, The Orlando Sentinel reports that some analysts have gone a step further, saying that actually paying for a car through a web site, no matter what the business model, won't work. Web sites that provide car shopper leads to dealers — third-party intermediaries — also will die. Ultimately, they say, the only winners will be the local dealerships and car makers who use the Internet to get more customers and strengthen their customer relationships by providing additional services after the vehicle is sold.
Even noted industry watcher Maryann Keller quit Priceline.com in November saying, “For car buying, the Internet is an idea whose time has not yet come and may never.”
Mr. Frauenfelder's experience wasn't perfect, however, which brings about an area where dealers must adapt to the Internet culture. Although he did a lot of work online, he had to go to the dealership to pick up the Beetle. While there, he was directed to the F&I department, where he was encouraged to buy paint protection, and “some kind of leather upholstery treatment for $500.”
He closed his article with the line, “the next time I buy a car, it'll be through Greenlight. Just keep the finance guy away from me.”
People who use the Internet to research their vehicles aren't going to put up with pushy F&I salespeople, using tired sales pitches for products that some feel are unnecessary. These tactics are what give life to negative dealership stereotypes.
Fortunately, these views are changing among the public. The results of two new consumer opinion polls reveal that many of the stereotypes about new-car dealerships are outdated and inaccurate.
A Gallup poll found that 94% of recent car buyers had a positive experience with the dealership where they purchased or leased their most recent new vehicle.
Wirthlin Worldwide discovered 88% of minority consumers said they had a positive experience at the dealership.
The moral of the story is that dealers seem to have survived the Internet threat. But, they need to keep a keen focus on customer satisfaction, especially with those customers who learn about dealerships online. They are a different breed, but a breed that will only increase and expand as the Internet becomes more popular.
Tim Keenan is senior editor of Ward's Dealer Business. He can be reached at [email protected]