Can dealerships make money selling cars online? I'm asked that a lot at Internet-related conferences. It's surprising how many dealers still think Internet sales either are not as profitable as the so-called traditional sale, or worse, they lose money.
In fact, many dealers make a lot of money from their Internet departments. The real question is not “Can we make money?” but “How can we make money?”
To get some answers, I talked to three Internet managers from this year's Ward's e-Dealer 100: Ashley Antonio of Paragon Honda in Queens, NY; Rick Kellogg of Bill Fox Chevrolet in Rochester Hills, MI; and Sidney Haider of Galpin Motors in North Hills, CA. (The conversation is part of a Ward's podcast that can be heard in its entirety at http://www.wardsdealer.com/podcasts/edealer100.)
Kellogg says it was common, when Internet automotive retail was young, to think of Internet customers as “mooches.”
“That has changed a lot,” he says.
Antonio says Paragon Honda management was guilty of similar thinking.
“We would think, ‘Oh no!’ High grief and low grosses — we don't want to deal with that,” she says.
Now Paragon will make anywhere from $5,000 to $8,000 per sale. Antonio says her highest grosses come from deals generated by third-party sites.
Paragon set up a customer relationship center with BZ Results to handle the leads. Once a lead comes in, the center tries to get the caller to set up a test drive. Pricing is provided right away, but there is an important distinction, Antonio says.
“We'll provide a price. Usually it is a certain percentage over the invoice price. But we never provide a payment price because you never know what position the customer is in,” she says.
At that point, the sales staff takes over. It is important to get everyone involved with sales to buy into the dealership's Internet pricing strategy, Antonio says. “Make it part of your culture,” she says.
Also important is that the sales people actually work the deals.
“And that includes up-selling accessories,” says Antonio. “It comes down to your staff being true sales people and not settling for the low-hanging fruit.”
Located in the Detroit market, Kellogg says much of pricing is fixed for Bill Fox Chevrolet due to employee-pricing programs. So most of his customers know what they want before they even contact the dealership. In fact, in most cases, the deal is done before the customer comes to the dealership.
Because of that, the back-end grosses, especially in areas of finance and insurance, are not as high as they might otherwise be.
Every vehicle has the manufacturer's suggested retail price and the invoice price listed on Fox Chevrolet's website.
“I'd rather the customer get that information from us than from sites like Edmunds.com,” says Kellogg He plasters his website with specials, and usually those specials advertise the base model in a stick shift. More often than not, the customer decides to upgrade, which leads to higher grosses.
“You have to work the deal smart, but you still have to be honest,” Kellogg says. “You have to be cognizant that you may not be the only dealer talking to the customer.”
Haider says many of Galpin's competitors still operate with the philosophy that the Internet customer is shopping only price. Galpin moved away from that strategy. Now it pitches the dealership experience and quality customer treatment.
“If you deal with them professionally, customers will let you make a profit,” he says.
Once that lead comes in, the Internet staff tries to get the prospect on the phone right away. “We don't let the customer determine or tell us what the sales process is,” says Haider. “It is our job to guide the customer.”
Cliff Banks is director of editorial development for Ward's Dealer Business. He can be reached at [email protected]