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INTERNET MATTERS

For the last several years we dealers have been bobbing on the waves of a perfect storm. What made up this perfect storm? First, unprecedented new car volumes of 17 to 18 million units putting the temptation of incredible multipliers into the mix and inviting new worlds of fresh players, wealthy and desperate alike, to enter our space. Add to this the dawn of the Internet with which manufacturers

For the last several years we dealers have been bobbing on the waves of a perfect storm.

What made up this perfect storm? First, unprecedented new car volumes of 17 to 18 million units putting the temptation of incredible multipliers into the mix and inviting new worlds of fresh players, wealthy and desperate alike, to enter our space.

Add to this the dawn of the Internet with which manufacturers and consumers conspired to cut out the middleman. Lastly, interpose project 2000 at full boil with public roll ups, consolidations, Ford's Tulsa experiment and the closing down of Oldsmobile.

During most of my tenure in this business, it was Labor Day, Thanksgiving, and Christmas that formed an unholy trio ushering in the end of the selling year. Car guys' heads hung low in anticipation of depreciating used-car inventories, increasing flooring costs and impossible marketing challenges.

Cutting through the holiday advertising clutter during the forth quarter was hard enough, competing for a share of the discretionary household dollar was misery itself. For sure the fourth quarter, in my neck of the woods, has always been ripe with budget cuts and layoffs. Smart money ties a knot and hangs on in hope of few days before New Year's Eve to recoup some of the loss.

But it wasn't always this way. Old timers still gather in the cafeterias of auction houses to reminisce over the glory days when the fourth quarter brought new models hidden under sheets until the special day when all the latest innovations (much of which included more chrome or longer fins) would be unveiled to the public.

Then, the legend continues, the public would be whipped into a buying frenzy by the desire to be the first to own the newest styles; for a fortunate few the fourth quarter was the time to achieve this distinction. It hasn't been that way for close to 50 years now. Stuff must have happened and things changed.

So now I'm scanning the landscape to see if this latest storm will bring more change to our industry. I find myself thrashing back and forth with the following observations:

First, those unprecedented volumes and revenues seem to have anointed the Koreans as kings of the entry-level marketplace, smashing open the floodgates of sub-prime and opening the eyes of second-tier finance houses to the opportunity of extraordinary arbitrage.

Next, the Internet promised a direct link between manufacturers and consumers. With this new tool, consumers of all ages have shown us just how motivated they were to suffer all kinds of new techno challenge to avoid grappling with their neighborhood dealership for a fair deal.

Then there is project 2000. Its origin was the usual rhetoric of manufacturers pushing to upgrade their franchise network in accordance with documented shifts in the population.

The result included stores changing hands and a flurry of consolidation that proved once and for all that the pros of high finance could lose just as much money as the rest of us.

It also proved the industry was likely to remain fragmented, but now with publicly funded consolidators living side by side with entrepreneurial dealers.

Sadly, despite all this bobbing and weaving and all the lessons learned in the process, I am here to tell you that record car sales have not been rewarded with record car profits.

Nor did they produce a more thankful public whipped into a frenzy over our latest models and incentives. And this, even though everyone likes a low interest loan and we now offer zero interest, the royal flush of interest incentives.

So, as I close my eyes and wonder what the headlines of the coming year might tell me, I read the following:

  • “Manufacturers Try Giving Away Cars For Free To Boost Sales”

  • “Dealers Contribute $1000 Per Car To Reduce OEM Losses”

  • “Sole Remaining Lead Aggregator (Autobytel) Finally Learns How To Directly Charge the Customer for Handholding and The Manufacturer For Research”

  • “Insiders Acknowledge That Inventory Was Always The Missing Ingredient To Directing Sales”

    But, perhaps the most provocative headlines we're likely to see are:

  • “Richest Dealers All Say Used Cars Drive Profitability — Current Margins Render The New Car Franchise Just A Credibility Tool”

  • “Internet Sellers Offer Points and Free Cars To Those Who Use Online Buying Services For Household Purchases.”

Have we changed? Dealers are still the narrow end of the distribution funnel although manufacturers and Wall Street repeatedly tried to enter the retail space.

Dealerships are still the overwhelming choice by consumers as to where to buy a car even though studies suggest that over 50% of all shoppers consult the Internet before taking delivery.

And notwithstanding consolidation, not a single manufacturer has succeeded in capturing any one of the 50 major U.S. markets and no consolidator has successfully entered all 50 of them.

So have we really changed or simply survived this latest storm? I'll let you know when I see how much more chrome there is and how much longer the fins are this fall.


Peter Brandow is a 25-year veteran dealer with stores in Pennsylvania and New Jersey. He is president and CEO of Brandow Companies.

TAGS: Dealers Retail
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