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The Internet: False Prophecy or Holy Grail?

October 29, 2010

Our Sales Driver columnist, Cory Mosley, refers to it in his column this month. Several of our presenters at this year’s F&I Conference and Expo touched on it as well. What I’m talking about is the dealership of the future.

You know the future I’m talking about: Customer jumps on his iPhone or iPad — or whatever the gizmo of the day is — searches your virtual lot, doesn’t have to negotiate because the dealership employs a no-haggle pricing system and, presto! He or she is the proud owner of a new car without having to set foot on the showroom floor. As for the F&I office, well, the customer never had to set foot in there, either.

It’s a novel idea our industry’s thought leaders are pushing these days. And, yes, I get it, customers love the never-have-to-leave-my-comfort-zone world the Zappos.coms, Amazon.coms, iTunes and eBays of the world have created. But does it work for the automotive business? Yes, 75 percent of Zappos.com’s sales come from repeat business and the number of paying customers has grown to 8.2 million. Then again, no one ever questions the price of a pair of shoes.

What I’m getting at is, are we sure this is the road we want to travel down? Hey, I know someone will eventually figure out how to make this work. AutoNation is testing this idea out with its AutoNation Direct department and Sonic Automotive has made no secret of its intent to do the same. Heck, Penske just launched its own car-shopping site.

Look, whether you realize it or not, we’re losing some of that control we’ve always had over consumers. They know our pricing, which is cutting into our margins, and they are getting a regular dose of those car-dealers-are-at-it-again articles from the consumer press. So, yes, we have to change, but let’s not give everything away.

In a recent survey conducted by Chrome Systems, only 24 percent of respondents said they selected a dealer based on a friend’s recommendation, down from 37 percent last year. I bring that up because I can’t fathom that number getting any better if the customer never has to step foot in our dealerships. Sure, the early adopters of this e-dealer strategy may benefit, but what happens when everyone jumps on the bandwagon?

Now, don’t get me wrong, I get the point of those Chrome stats — buying behaviors are changing. Not even vehicle brands are winning the loyalty game these days, with the percentage of respondents who said they’d buy the same brand they previously owned dropping from 39 to 36 percent this year.

But you have to ask yourself, are the conclusions in that study permanent or just a result of the Great Recession? I mean, a mere 21 percent of respondents in that Chrome survey said they bought or leased their vehicle because they wanted something new. I just don’t think we can draw conclusions about where we need to head when consumers are buying out of need, not want.

But all this talk is moot if we don’t clear a couple of hurdles first. As JM&A’s Forrest Heathcott pointed out at our conference, things like intrastate and interstate vehicle sales over the Internet and electronic signature laws need to be addressed. And, as AutoNation’s Kevin Westfall pointed out at our show, we’ll still need to navigate the 19 and growing compliance issues we face on every deal.

And let’s not forget the culture change we as an industry need to endure. Cory talks about that change in his column. His message is we need to get our house in order before we start moving to this vision of the future.

Look, I'll admit I'm a little biased on this topic. After all, look at what the Internet has done to my industry. Many of my reporter buddies never saw what was coming when their stories began appearing online before the ink dried.

Listen, I'm all for consumers having it their way, but at what expense? Just look around your own workplace for a second. Many of those people you see walking around — maybe even yourself — might not be there when this virtual world materializes. My fear is the dealership of the future could turn out to be no dealership at all.

Comments

  1. 1. Jeff Harkins [ November 09, 2010 @ 01:15PM ]

    neat angle Greg!! not a bad october huh???

  2. 2. Greg [ November 09, 2010 @ 02:52PM ]

    Hey, thanks Jeff. And yeah, not bad at all.

  3. 3. Jeff @ DealerRefresh.com [ November 16, 2010 @ 08:00PM ]

    No matter the outcome, dealers need to be more efficient.

    I've worked with 2 different companies trying to figure out the complete online transaction and both hit stumbling blocks before realizing they have sunk a lot of money and resources into something that less than 10% of the population is willing to do - buy a vehicle completely sight unseen online. I'm not saying that percentage won't increase but not at a fast pace.

    "In a recent survey conducted by Chrome Systems, only 24 percent of respondents said they selected a dealer based on a friend’s recommendation, down from 37 percent last year." - the difference here is not enough considering the change in economy. Plus surveys like this are always skewed.

    I hope to see our industry grow and mature and we do have many changes on the horizon that will force us to rethink our process (we only have ourselves to blame for most of it).

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