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Internet Impact Grows: Dohring Survey

February 15, 2001

The Internet may have become the friend, not the foe, of dealership-based car sales, according to a Dohring Company national automotive consumer study conducted in January 2001.

But those sales are going on in new ways, with informed customers challenging salespeople on prices, according to Rik Kinney, senior vice president of the Glendale, Calif.-based company.

AKinney said that’s because customers can now challenge sales people and feel confident about the deals they strike.

“One-price shopping was, in its day, thought of as a solution to the ‘bad’ experience people supposedly had in dealerships. The Internet is actually playing a more important role in arming people to the point that they actually feel comfortable going into dealerships,” Kinney said in a presentation in Detroit.

According to Kinney, eight out of ten car buyers actually like to negotiate a purchase price, and car purchases are such a major event that most buyers want a “bricks-and-mortar, eyeball-to-eyeball” experience to go with it.

The Dohring Company provides custom market research to automotive retailers, and has conducted its National Automotive Survey eight times since 1993. The 2001 scientific survey, done in early January, randomly contacted 7,955 drivers. Its results have a margin of error of plus or minus 1.1 percent.

The data show that 64 percent of Internet-using car shoppers used the resource to check the dealer’s invoice price, and that 91 percent said dealer invoice information would be important to them in the purchase of their next vehicle. Kinney said that turns the typical sales experience upside-down.

“The sales price, for these people, starts at invoice and goes up. It’s not the traditional MSRP and down process.

“The pressure on salespeople is on, here. They have really got to know their stuff. Otherwise, the consumer is likely to know more than they do. I think the Internet is likely to push the level of professionalism and product knowledge of salespeople to the highest level we’ve ever seen,” Kinney said.

According to Kinney, car buyers are using the Internet to change the car sales experience, but primarily through online research, not by using buying services.

“They’re looking for information; they’re looking for all kinds of information. They’re not looking necessarily to buy the vehicle online and avoid the dealership at all costs; they’re simply looking for information,” he said.

“When they go into the dealership, they know what the car’s worth, they know what the dealer is paying, they’re not so in the dark as perhaps they once were when it came to buying a vehicle. Which, quite frankly, makes them an easier sale – at least with regard to a professional salesperson.”

Dohring survey results showed the importance of the Internet has grown in shopping and buying decisions since last year, when 46 percent of people said it was “not at all important” in their decision-making. The 2001 results show only 20 percent believed the Internet was unimportant, while those who believed it was “important” climbed by 14 percent from 2000’s 12-percent figure to 26 percent this year. The percentage of buyers who labeled the Internet “very important” grew to 15 from 10.

Buyers are becoming accustomed to making purchases online, according to Kinney, with 80 percent of those surveyed saying they had bought something online, no matter how small a purchase, up from 39 percent who had done so last year.

More than one-quarter of all the consumers surveyed said they had used the Internet in some way in their most recent vehicle purchase. Since the survey focused on people who were about to buy a vehicle, that purchase could have been several years ago when fewer online services were available, Kinney noted.

But of those Internet users, most said they visited consumer guide sites and manufacturers Web sites. Only 46 percent said they visited dealer Web sites, though that number was up from year-ago figures of 38 percent. Auto enthusiast publications, online buying services and Internet chat rooms actually lost share compared to year-ago figures, with buying services plunging five percent and auto enthusiast publications down six percent, to 19 and 20 percent respectively compared to year-ago use figures of 24 and 26 percent.

“People are using the Internet more as informational tool as opposed to actually looking to purchase. And I guess the question with the third party buying services and such, is, what is the value to the consumer? What’s the benefit to them? That would need to be more fully defined for them in order for them to more fully embrace online buying services,” Kinney said.

Other findings of the consumer survey show that new-car sales may be in trouble if automakers try to eliminate incentives and discounts they have used to move inventory. Car buyers are already focusing on the growing fleet of high-quality, off-lease used cars available, and the number of buyers who said their next vehicle is likely to be a used car climbed to 48 percent this year, up from 38 percent in 2000 and the highest percentage number reported since 1996.

“Incentives have been a tool manufacturers have used to almost prop up vehicle sales, kind of pulling people out of the used market and into the new market,” he warned.

“Vehicle incentives have become sort of a drug. People expect vehicle incentives – when they’re not present, they tend to be out of the market.”

Dohring’s survey found that half of all customers would rather buy a higher-end used vehicle for $20,000 than a less-equipped new vehicle for the same price. The figure should be a warning to the industry, Kinney said, that their recent robust years may have artificially inflated demand with huge discounts.

The real demand for new cars may be much lower than the industry expects, and customers using the Internet for information will be just as fast to take advantage of good used-car values as they are to buy new, according to Kinney.

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