The decision to adopt new technology into a dealership conjures up images of past experiments that failed to deliver on their promises, were significantly more expensive than planned, and/or were quickly replaced with "better" solutions. Often the "better" solutions suffered from the same problems experienced with the earlier solution. Does the Internet suffer from the same risks and how might a dealership make an informed decision concerning its approach to this medium? Before we answer these questions, we need to examine some hard facts.
According to Internet Valley (www.internetvalley.com), in 1993 there were approximately 100,000 www Internet "hosts." A host is defined as a "uniquely reachable computer." That number can be sampled electronically but we are unable to accurately determine the number of individuals who use the Internet, since several hosts may have multiple individual users. In 1998 there were at least 38 million hosts. We can safely conclude from this that the Internet is not going away any time soon and the number of persons using the Internet will increase.
The U.S. Government publication, The Emerging Digital Economy, estimated that 16% of all new car buyers in 1997 researched their purchase over the Internet. The publication goes on to estimate that by the year 2000, that number will have increased significantly. Automobile dealerships felt the effects of this trend with even more downward pressure on already thin new car margins.
These facts tell us that not only will the Internet continue to impact how business is conducted, but also that the effects of the Internet will strain our resourcefulness as business owners and managers. In short, we must learn to use this tool effectively by creating and implementing an Internet strategy.
There are a number of business service providers emerging today that promise to assist you in your quest to master the Internet medium. Examples include automobile locator services, Internet web creation and hosting services, and companies that provide a credit application distribution service to improve response time and back-end profitability.
There are five basic questions that a dealership should consider when evaluating an Internet service or technology: 1) What is the value to the organization? 2) What are the risks of implementing the technology? 3) How easy is it to implement? 4) Is the industry moving in this direction? and 5) What are the alternatives?
The first question concerns the potential return to the business. The value of a proposal is measured against its ability to return more profit to the dealership and/or reduce cost by a factor that exceeds the initial and continuing investment in the new technology. While we often evaluate a proposal based on the initial investment, the continuing costs associated with training, lost productivity, required management attention to the technology, maintenance of the system, and other factors often exceed the initial investment. Before committing to a new product or service, make certain that you have assessed the continuing costs associated with that technology.
In the case of Internet technology, the minimum initial investment required is a Pentium-class computer, an ISP (Internet Service Provider), and a dedicated phone line. This will enable the dealership to access the Internet. For more committed Internet users, high-speed access is achieved through an ISDN line. The continuing cost is usually limited to the cost of the Internet access service and the local phone line. Internet browser training (Internet Explorer or Netscape Navigator), in addition to more specialized training on the particular service software, should also be considered.
When you decide to make your dealership accessible through the Internet, you might evaluate several Internet web site creation and hosting services. Some OEMs have web design and hosting available to their franchisees. Other Internet related service companies offer web site hosting services. Finally, the dealership may decide to have web sites in several locations if a large Internet presence is part of the strategy.
The return to the dealership is access to those customers who research their automobile purchase through the Internet. If the dealership does not have an Internet presence, that portion of the market, estimated at 20%+ of all new car purchasers in 1999, will be missed. As we discussed earlier in this article, those customers are becoming an increasingly important group.
The risks of implementing an Internet strategy are relatively minor. The greater risk is associated with not having an Internet strategy and presence. Since there is no alternative to the Internet, choosing to not participate in this communication medium is only postponing the inevitable. By carefully considering each of the points discussed in this article, your dealership will adapt and adopt the Internet as part of the dealership marketing, sales, and management practices.
As the vice president for e-Fin Electronic Financial Marketplace, Michael Hucks uses his unique blend of sales, marketing, and technology capabilities to further the development of the world's first fully comprehensive electronic financial marketplace for automobile credit applications. If you have specific questions or require more information about this subject, please check the appropriate box on the reader response form on page 3. mhucks@dealeronline.com