Digital Dealer
By John Holt
Every once in awhile you hear something so ridiculous you just have to roll your eyes up at the ceiling and say "whatever." I recently had this experience while reading a Time magazine cover story entitled, "The Hottest Jobs of the Future," in which author Tom Peters makes a completely unsupportable remark to the effect that the Internet will cause auto dealers to go the way of the dinosaur. My response: He's dead wrong. Peters' uninformed opinion is being contradicted at every turn by significant industry, consumer and legal trends.
For starters, there are the franchise laws in 44 states that protect the dealer's right to sell cars. Recent challenges to these laws not only have failed to usurp the dealer's position, the laws are actually being strengthened and expanded all over the country. This from the Wall Street Journal, May 10, 2000: In September 1999, 32 states had laws restricting manufacturers from competing with their dealers. Since then, 12 more states have passed such rules, including some that toughened regulations already on their books. Already state laws ensure that independent, online sites such as CarsDirect are just fronts for franchised car dealers. So traditional car dealers have a lot more protection from Internet challengers than, say, booksellers do from Amazon.com.
Very true. Not only that, but manufacturers-admittedly, grudgingly and belatedly in some cases-are now endorsing dealer-inclusive strategies to the online automotive business. To give credit where credit is due, Ford fired the first shot in the e-broker wars this spring when they announced they wouldn't sell to brokers and didn't want their dealers to either. GM, Chrysler and many others quickly followed suit.
So where do dealers stand right now? On very solid ground, as a matter of fact. Admittedly, it can get a little confusing trying to follow all the plot twists in this three-way tug-of-war between dealers, brokers and manufacturers over who's going to prevail in the online auto business. A simple rule of thumb for keeping your bearings: Watch where the money goes. The Big Three have all recently announced Web strategies for their dealers; General Motors enlisted its dealer councils to help strategize a pilot program for online selling; Daimler Chrysler is backing the creation of Web sites for its thousands of "Five-Star" dealers. And, while they're busily lining up their own dealer-inclusive online selling strategies, the big manufacturers are turning their backs on the e-brokers.
The truth of the matter is that manufacturers as a group are now aggressively pursuing a model for the 21st century whereby the Internet and the dealership work in tandem. When you think about it, that's the only system that really makes good sense. Let's face it, this is still very much a people business. You can't take a virtual test drive or get your car serviced online. Now that customers can go online to do most of the research, financing, and paperwork associated with vehicle buying, dealers have more time to focus on the human side of the industry-customer service, test drives, and consultation. This kind of person-to-person contact increases consumer confidence and satisfaction and is an essential bridge between the customer and the industry.
None of this is as dispensable as Tom Peters and Time magazine have suggested. Is the Internet changing the way dealers do business? Of course, obviously. Is it a bell tolling their doom? No way. Just the opposite. The Internet will continue to have a positive effect on those dealerships that embrace its incredible potential for increasing sales, operational efficiency, branding, and customer service. The only dinosaurs in this equation will be the dealers who bury their heads in the sand or listen to uninformed doomsayers. Make sure you're not one of them. The rest of us will be busy having a very profitable 21st century.
John Holt is Co-CEO of The Cobalt Group, Inc., a provider of Internet solutions and business-to-business services to the automotive industry. Cobalt operates the automotive industry portal MotorPlace.com and the PartsVoice.com parts locator. jholt@dealeronline.com
