Challenge For Digital Dealers: Selling Into A Down Market
By Mike Bowers
As we stand now, the Internet-retailing juggernaut looks like it made a wrong turn onto a very bumpy road. Early predictions by the armies of 20-something techies about how the dealership dinosaurs would be crushed by the shear power and force of the new medium have been proven wrong. At least that is how it looks now.
Few would disagree that we are entering a "down market," the first in almost ten years, and auto dealers are busy reevaluating all initiatives. Many are looking at the time, attention, and money they are expending on their Internet selling activities and wondering if now is a good time to scale back or eliminate such programs. What may have appeared to be a good investment last year may look like a poor use of company resources as business tightens.
The collapse of the dot-coms in almost every retailing sector is well documented and the Internet revolution seems to be less comprehensive than many tech stock investors had hoped. The focus is returning to sound business principles- like positive cash flow. Is this a good time to abandon new ideas like Internet selling?
Have those dealers who have chosen to stand on the sidelines while all this "Internet stuff" shakes out been proven correct? I don't think so. I believe that the truth lies somewhere between the extremes.
No, the Internet is not going to destroy the auto dealer franchise system. Put that idea on the same ash heap along with the destruction of the dealer by publicly held dealer groups like AutoNation and United Auto. The system is stronger than that and will survive. However, just as the publicly held dealer groups will be a force in the marketplace, dealers actively involved in fine-tuning their Internet selling skills will also be a force to reckon with.
This business is about market share and using new technologies to carve a larger piece of a very competitive new car sales pie. Let me offer a comparison with some historical perspective. Technological advances in business practices are not a new phenomenon. Let's take the telephone as an example.
Imagine selling farm equipment in the late 1800s, before the telephone. How would you communicate with the suppliers and manufacturers of the products sold? Also, think about the marketing problems facing such a retailer. Just how would you market your products to farmers?
Clearly communication was much slower as was the pace of business. Letters and telegrams were the order of the day. Decisions would be framed in terms of months rather than days. Retailing was more dependent on face-to-face communication with your prospects. There was no telephone that could be used by your salespeople to follow-up with potential customers. They either came to you, or you went to them.
The telephone was a revolutionary change in communication in general, and maybe even more so in business communication. Surely business people had to adjust while telephone communication grew into a necessary element of all commercial activity.
But adjust they did. Surely no one could continue in business today without adequate telephone capabilities. I know that if our phones go out, we are essentially out of business. Same for your dealership(s).
Those who were able to adjust to the telephone quicker than their competitors had an enormous advantage.
The same is true for an auto dealership's use of the Internet, in the customer-facing selling process, as well as in every communication-based system within the business. Early adopters-those "in the game"-will have an advantage over those sitting back to see how it all shakes out. And make no mistake; at least one dealer in every market is still in the Internet game.
But what about selling in a down market?
It would be easy for dealers to look strictly at the costs associated with their Internet activities and determine that they simply are not worth the investment in light of lower revenues and profits. However, for most, this approach would be shortsighted.
But it would be unreasonable to assume that all dealers will take the same attitude. Some will continue their experimentation and implementation of Internet selling systems. Those dealers will come out of the sales slump with a clear advantage over those sidelining their Internet initiatives.
So, full steam ahead? Clearly, for many auto dealers, the realities of slower sales and profits must be taken into account. It can be argued that the prudent path now would be one that keeps you in the game, improving your knowledge and understanding of how Internet technologies will ultimately impact your business processes.
Don't waste money or spend wildly, but don't abandon the Internet as an important selling channel for your dealership. Those who overreact will ultimately lose market share to those dealers who continue to experiment and learn.
It is a balancing act forcing you to choose between the need to conserve operating cash, while still developing the Internet selling channel for your dealership. Consider all aspects and spend wisely.
Mike Bowers is managing editor of WD&S Publishing, Metuchen, NJ. WD&S is a provider of information services for the automotive retail industry. Publications include Dealer's Edge, Warranty Dollars & Sense, Auto Retailing on the Web, The Parts Manager and Fixed Coverage. mbowers@dealeronline.com
