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Dealers Not Taking Internet Seriously, Study Says

15 October 1999

Dealers Not Taking Internet Seriously, Study Says; Consumers Prefer On-line Auto Financing, Many Still Want to Talk to a Sales Representative In Person; More than 30% Snack While on the Web

    BANDON, Ore., Oct. 14 -- CNW Marketing/Research's latest
consumer study, to be released October 18, puts a fine point on answers to
long-standing questions about the effectiveness of the Internet as an
automotive shopping tool.
    The two-year project resulted in 1.1 million respondents with more than
219,000 heavy Web users. Some of the findings of the 300-page "Computers, Cars
and the Internet" report include:

    -- About 41 percent of serious Internet new-vehicle shoppers
       sent an e-mail to a car dealer requesting information
       about price, product availability and other subjects. Of
       those, only 20 percent received a reply. This lack of
       response may be the single best argument for automakers
       and buying services to circumvent the franchise dealer
       system.

    "The low response rate clearly indicates most dealers aren't taking the
Internet seriously enough," says CNW M/R Vice President Art Spinella.

    -- Satisfaction with the responses is equally telling. On a
       10-point scale, satisfaction scores ranged from a low 3.1
       for Mazda to a high of 9.1 for Jaguar.

    -- Because of the large sample size, the study is able to
       break down responses by model of vehicle eventually
       purchased. For example, year-to-year Internet usage as a
       means of collecting information jumped 176 percent among
       Cadillac Escalade buyers. General Motors' Cadillac
       division was up 109.6 percent. Pontiac, on the other hand,
       was up barely 17 percent. The single greatest year-to-year
       increase was among buyers of the BMW 7-series at 318
       percent.

    -- In their search for a new vehicle, consumers searched:
       * 4.3 different manufacturer sites
       * 4.8 dealer sites
       * 3.8 buying services (such as AutobyTel)
       * 3.6 auto financing sites.

    -- Fully 63 percent of those who used the Internet as a
       source of automotive information prior to making a
       purchase said they would prefer to apply for an auto loan
       on line rather than at a dealership or bank.

    As much as the Internet is touted by some as a means of eventually
eliminating the "new car dealership hassle," or dealerships in general, the
study shows resistance to doing too much of the auto-buying process
electronically.

    -- In seven new-vehicle intender focus groups held across the
       country, CNW M/R found that 43 percent felt on-line buying
       of a car was "too impersonal." About 41 percent said they
       wanted to drive a car first before buying and another 31
       percent said it was simply more fun to shop "in real life
       at a dealership or auto show" than to simply search for a
       vehicle on line. Nearly 20 percent even said they wanted
       to talk to a salesperson.

    -- Better than 26 percent of all new-vehicle Internet
       searches occur at the office with 59 percent occurring at
       home, 6 percent from a library and the rest at other
       locations such as dorm rooms and senior centers.

    -- The vast majority of those who shop for a new vehicle on
       the Internet continue to use other media such as
       newspapers as information sources, but cut back
       significantly on dealership visits.

    -- Most liked automaker web site (as of October 3, 1999):
       Toyota followed by Lexus, Porsche and Audi.

    -- Greatest point of dissatisfaction with automaker web
       sites: Slow download speed followed by muddy photos.

    -- Acceptable download speeds: For serious Internet shoppers,
       less than 20 seconds. A site that takes a minute to
       download results in a 60 percent defection of visitors.

    Conclusions: The Internet may eventually be responsible for 27 to 30
percent of new vehicle sales and 65 percent of auto financing. Women, who
currently make up only 18 percent of new-vehicle Internet shoppers will likely
double that percentage within two years. Better than 25 percent of Internet
new-vehicle shoppers do so with a spouse or friend. And a third of all
Internet shoppers snack while on the web.
    "For automakers, the Internet is an arrow in the marketing quiver, but
diverting funds from other marketing areas could be dangerous," Spinella says.
"This study clearly shows that the Internet doesn't add a single new vehicle
sale to total volume. Rather, the Internet is best at convincing someone to
select one make instead of another."