Feature Story

BUSINESS REFLECTIONS

by Bob Hagin

May 2, 1997

The automobile business is very, very big, both here and in all the industrialized countries around the world. At one time, it was estimated that one out of every nine Americans was directly or indirectly involved in the car or truck business and that involvement ranged from food service in the factories, to writing auto insurance policies for motorists. I'm included in that group, too, since I write about cars.

The bottom line of the car business is really pretty simple; someone or some business organization buys a vehicle from somebody or some sales organization and it rolls off the showroom floor destined for a finite life of service. When I was growing up, there was a standard routine. A salesman at our local De Soto, Hudson or Nash dealership ushered a customer (they weren't called consumers back then) into his showroom, exhibited the merchandise, demonstrated it and made the deal.

But things are rapidly changing and some of those time-honored ways of doing business are being circumvented. Credit unions are becoming middlemen, brokers are setting up deals and dealer association "tent sales" are collectively peddling cars and trucks in a carnival atmosphere all around the U.S.

But of all the forces for change, the most dynamic and potentially the most far-reaching is the use of the home computer and the internet to buy new cars and trucks. To get information on the performance or esthetic factors of a particular car or truck, the interested web-surfer needs only to sit down at the keyboard, click onto one of the many web sites that provide information and road tests and search among the offerings for the make and model that he or she is interested in. Everybody from specialized information providers like the Auto Channel, to traditional "buff" magazines like Motor Trend, offer road tests and evaluations on everything from Kias to Ferraris. In some cases, they're accompanied by video clips of the car or truck being examined, and the beauty of it is that the viewer can go "tire-kicking" any time of the day or night. Then the virtual shopping begins in earnest.

Since most potential buyers are pretty heads-up consumers (there's that word again), they want to get a handle on what the car of their dreams is going to cost them. At this point, they click onto one of the many "servers" who provide sales information. These are highly- specialized businesses that research prices of any and all cars, trucks and other licensable vehicles sold in this country, including motorcycles. The know the bottom-line costs of all these machines paid by retailers as well as the costs of all the factory options and accessories from special performance tires to cold-weather block heaters. For a price, the researcher provides an extremely detailed report on what a dealership pays for a vehicle, what the manufacturer's suggested retail price or lease capitalization cost should be, including costs and prices of whatever accessories and options are desired. The web-searchers usually wind up with much more information than they really need, but what the heck, it comes with the package.

At this point, most of us would abandon the virtual world and go out to dealerships to kick tires, inhale the new-car perfume from the unsullied interiors and peruse the colors available. If we buy, we deal with real people, sign real contracts and drive out in a euphoric stare of well-being.

But there is another way of doing it and again, it's the computer-oriented web-crawlers who are at the forefront of the new purchasing technique.

Around the country, a great multitude of dealerships have gone on-line with web sites that are, for all intents and purposes, showrooms without walls. A search of the web produces dealers of almost all brands who use their in-house web sites as an inexpensive and often very successful method of selling their merchandise. They make interactive "deals" around the country and will often provide air fare to customers who fly in to pick up their new vehicles. The system is so new that some of the auto makers are still trying to figured out how to uphold the time-honored tradition of "turn-and-earn." This is a system whereby dealers are allotted new hot-selling vehicles based on how many of them were sold the week before. Until the advent of internet selling, sales outside a dealer's primary area were relatively rare but now the entire world-wide web is a potential sales area for dealers who have the know-how. As it is now only about one or two percent of American auto sales are internet-generated.

I know those numbers can be increased, but it will take new and innovative technology. All the dealers have to do is figure a way to transmit that new-car interior smell over the wire.