Dealers:  Is there a looming digital divide?

In a recent article titled "The World in 2007:  Don't Bet Against the Internet", Eric Schmidt the CEO of Google was quoted as saying:

"…what’s surprising is that so many companies are still betting against the net, trying to solve today’s problems with yesterday’s solutions. The past few years have taught us that business models based on controlling consumers or content don’t work. Betting against the net is foolish because you’re betting against human ingenuity and creativity.

Of course this new technology raises profound challenges for many established companies..."

As someone who has worked in a dealership, here is what I thought about when I read Eric's quote:

• How comfortable were you as a car dealer or manufacturer reading Eric's words and thinking about how you do business?
  • Still running newspaper, TV, and radio ads to fill your showrooms?
  • Still buying Internet leads (letting others speak to your consumers because you're not very good at it online)?
  • Still too busy trying to do things the way you've always done them? 
  • Still have a website that is little more than a billboard?
    • This is my definition, but if all a consumer can do on your website is look at cars then call or email, you have a billboard.
    • In 2007, I want to be able to schedule my service appointments online, buy parts and accessories and for sure I want a shopping cart experience when I want to buy a car.
    • Email forms do NOT cut it.
• Most consumers do NOT prefer coming in to a showroom when buying a vehicle.  Traditionally and even largely today they just have not had any choice. If you think that is not going to change, you are betting against the Internet.
• Newspapers and to a lesser extent radio have already experienced what happens when their business model stood between controlling consumers and what consumers wanted.  If you don't think that can happen in automotive, keep reading. 
• If your online presence is designed so that consumers who do bother to go to your website can only look at pictures of your vehicles and send you an email, you are going to be disappointed with your Internet results.  That strategy only serves your needs, not those of your consumers.  By continuing, you are betting against the Internet.
• Your website and all the other online places you show your vehicles is your new age showroom.  It is where your consumers are.  How does your spending there compare to what you spend on your brick and mortar facility and how much you spend to fill it with consumers?
• Consumers are on the Internet because they want a different / better experience than the showroom.  Buying a car is scary to them.  It is a lot of money.  They experience trepidation because they don't do it very often.  They have no idea if they can trust you.  When they communicate with you, trepidation comes across as defensiveness and reluctance.  The Internet is a terrific place to hide when you are scared or uncomfortable.  How do you tap in to that to be profitable and efficient?  Other industries do it quite effectively, why not automotive?
• If you have ever experienced low Internet "conversion" rates such as  # leads received vs. # appointments kept or # website visitors vs. # leads received, then you are not overcoming these consumer emotions effectively.  That is your fault, not the consumer's and not the Internet's.
• You are "betting against the Internet" if you give up in frustration and go back to your old ways.
• At this point in 2007, you do so at grave peril to your dealership's very survival.

Sound alarmist?  Perhaps, but the true impact of the Internet is just now beginning to be felt in automotive.  Overwhelmingly, consumers use the Internet when buying a vehicle.  Yet to date "leads" are a relatively inefficient means to get consumers to buy.  A lead is an expensive sales channel for a dealer and manufacturer to buy, generate, manage, and most certainly is hard to sell to.  Often the result is lots of effort and low or negative profitability as giving away gross is done as a weak effort to get over consumers' real concerns surrounding trepidation and reluctance to engage.  As a dealer you could have largely ignored much of the Internet so far and while your volume may be off, your profitabiltiy could be better than than those in your peer group who have executed badly in this area. 

That may have been good enough so far and even allowed a certain smug arrogance by the old guard, but the day of reckoning is at hand.  A lead is not as good as the Internet is going to get for car sales.  Not even close.

But don't take my word for it.  Challenge yourself with facts.  How much is your current digital divide costing you?  Today, the best eDealers that I know achieve 35-40% of their total dealership's vehicle sales volume from the Internet and they do it at regular front-end (the car) and back-end (finance + insurance) gross profits.  

How does that compare to your dealership's Internet result?

How does that loss of profit make you feel?

As a manufacturer, this applies to you too.  Look to Scion or Mini to see how an online, competitive differentiation strategy impacts volume and dealer success.  At the manufacturer level, consumer choice is among competing brands and that means online shopping experiences matter.  Exactly why was Saturn successful with "A different way to buy a car" in the days before the Internet with what was then a fairly mediocre product?

Now why did I say that the digital divide is only going to get worse?  You may already be saying that it is pretty bad if you have just done my calculation.  For sure don't blame your Internet Managers if you are coming up short.  Responsibility for strategy and profitability belongs to whom in your dealership?  A person you have on a straight commission pay plan?

Here is why I said the digital divide is only going to get worse... If 80+% of consumers are on the Internet and the "lead" model is still quite inefficient, then adding a shopping cart in to the mix is going to separate those with profitable results even more from those who are betting against the Internet. 

Shopping carts are the defacto standard in every other industry and they are just now coming to automotive.  Ai-Dealer has been fine tuning its shopping cart since November 2006 and while indirect car sales (those from unsold cart follow up) remain the primary benefit, the first direct sale happened in April of 2007.  Others are now starting to come out with theirs.  Lithia added a different one on its new L2 used car superstore at the end of August and another major public retailer is due out with one next month.

You are either going to have one or have to compete with one.  I get asked this, so here is the skinny:  those the majors are using are from ADP (based on their AutoFuse acquisition and more recently known as "Deal Builder").  They are heavily customized, restricted for those large retailer's own use, and only work with an ADP DMS.  I am attending Ralph Paglia's session at the upcoming AAISP conference as I am sure there are great things in the works as there is no way their shopping cart is going to remain a custom solution only.

For those not familiar with it, here is how the adaptation of the shopping cart concept works in automotive: 

• Communicate that you have the shopping cart capability
  • Certainly insert the message in to your traditional advertising.
  • Do a bulk email to your sold + unsold consumers telling them about it (our website is now open for business).
  • Include a message about and a link to it in your auto-responder sent to third party leads (why let them shop elsewhere?)/
  • For now, Ai-Dealer gives a 30-50 mile franchise-exclusive territory to its dealers so they can insert the word "ONLY" along with the shopping cart message.
• The shopping cart goes behind a consumer login (so your dealership gets the selling opportunity regardless as to whether the consumer completes the deal online or not), but then comfortably removes those consumer trepidation fears.
• Viewing the experience through the lens of the consumer:

"I thought I'd put it to the ultimate test.. what did my wife think?  She's pretty crafty you know.  She selected the Camry and breezed through the rest of the process... She got a kick out of how the avatar's eyes followed the mouse and how it changed facial expressions... Now my wife has purchased a vehicle before, but it sounded like this was the first time she completely grasped the itemized breakdown of the deal."

Is it any wonder that the shopping cart raises website conversion rates?

Is it any wonder that a properly designed shopping cart lowers consumers' trepidations with its "Persuasion Architecture?"  It answers their questions, teaches them what they don't know, makes them comfortable and guides them through the process of self-serving their own car deal.  Not just the car, but price, credit, interest rates, rebates, trade in equity, extended service contracts, protections, tax, title, fees and accurate monthly payments.  The real deal, just like they are sitting in the showroom.  Is it any wonder that some complete this exercise entirely online, only arranging to come in for delivery?

Is it any wonder that the response rate to unsold shopping cart follow up is dramatically higher and less confrontational than with regular "inquiry" leads?

On which side of the digital divide do you want to be on?

Or as Eric Schmidt said:  Are you betting against the Internet?