NEWS ARTICLE - February 4, 2008

E-commerce alters how dealers do business

Automotive News
February 4, 2008
By Donna Harris

More clicks, fewer bricks. The auto industry continues to move elements of vehicle sales and service online. Some experts predict the electronic sale — from an initial customer inquiry to home delivery of a car or truck — will become dealers' dominant business model within five years.

Skeptics counter that selling cars and trucks is simply too complicated to expect that the complete process will be online soon — if ever. They ask: How do dealers take trade-ins over the Internet? How many customers will want to place their private financial data on the Web when they buy or lease a car?

But enthusiasts and critics agree: For better and worse, the Internet is substantially reducing the amount of time customers spend at dealerships.

"By the end of the decade, dealers won't have an Internet department," says Steve Emery, a consultant to the National Automobile Dealers Association. "That will just be how all car deals are done."

As dealers gather in San Francisco this week for the annual NADA convention, there's likely to be plenty of talk about e-sales and other online operations.

This special section of Automotive News examines aspects of the digital dealership: new- and used-vehicle sales, finance and insurance, parts and service, marketing and advertising, inventory management and factory communications.

Click-through Sales
Consumers are used to buying a variety of merchandise online from such popular Web sites as eBay and Amazon.com. Evidence suggests many customers would like to click their way through vehicle sales as well.

Two out of three consumers say a start-to-finish Internet car sale appeals to them, according to survey data from AutoNation Inc. The nation's largest dealership group is testing e-sales in Atlanta.

Asked how they would prefer to shop for a car, most survey respondents say they prefer the Web to a dealership visit, AutoNation says.

Last year, two-thirds of new-vehicle buyers and three out of five used-vehicle buyers used the Internet at some point during their purchases, J.D. Power and Associates reports. Power says the vast majority of vehicle buyers who shopped online said data from the Internet helped them decide on make and model and influenced the price they paid.

Product presentation already has moved to the Internet, says Jeremy Anwyl, CEO of automotive Web site Edmunds.com. "We can put a lot of elements of the transaction online," Anwyl says. "Customers are doing it themselves."

Dealers say increased use of the Internet has reduced showroom traffic.

"If you went back to the Internet leads and pretended they were people who walked into the showroom, I think traffic would be the same," says Mark Rush, a Lincoln-Mercury dealer in Columbus, Ohio.

Crawling Forward
According to an NADA survey, 96 percent of franchised U.S. dealerships had Web sites in 2007. Almost all of those sites allow shoppers to view vehicle inventory. Most list sticker prices. Most sites also let customers complete credit applications, schedule sales and service appointments and visit automakers' Web pages, NADA says. But just one in four permits buyers to order vehicles online. An even smaller percentage — 8.4 percent — allow them to pay for cars and trucks online.

Developing and managing software to accommodate start-to-finish e-sales could cost millions of dollars, industry consultants say. Only the largest dealership groups have the resources to pursue full online sales, the consultants add.

AutoNation and Lithia Motors Inc. have pilot programs under way to test complete online sales. Two more public dealership groups — Asbury Automotive Group and Penske Automotive Group Inc. — plan similar experiments.

AutoNation CEO Mike Jackson says his company's experiment is proceeding "slowly." But he adds that one chronic objection to e-sales — the notion that customers won't be candid about the value of their trade-ins — appears unfounded. "They do a pretty good job of that," Jackson says. "They're brutally honest."

Many smaller dealers appear far less prepared to take complete sales online. To get ready for digital sales, dealers need to improve online security and communication with customers, says Paul MacDonald, a computer consultant who has ownership interests in several Salt Lake City dealerships. "Most dealers today are just starting to crawl," MacDonald says.

Lenders Lag

Many vehicle lenders also are unprepared for e-sales, although they have made strides in electronic contracting.

In 2007, Chrysler Financial processed nearly 20,000 retail and lease e-contracts — about 2.5 percent of all contracts. This year, the captive finance company expects to complete 25 percent of contracts electronically, says marketing Vice President Kelly Mankin.

The online credit application network DealerTrack allows dealers to put credit applications on their Web sites, but customers still must come to the dealership to complete the process.

Edmunds' Anwyl says the next step in electronic F&I is an online deal jacket. "One of the more frustrating parts of buying a car is waiting to get into the F&I office," Anwyl says. "Why not put the deal jacket online and automatically submit customers' information to a bunch of banks? As they get approved, they get an e-mail congratulating them."

Edmunds is developing a program that would allow customers to research vehicle purchases online and transmit their preferences to several dealers. When a customer visits a dealership, its employees would know the customer's needs and have contact information, Anwyl says. As a result, the data wouldn't need to be re-entered into the dealership's computer.

Neosynergy LLC, a dealership software vendor, plans to introduce an electronic deal jacket this year. CEO David Wassermann says the program is compatible with the dealership management systems sold by Reynolds and Reynolds Co. and ADP Dealer Services.

"We take customer information and move it into a desking tool without a dealer having to rekey," Wassermann says. "It allows the dealer to do business online 24/7."

Red Flags
As technology advances, legal concerns remain about online vehicle sales. Some state franchise laws prohibit off-site sales. Federal law requires dealerships to follow safeguards against identity theft.

For example, under new federal "red flag" rules, dealers must check photo identification to confirm customers' identity, says Mike Charapp, a dealer attorney in suburban Washington.

Says Charapp: "How does one do that over the Internet?" 

John Symes owns three dealerships in suburban Los Angeles. He says California requires customers of franchised dealerships to take delivery of a vehicle on site.

"Bad things happen when the title is floating outside the dealership," Symes says. "A salesman can go to deliver the car but instead take the title and disappear. Or the salesman meets the customer with a brandnew Escalade, and the customer pulls out a gun."

Adds Symes: "People today want to rush the process — click and have the car delivered. Unfortunately, it's not that easy."

About PowerDEX, Inc. / ControlCSI

PowerDEX, Inc. (www.PowerDEX.net), of Reno, Nev., is the developer of the ControlCSI (www.controlcsi.com) hub of web-based applications created exclusively for the Automotive Industry. In addition to NeoSynergy’s products, the ControlCSI suite includes ChatDEX, an innovative live-chat program; ChatDEX+, which integrates ChatDEX with a 24/7 live-chat monitoring center; MailDEX, an enterprise-level mail server; CallinDEX, a total call-in solution; and AnaDEX, a ground-breaking analytics program that provides in-depth reporting and unbiased result comparisons of a dealer’s various marketing campaigns.

In all, ControlCSI enables a dealership’s ability to observe and engage customers in ways never before possible.

For further information about PowerDEX or ControlCSI, please call 1-866-721-7366 or visit our website at www.controlcsi.com and fill out a short contact form.

About NeoSynergy, Inc.

NeoSynergy, Inc. (www.neosynergy.net), based in Bloomfield Hills, Mich., is a provider of web-based enterprise automotive retail management, advertising and e-commerce software and services to the Automotive Industry. NeoSynergy's applications enable manufacturers, service providers, dealers, and consumers the ability to link in real time via the Internet to conduct vehicle, parts, and service transactions.

CONTACT
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