AutoNation Inc. expects its revenues generated by the Internet to hit $500 million this year.
The Fort Lauderdale, Fla.-based chain has always had big plans for Internet marketing. But after its initial foray in cyberspace, AutoNation now has data reinforcing its commitment to online sales.
Internet leads produced more than 6,600 vehicle sales and $150 million in revenues for AutoNation during the first quarter of 1999 - roughly 3.6 percent of the chain's new- and used-vehicle unit sales and 4 percent of the chain's new- and used-vehicle revenues in the first three months of the year.
Those percentages still are relatively small, but AutoNation's research reveals the Internet's enormous potential for attracting customers. AutoNation President John Costello would not speculate on how much of AutoNation's sales ultimately will be generated by the Internet, but the company plans to make a major investment in online marketing.
AutoNation found that in Denver, where it has emphasized the Internet as part of a new brand marketing campaign, 50 percent of its customers would not have visited the stores without an Internet presence, and 35 percent would not have bought from AutoNation if it did not have a Web site.
The Denver brand campaign, including the Internet strategy, eventually will be rolled out nationwide. The company also learned the Internet can triple the size of a dealership's sales territory. Promoting a Web site can expand a dealership's sales territory to a 30-mile radius. Typically, a dealership draws 90 percent of its customers from within 10 miles of the store, said Costello.
Although the Internet can enlarge dealership territories, AutoNation has no plans to use virtual dealerships to reduce its investment in bricks and mortar.
AutoNation is the largest dealership group in the United States, with 223 dealerships and $13.5 billion in revenue in 1998. The chain's stated goal is to dominate the car market using the Internet, but that will not affect AutoNation's aggressive acquisition plans.
AutoNation primarily will use its Web sites to build traffic at its dealerships, said Costello. Few customers are ready to buy vehicles sight unseen, so there is still a need for a large network of dealerships, AutoNation's research shows.
'Dealerships remain central to our strategy,' said Costello. 'The Internet provides an opportunity to generate greater traffic and revenue. The physical dealership will play an important role in the sales and ownership experience.'
Costello was known as a strong proponent of Internet marketing in his previous position as senior vice president of Sears, Roebuck and Co. But his experience with Sears convinced him that the Internet should be used to drive in-store traffic, not replace retail outlets. Some customers who gather research on the Internet still would rather come to a store to make a purchase, Costello said.
AutoNation defines an Internet sale as any sale that comes from an online referral service or from the AutoNation Web sites.
To boost online sales, the company is:
Setting up Web sites for each of its dealerships in addition to its corporate site.
Subscribing to several online referral services.
Using proprietary software called Compass, which tracks Internet leads.
Dedicating one or two salespeople at each dealership to following Internet leads.
Giving online salespeople pagers that alert them to incoming Internet leads.