We've heard it all before from dealers who say they don't care about the Internet. They say you can't make any money off an Internet customer. That all Internet customers care about is price - invoice price. That the old way of selling cars has worked just fine for the past 50 or 60 years - so if it ain't broke, don't fix it.
Oregon dealer Dave Thomas, 45, is living proof that business-as-usual won't cut it much longer. Thomas Motors is in a national scenic area along the Columbia River. Two stores are in The Dalles, which has a population of 12,000; a third store is in Hood River, population 5,000. In a total market area of roughly 50,000 people and with 16 franchises, Thomas and his brother Bob expect to sell a little over 4,000 new and used vehicles this year. In the future, the sky's the limit.
The reason: Thomas Motors' Web site, Autocost.com, is already the largest Internet-direct distributor in the Northwest.
The Internet, says Thomas, 'allows me to increase my incremental sales. My brother and I were looking for something to do that, because I knew my market was only so large.'
Thomas, who started his Internet operation in 1995 with one person, was one of the first dealers to sign up with the Autobytel buying service. 'Every one of my Internet customers comes from metropolitan areas, Portland or Seattle,' he explains. 'So I have to draw my people from a minimum of 80 miles (distance to Portland) to 300 miles (Seattle) away. If we were in a large metropolitan market, we'd be selling 250 to 300 cars a month, easy, on the Internet, because the demand is there.'
Right off the bat, Thomas, who started in the car business in 1968 at age 13, realized that Internet shoppers cannot be handled like traditional customers.
'When you get that purchase request from the customer, a lot of these sales-lead generators - or even the manufacturers - say you need to get back to the customer within a four- to six-hour time period,' he says. 'Well, I'm sorry, but that is too long. You have to be in contact with that customer in less than 30 minutes - 30 minutes is even too long.
'With our organization, we do what we call `contact in real time,' meaning immediate contact. As long as we get that purchase request within our 12-hour working day, we contact that person usually within the first five to 10 minutes. Because the longer you wait - every hour you wait - the less chance you have in closing that deal or selling that person a car.'
Thomas has a facility adjacent to his downtown store in The Dalles just for his Internet operation. 'We have eight full-time Internet people located in our Internet facility,' he says. 'We operate from 7 a.m. to about 8 p.m. If we had the business, we'd operate 24 hours a day. And it's looking like with the increase in sales that we are getting every year, we will have to staff more and more people.'
Thomas, whose father, Fred, started the dealership in 1960 with three employees and a Lincoln-Mercury franchise, says dealers cannot use the traditional sales process to close a deal with Internet customers. 'The process we've developed is based on what we've heard from our Internet customer. What they want, what they want to hear, the way they want to be treated. There is a whole different thought process for dealing with Internet customers.
'You cannot use that stereotypical old sales process on an Internet customer. First of all, they know a lot more than the average salesperson does about their product.' One reason for that is the high turnover rate in the retail auto industry.
'Another thing,' says Thomas, 'is you have to have the answers to their questions immediately. There is no calling them back, or checking with a manager, or any of that.'
On the Autocost Web site, salespeople are called 'Internet consultants,' and a 'straightforward approach' is touted. 'Autocost staff has been trained to always be up-front and honest,' reads the 'About Us' section. 'You get straight, honest answers to your questions, and a discounted wholesale price from an Internet consultant who handles the whole deal. No bull, no back-and-forth, and no long wait!'
Price is, of course, another difference between shoppers on the Net and traditional customers. 'Internet customers are very informed, and they know what your invoice price is,' Thomas says. 'In a lot of cases, they have retrieved the invoice price off the Internet, and in some cases, it is not an accurate price, so there has to be an education process. What we do is we have full disclosure in the first 10 minutes of the conversation. We disclose invoice in the first 10 minutes.'
Thomas admits that the practice of full disclosure seems off-putting to many dealers, to say the least. 'Dealers are going to say, `This guy is crazy!'' he says. 'Well, excuse me, but the customer already knows what your invoice is, or about what it is.
'The problem with retrieving their information is lots of times it doesn't have advertising assessment and so forth or even freight on their invoice price. So you have to lead the customer through an educational process so you can match your invoice with their invoice so you can be talking apples and apples. And then the price is determined based on supply and demand. The higher demand, the more you are going to pay for it over invoice.
'But I have to say that an Internet customer is not doing this just for price,' Thomas adds, 'and I don't care if people on the Internet are purchasing CDs, cars or clothing. The main issue is service. All these people want is someone to help them through the shopping process. They just want somebody to answer their questions, confirm their information, and be up-front with them on the price. Price is not the issue here -it's the process.'
Thomas uses several Internet buying services as lead generators. 'I was one of the first dealers to sign up with Autobytel,' he says. 'Everybody at the time told me I was crazy. But I remember when my dad signed up with Toyota in 1965, he came home frustrated and depressed because his fellow dealers were telling him no one was ever going to buy Japanese cars in the United States. That always stuck in my mind. He always told me, `Don't be afraid to try new things.''
Thomas' Web site is quite different from a typical dealership's page on the Internet. It has its own name, essentially a new brand name, with more meaning than just the dealership's name. It also has unique categories, such as 'Testimonials,' 'Delivery' and 'Media'; and the pricing sections work quickly and easily.
It was created when buying services started to expand. 'Unfortunately, the lead generators are chopping their territories,' he says. 'My fees have been raised, and my territory is 50 percent of what it was. But we saw that coming down the road about 21/2 years ago, so we developed our Web page called Autocost.com. We are still fine-tuning it. We are always doing new things to make it more convenient for the customer.'
Thomas and his brother have expansion plans, but as with their Internet operation, future growth won't follow a traditional path. 'We are in the process of setting up a company that will assist dealers with the Internet sales process,' he says. 'We're setting up a company that allows dealers and also manufacturers to get into the e-commerce field without having to add the huge amount of expense that it takes to set up a separate Internet department.'
With the new company, dealers 'will be able to hire a vendor or a person who represents the dealer and processes the purchase requests in a manner that the Internet customer admires.
'We've talked to Toyota and other manufacturers that are very conscious of the power of the Internet,' says Thomas. 'By the year 2002, they figure 75 percent of automobile purchases could be made over the Internet. Things are definitely going to change for our industry, and some of the manufacturers realize this, and they are preparing for that. But a lot of our dealer body doesn't see it, or doesn't want to accept it.'
And that, according to Thomas, could be deadly. 'Everybody's an Internet customer; the problem is, not everybody has got on the Internet yet. It's like VCRs. Do you know anybody today who doesn't have a VCR? Microwave? CD player? Fax machine? People are accepting the Internet five times faster than they did the VCR. So it's a wake-up call. Dealers have got to understand that the Internet customer is the car-buying public.'
According to Thomas, the high volume of purchase requests from Internet shoppers that are not turned into sales is proof that dealers who are already on the Net also must respond differently. 'The Internet is changing our industry so fast that our industry can't handle the volume of purchase requests,' he says. And when dealers handle them as if they are business as usual, 'then they are not being effective, and they are not selling cars. So, really, the winners are going to be whoever can get out there and get into the e-commerce field and change some of the selling standards, change the sales process, to adapt to the Internet purchaser's needs. Dealerships that can do that are going to sell a lot more cars.'
Karen Passino is an Automotive News associate editor in Indian River, Mich.