UnityWorks! Media // Industry Articles

Leveraging the Internet to Prosper in Today’s Retail Market
By Phil Sura, VP of Automotive Sales
As seen in Dealer Magazine: digitaldealer-magazine.com

On a flight from Minneapolis, I visited with a former automotive dealer who had left automotive retail for an opportunity to open a wrestling, boxing and marshal arts club in Atlanta (Lee won a gold metal in the summer Olympic Games). Lee is just one of a number of dealers nationally who have moved into a new career or have simply retired. Their reasons vary from losing faith in the future of the car business, to losing the desire to fight the day to day battle, to being pushed out by the manufacture.

The June 18 Wall Street Journal carried an interesting published article titled, "Big Three's Other Woe: Too Many Dealers" which reported one obvious concern. Toyota has 104 dealers for every percentage point of market share while GM and Chrysler have 285 dealers and Ford has 256 dealers. The article explained the contrast between a Lincoln Mercury operation and a Toyota store in North Hollywood suggesting that there needs to be a (continued) reduction in the dealer ranks. This uncertainty trickles down through the management positions and most of the staff positions. One report from NADA suggests that there are 100,000 job openings within the retail automotive dealerships. Many GM's have indicated it is harder to recruit top notch talent and that the level of commitment simply isn't there. There also appears to be more movement than ever within the senior management positions.

This isn't true across all OEM lines. Clearly, now is a great time to be a Lexus, Toyota or BMW dealer. Life is good for these guys. Dealers can make a lot of mistakes and still look like superstars if they have consumers chasing after them. For many of the others, life isn't quite as grand. All the bad news can not be tied to the manufacturer. There are Ford, Chevrolet or Dodge dealers who continue to earn a great bottom line while others in the same cities representing the same manufacturers are printing red ink.

Many of the dealers who are the dominate players in profitability, market share and low turnover have adapted to today's market. They are doing things differently. Billion Automotive Group in Sioux Falls , SD is a leader with 1,000 plus units each month. Bill Termaat believes in hiring topnotch people, paying them unselfishly and providing a fair balance between job time and leisure time. Bill has been a veteran in the car business for 30 years. He wants his managers to take a day off each week and holds them to a 45-50 hour work week. Bill knew that to attract and retain the best help, he needed a different personnel package than what he had in past years.

Billion is also a Wards top 50 E Commerce dealership. They believe the internet offers a tremendous opportunity to drive showroom traffic. The dealership has a team of twelve people in their internet office managed by Michael Johnson, who came from a software development group. Michael thinks differently than the traditional retail manager because of his background. The attitude with some dealers in less populated states like South Dakota is that the internet is a tool for the large metro dealers. With an additional 250 retail units being sold directly through the internet team at Billion, the Internet is clearly adding to the success of the dealership.

The popular expression; “location, location, location” is overrated according to Mike Gillespie, a first generation dealer in Chicago . Mike gets 8-10 people in his showroom every day that drive past three or four similar types of dealerships because of his focus with the Internet. According to Gillespie, his customers will drive from more affluent areas to get to his dealership because of the “box on the desk”. Mike will personally handle Internet leads on his BlackBerry if his Internet team is struggling to get a customer to visit the dealership. It is all about team work and Mike is leading by example. Mike trains his Internet team with different tasks such as providing them with a $250 credit card. The Internet team is allowed to purchase various items with this credit card to become familiar with how the Internet works from a customer perspective. Gillespie Pontiac is rated fourth in the nation and first in the Chicago zone. Mike is on the national dealer council for Pontiac and serves as president of the LMG. In addition to Pontiac , Gillespie has two other dealerships managed by one Internet team and a separate BDC. The internet is managed by Dave Page, Gillespie's Service Director. Dave attributes 40% of their 550 monthly retail sales to the Internet team. The store also has its own in house web designer. Dave manages 60 micro sites and the SEO efforts for each micro site. Gillespie's goal is to sell 60% of the retail sales through his Internet team.

Another Chicago based Pontiac dealership is Community Pontiac, managed by Richard Head. Richard started to focus on the Internet one year ago and the company is serious about expanding this part of its business. I think it noteworthy that 60% of the total advertising budget is directly tied to Internet focused initiatives. Moreover, according to Richard, 15%-20% of their retail sales are coming directly from the Internet. Community typically ranks third in retail sales for Pontiac in the Chicago Region. .

Courtesy Chevrolet is a powerhouse operation that consistently ranks in the top five for total retail sales nationally. This is a store that focused on the internet ten years ago with one of the automotive Internet pioneers, Ralph Paglia. Ralph has created more micro sites for Courtesy than any other person that we know of. Courtesy now has a team of seven dedicated used car sales people and twelve new internet sales people. Courtesy also enjoyed a 10% increase in retail sales last year (something that most Chevrolet and Ford dealers can't claim, unfortunately).

Courtesy has a focused approach with their recruiting and formulating career paths for employees. The path for the successful salesperson is to move into the Internet team. The dealership is forgoing most print advertising, now, investing largely in Internet advertising initiatives and some mailers. Brian Long is in charge of the used car internet team. Brian came from a retail automotive background. He previously worked as a team leader for Van Tuyl. Brian is young, bright, energetic and able to think outside of the traditional box. When I visited with Brian he was dressed for the Phoenix heat in shorts and a polo shirt. Doubtless, this dress code would not please some parochial dealers who required pressed dress shirts with ties. Courtesy has modified its dress code to better fit the changing business world and the values of the younger people.

The Chapman Automotive Group is another recognized leader in Phoenix and Vegas. The core marketing focus of the operation is driving sales through Internet teams. The group recruited a savvy teckie, Dana McFall, who has helped transform the way that the entire operation sells cars. The Chapman Group is strong on harnessing the power of the Internet to sell cars and they market themselves differently today than what they did five years ago. The result is that 27% of their total sales are Internet Buyer sales. Dana believes that there are three types of Internet buyers:

Anonymous Buyer -searches the dealers website and inventory but never submits information as a lead before visiting the dealership to make a purchase.
Never Responds Buyer -searches the dealers website and submits information as a lead but doesn't engage with the Internet team via Email or phone, however will purchase a vehicle through another sales person at the dealership.
Internet Buyer -searches the dealers website and submits information as a lead and then corresponds with the Internet team to make a purchase.

Dana believes that 30%-40% of the total retail sales are included in these three types of buyers. Dana is provided with less than 25% of the total store advertising budget so he closely measures every banner ad and every lead provider to maximize a return. He also focuses on driving an average closing ratio of 12%. The Chapman stores close anywhere from 8% to 16% of there leads.

Red McCombs is the largest retailer in the San Antonio market. When Rad Weaver needed to recruit a person to replace himself as the E Commerce Director, Rad was interested in finding a person who would take the team to the next level. Rad hired Tony Rimas who had a background in the field of Chemistry and Physics. All advertising dollars for this group are invested in the Internet. Every Internet advertising investment is analyzed from a ROI perspective. This group believes that advertising efforts apart from the internet are wasted dollars. Their modus operandi include SEO, SEM, website initiatives, lead generation, video streaming and driving people to their websites.

I am not suggesting that mastering the Internet is the only difference between the market leaders and others on the fringes. What I've presented is merely a “short list” of dealers who are leaders in their markets; although one common theme does exist. These dealers are aggressively mastering new ways to promote their operations and inventory through the Internet. With 80% of the car buyers using the web as a means to research options, it is obvious that customers have shown that they are interested in Internet advantages when researching and buying vehicles. There are many other examples of dealers who have evolved with the times. I have visited hundreds of dealerships over the past couple of years. Here are some of key points that I've observed with the successful operations:

The dealers who have embraced technology and the Internet as an opportunity are ostensibly ahead of the dealers waiting for the good old days to return. The dealers who have not partnered with the Internet have a variety of reasons for their reluctance. Typically, though, it comes down to a desire to stay with what has made them successful over the years and unease with the Internet revolution.
Successful dealers are willing to test new technology which helps them stay ahead of the pack. Invariably, these business people have a higher percentage of their advertising budget directed at SEM, SEO, video streaming, micro sites, banner ads and progressive CRM tools for their Internet teams.
Successful dealers have defined key measurements for the Internet teams which are reviewed daily, weekly and monthly by the management team. Examples would include overall closing ratio of sales to leads, response times, total leads per dealership, ROI for each lead provider, cost per sold unit per provider, and goals for Internet sales as a percentage against total retail sales.
Successful dealers recruit energetic men and women who are not particularly seasoned retail veterans. There's a noticeable trend to recruit bright 27-40 year olds with strong academic backgrounds, offering them a chance to shine at the dealership and have some private time for a quality lifestyle. Wise owners then empower these Internet Directors or BDC Managers with a solid budget and the GM's avoid micro managing the process. It's pretty basic stuff, actually. Successful dealers invest in their employees and grant them reasonable independence to let them know they are key members of the team with a future. Of course, they are expected to produce in return.

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