Auto industry consulting firm J.D. Power and Associates estimates that 5% of new vehicle sales will be closed online this year as the boom in Internet use among car dealers accelerates.
Several new Internet-related marketing initiatives – including a Web site that the National Automobile Dealers Association is scheduled to launch this month (www.nadadealers.com) – are expected to increase online traffic and sales for car dealers.
NADA’s new online effort will provide links to thousands of car dealers’ Web sites and details about retail showroom locations. Information such as dealer invoice prices and price quotes to consumers will be made available by participating dealerships.
According to NADA, 80.3% of car dealers nationwide have set up Web sites, particularly those in Northeastern and Western states. About 93% of these sites are interactive, for order processing, e-mail and scheduling sales and service appointments for retail showrooms.
Most dealers get about 50 Internet inquires per month, but 14% receive more than 500 a month, according to the dealers association. Online customer service is often poor, with 19% of dealers not even bothering to respond to inquiries, according to market research firm Friedman-Swift Associates, Cincinnati.
Dealers are being encouraged by auto manufacturers to improve online customer service. Ford Motor Co., for example, is providing advertising incentives to dealers with sites that meet or exceed standards for handling Internet-generated sales leads.
Dealers are also working independently to boost online sales. CarsDirect.com recently inked affinity marketing deals with American Airlines and United Airlines to generate online traffic and customer referrals through their respective sites.
Banks and other lending institutions are indirectly promoting car sales on the Internet by offering dealers access to automated loan approval and processing programs that allow credit applications to be evaluated online.
– Franchised car dealers spent a record $5.7 billion on advertising in 1999, including $400 million for direct mail and $272 million on Internet advertising, the two fastest-growing media in this sector. Newspapers snagged $2.9 billion, the biggest chunk of ad budgets.
– About 17 million vehicles are projected to be sold this year. Sales of new vehicles account for 29% of profits and used car sales generate 24% of profits at 22,600 car dealers nationwide. Service and parts sales typically constitute 47% of profits.
– Dealers spend an average of $209 for advertising per new vehicle sold to earn slightly more than $300 in net profit per vehicle. A typical dealer generates $403,000 in yearly net pretax profits.
– Only six states have more than 1,000 car dealerships. California has 1,655 dealers; Texas, 1,350; Pennsylvania, 1,345; New York, 1,295; Illinois, 1,110; and Ohio, 1,065. Alaska is home to the fewest: 40.
– Among car dealers with service departments, 60% stay open evenings and weekends. Dealers are open 53 hours per week on average. Weekend service hours are available at 33% of dealers while 11% stay open evenings and 16% remain open evenings and weekends.
– Turnover of sales reps working at car dealerships averages 43% annually. Dealers selling Asian brands have the highest turnover rate (61%), while those offering European models have the lowest turnover (23%). Among U.S. brands, Daimler Chrysler has the highest turnover (50%), followed by Ford (38%) and General Motors (32%).
Source: National Automobile Dealers Association
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