And then, the Internet Happened.
I’ve been working in the Internet Departments of various Los Angeles-area dealers since 2004. In my experience, the Internet Department has evolved greatly over the years. Not to mention its impact on a dealer’s sales revenue. As you read, what do your experiences tell you?
1997-2003 (The Early Years)
In the early days, the Internet Department was a simple concept. A competitive quote was likely just that: a straightforward quote the dealer felt comfortable with. Customers responded well. Life, it seemed, was going to work out for all. I never participated in these early years, but I remember our first internet salesperson. Her guideline was simple – whatever invoice was, she added $500 and cranked out 20 sales per month. Her customers seemed different. They set appointments, arrived on time, and seemed calmer and happier than the customers I worked with. In essence, the Internet Department was kinder to the dealership and its internet customer.
2003-2006 (The Golden Years)
Over time, with more sales originating from the Internet Department, a more complex competitive environment emerged. Dealers faced an unfamiliar, unique set of challenges and felt a sense of urgency and pressure to grow this department. Dealers expanded their investments by purchasing CRM tools, leads, training, and taking on more personnel. I became involved in internet sales during this era. I may have been selected because I knew how to type. Or maybe it was because the old internet manager had “issues” getting along with other salesmen. I can’t be certain.
With this growth came a higher degree of competition amongst dealers to win deals. Dealers became much more price-competitive on internet sales – to the point some were comfortable taking net and negative deals for the all mighty unit sale.
To the customers who found these deals, this may have seemed like the Golden Years. I think it may have been so for the dealer, too. For the most part, the retail sales side of the store still hummed along, largely unaffected by the Internet Department. When I came into the Golden Years in 2004, I averaged about $2,400 per car, squeezing out 25-30 units per month at a Honda store. But that would soon end.
The impact of the Internet Department’s growth, coupled with the emergence of customer protection laws (such as California’s Car Buyers Bill of Rights in 2006) marked an end to many of the profitable practices dealers had relied on for decades. In my opinion, the door had closed on the Golden Years.
By the end of the Golden Years, the Internet Department at my store sold about 40% of the store’s volume, averaging about $500 per car. Desk Managers wouldn’t even let me buy them lunch anymore.
2007-2009 (The Dust Bowl)
At this point, a growing base of internet shoppers found well-formed and highly responsive internet departments deeply entrenched in pricing wars.
With a rapidly declining economy, dealers experienced their own version of a double-dipped recession, faced for the first time with the very real challenge of making money in their sales departments. Some dealers began closing their doors. Those remaining remained unsure.
Before finding any real solution, the government came along with “Cash for Clunkers.” For a brief period, dealers could re-live a time they’d nearly forgotten about, even though past problems still plagued them. I believe, however, the program was strong. Strong enough to put an end to the Dust Bowl.
2010 – Present (The Last Stand)
Today’s dealers are still struggling to shake the Dust Bowl era, and this shake-off may be no more than acceptance and a re-alignment of profit expectations. I’ve heard GMs say, “I don’t care what you sell the car for. If you can move an extra 20 units off the lot each month and it only costs me $1500, fine with me.” Yet, when I present others with marginally profitable deals, they sometimes throw me out of their offices and tell me to get rid of the customer. Aside from these GMs’ different approaches to profit and unit sales, one thing is nearly identical. They all seem challenged in their grasp of social media and video. Reaction to consumer-based review sites is just that and only that. Reactionary.
I’ve seen a few pioneers, however. Dealers that embrace and excel in a new environment of customer interaction and satisfaction, transparency, and content. Maybe this should be the “Left Behind” era. After all, that’s likely what will happen to the ones who fail to excel in this environment.