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Dotcoms must operate as dealers if they hope to win

In the fast moving world of the internet it is surprising that not much seems to have changed since our last survey. Recent analysis of the US economy has concentrated on productivity gains and the question of their sustainability.

The preferred answer seems to be that the gains are sustainable, at least for a while. The rate of investment in technology has substantially increased and has changed the parameters relating to productivity. Far from diminishing marginal returns in the search for efficiency, a new era has started.

People will not transfer their allegiance en-masse to the dotcoms. Buying online may be an increasing trend, but only to a point. The whole emotional issue of test drives, trade-ins, touch/feel and smell will keep motor retailing ultimately a physical process depending on service.

Some dotcoms depend on people being able to do their window-shopping at dealer groups and their buying with the dotcoms. If dotcoms become more successful in this, the shift in revenue generation from dealer groups to dotcoms will mean a reduction in – or possible disappearance of – dealer groups.

The dotcoms will have to set up centres for test drives with people to talk about trade-ins and cars to look at and sit in. They will need call centres to sort out web-based misunderstandings, discuss technical matters and negotiate specifications.

The same marketplace is being targeted by three brands – manufacturers, dealers and the joint ventures through websites. Those brands should not overlap too much or they will be competing with themselves.

The internet may be more hype than substance, but the enabling technology allows dealers to generate more productivity and profit opportunities.

What does seem to have emerged is three apparently different approaches: * Integration with manufacturer strategies. * Developing their own approach to the market. * New entrant dotcoms.

One approach reflects the view the internet is an overhyped medium adding another dimension to processing enquiries. The other two relate to the internet offering a huge opportunity to derive new and incremental business in entirely different ways.

The seemingly more reactive strategy of relying on the manufacturer to channel business to your showroom is low cost. But success depends on the quality of someone else's web presence and the efficiency of their marketing and underlying processes.

For example Ford dealers relying on increased business via ford.com are: * Committing potential customers to a rather tortuous experience in discovering which car suits them. * Restricting any used car opportunities to the Ford Direct offering. * Relying on a format that does not link to the rest of a dealer's site.

The more proactive strategy requires dealers to decide on their brand image, the services and products they are going to offer, the partners they need to venture with and the processes they need to invent or alter. This means investment, a longer planning scale and a clear idea of how return on the investment will be generated.

The new entrant dotcoms seem to be a mirror image of the latter. More proactive dealers are building a separate web brand and looking for e-commerce skilled partners. Meanwhile, the dotcoms are building a brand and looking for or building a physical delivery system.

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