AM Online

Carmakers split over online sales dealer money

Carmakers are divided over how much their dealers should be paid for sales achieved via the internet.

Audi and Fiat maintain the same terms for traditional and new media sales, but Vauxhall is paying a reduced commission for online sales. Ford pays dealers only a delivery fee.

Their different approaches can be explained by the level of control dealers have over the online sales process.

Audi's new website provides central facilities such as online valuations for trade-ins and finance quotations.

Customers can order online with their deposits held by Audi UK, but negotiations are with dealers who retain control over each transaction.

Kevin Rose, Audi UK director, said: “Users are referred to dealer websites. After registering with the local dealer who will be the delivery point, they can interrogate national stock lists of new and used cars. If the car is not in stock at the dealer, the site will tell them how soon it can be delivered.”

He emphasised that negotiations are with the dealer, not with Audi UK. “Audi is the facilitator only. While there is room for improvement in the supply chain mechanism, we are sticking with the dealer network for as long as the Block Exemption legal framework remains as it is.”

Fiat has given its UK dealers a similar level of authority over the sales process, through its “dealer-centric” website programme. The Fiat Group is investing £32m on its five-year e-commerce strategy, launching two separate online buying services for Fiat Auto and Alfa Romeo.

Despite being named an online buying service, neither website allows customers online transactions or inventory listings. Also missing are trade-in valuations and finance quotes, though users can now apply for a credit check to establish whether they would be eligible for finance.

Ash Choudhury, project leader for Fiat's internet activity, said: “The project was kick-started by the need to compete with intermediaries and thereby protect our dealers.”

Sales leads are handled by Fiat before being passed to dealers within eight hours. Dealers are required to follow up leads within 48 hours of receipt. Online leads will be handled in the same way as traditional sales, with margins unchanged.

Conversion levels for online leads are likely to be far lower than with other marques, like Mercedes-Benz whose dealers are compelled to respond within an hour of the original enquiry.

Vauxhall is demonstrating a stronger commitment to e-commerce, but is also at pains to point out that its website is not a replacement to the dealer network. All Vauxhall models are now available online at prices typically 3.5% below list price.

Paul Confrey, Vauxhall manager of relationship marketing and new media, said: “We expect to be selling Network Q cars in the same way within six months. Total online sales are expected to be around 5,000 units over the next 12 months.”

Vauxhall is spending around £500,000 on promoting its internet strategy. Customers are able to configure all cars – including dealer-fit accessories – from this week, making finance applications and receiving part-exchange valuations.

“The final transaction is still with the dealer,” said Mr Confrey. “They will be paid a commission on every sale, though we will have to reduce the margin by a couple of percentage points from the typical gross wholesale margin of 10% for traditional sales.”

Mr Confrey conceded that dealers “aren't exactly over the moon”, but he added: “It stops them losing sales to cyber dealers. They know the online revolution is happening and it's unstoppable. They would rather be in with a smaller margin that out with nowt.”

Ford is offering discounts of 5-8% on list prices for cars bought on line. The www.fordjourney.com website currently offers Focus, Fiesta, Ka and Puma models, with new Mondeo to be added in January. Eradicating the dealer margin is the main source of the saving.

Dealers are responsible for vehicle preparation and delivery but have no other involvement in the transaction, making online trade-ins impossible. Ford would not reveal the value of the delivery fees paid to dealers.

Ford's UK strategy is in marked contrast to its policy in the US. The manufacturer and its American dealer council have formed a separate internet company called FordDirect.com to sell cars and commercial vehicles online.

Ninety-five per cent of Ford dealers are reported to support the website. Those that invest in the business will hold 80% of voting rights.

If you are not a registered user your comment will go to AM for approval before publishing. To avoid this requirement please register or login.

Comment as guest


Login  /  Register

Comments

No comments have been made yet.