Opinion is divided over whether a dealer website is a means of increasing sales – whether the transaction takes place online or not – or merely a useful communications tool. Although internet technologies have been around for several years, only a small number of car retailers are using it effectively.

For some it is still of no importance at all. A recent survey by Cap Network of franchised and non-franchised dealers found that 19% had no website. Of the 81% who did, a huge majority said the site generated 5% or less of their car sales. At the other end of the spectrum, 9% reported their site generated 16-20% of their sales.

The value of the internet as an information-gathering tool for the customer is unquestionable. But what worries some businesses is the use of the medium merely to obtain price quotations, with the deal then going to the retailer offering the lowest-cost option.

This is a potential problem, but many other factors such as the quality of information on a website and the speed of response to an enquiry can differentiate a website and add to its value.

In the US, internet shopping is used by more than 60% of the population. Chrysler Group has just announced price cuts of around £140 per vehicle for the 2002 model year and a £1,400 price cut on the Jeep Grand Cherokee in a move to lure internet shoppers. The inference is that at commodity level, if price is the only important criterion, being cheaper is all that matters.

One of the dealers that has tackled the issue with greatest enthusiasm is the Dane County Group, a family-run £30m turnover group with two Vauxhall outlets based in Cheshire. It is on track to achieve more than 3,000 retail sales this financial year and established a new business, the Car Partnership, late last year. It holds a stock of 200 unofficial imports at any time for sale through the internet. By the end of this financial year it will sell 1,000 new cars and expects to sell 1,500 units the year after.

Alistair Horsburgh, Dane County Group managing director, said: “Across the group we receive about 350 people a day visiting our two websites (www.carpartnership.com and www.danecounty.co.uk). We sold more than a car a day via the internet in 2000. In 2001 the sites have generated more than 150 leads a month from prospective purchasers.

“Online-only car traders have a short future. Most are now pairing up with major groups, which I feel is rather defeatist.”

Dane County reached breakeven on its online sales investment within eight months and expects this current financial year to be profitable.

Mr Horsborough is uncertain of the future impact of alternative supply channels such as supermarkets, import agencies and online retailers. “A lot obviously depends on when or even whether the UK joins the euro and at what rate,” he said. “Together with decisions about Block Exemption this will determine the fate of alternative supply channels. They are merely pawns in the war of car manufacturers.”

Some manufacturers welcomed alternative supply channels such as the internet and car supermarkets, said Mr Horsborough. “I believe they need them to help them earn vital market share,” he said. “Without the incessant moaning from the dealer network, I am sure they would happily sell direct through these channels.”

David Hawkins, Cybercar Europe director, is sceptical about whether the internet will ever constitute a stand alone sales channel. “You will always hear anecdotal stories of people buying a car completely unseen on the internet, and it does happen occasionally,” he said.

“But the reality is that the number of cars sold that way, worldwide, is infinitesimal.”

To sell on the internet, a company's proposition had to be interactional and informational, he said. “The site has to be easy to use, quick, and must give as much information as possible,” said Mr Hawkins. “I have heard people saying they won't put prices up because people are just shopping around for the cheapest price. But without knowing the price the customer will go elsewhere anyway.

Mr Hawkins argues that dealers and manufacturers must realise their sites are used primarily for the collection and comparison of information. “Dealers must have a process in place to deal with internet customers,” he said.

“That is where so many have fallen down. They have invested millions on the technology, and nothing in the process of handling a different type of customer.”

Cybercar, a 'process change' consultant, has been at the sharp end of many businesses' efforts to capitalise on new technology. There are success stories around, according to Mr Hawkins. “One of our customers contacted 75 potential customers by e-mail in a month and that generated 20 deals over a period of time,” he said. “Good technology alone does not sell cars.vWhat will sell is good technology plus good processes, plus good people.”

Trevor Finn, Pendragon chief executive, is equally cautious about the sales potential of the internet. Pendragon launched its Tins web presence 18 months ago, and has generated “a huge amount of traffic but a low level of transactions”.

Typically Tins has around 100,000 unique users a month, but most consumers are looking for information, and especially prices, said Mr Finn. “Then they go shopping.” Despite the low level of sales, Pendragon will continue with Tins because Pendragon thinks it is useful: “there are benefits from the consumer point of view,” said Mr Finn.

The group has recently opened Tins used car centres, carrying on the branding to mix the virtual and the physical, although Mr Finn acknowledged people would not travel far to buy used cars. “Tins has a relatively low cost base, “ he says, “But it is not a business model that works in isolation.”

Pendragon's experience with websites for individual dealerships suggests they are used largely for information gathering before consumers switch to the phone to continue the buying process. “For most people the phone is much quicker, it gives a closer and more human experience, and it is much more precise,” said Mr Finn.

Manufacturer-controlled websites tended not to be particularly functional but the by- product is connectivity to the manufacturer.

“Customers do not yet have the confidence to buy online,” Mr Finn said. “The confidence is not yet there to develop significant volumes of business.”

Peter O'Connor, TMS Group director, last year's winner of the Automotive Management website of the year award, said: “Our websites are a method of getting to people who would not normally deal with us, and the business generated is incremental.”

On its website the multi-franchise group based in Melton Mowbray, Leicestershire has a group page leading to dedicated sub-sites for its Land Rover, Volvo, TVR and used car business. “Each sub-site is different,” said Mr O'Connor. “They are starting to mature and develop.

Particularly in e-mail where some of the businesses are developing real dialogue with customers.” Commercially the star turn is the TVR parts business supplying customers internationally, but Mr O'Connor said he was able to put used cars in front of a much wider audience than he could by traditional means. His ecomcars.com site has attracted as many as 78,000 page impressions in seven days and retains visitors to the site for an average of seven to eight minutes.

“We do not sell online,” said Mr O'Connor. “But we generate a huge number of enquiries. People then like to talk to people, and see the car they are thinking of buying.” He believed the sites have great potential for the future. “We have only started to scratch the surface,” he says. Having invested heavily in the sites last year, Mr O'Connor is now watching them work further down the sales chain and become more closely integrated with the business as a whole. With the commercial success starting to come through he is looking to reduce spending on local media advertising.

Jerry Horwood, managing director of new media agency 2nd Byte of Godalming, Surrey, said: “In this electronic age I am all for getting rid of the term website. I want people to think of it as an electronic communications' medium between dealer and customer. The major weakness of most dealers is that they do not have the systems to handle the electronic dialogue.

“Service departments are better than sales departments, because they are used to going back to customers and developing relationships. But lead management in many sales departments is either poor or bad. If they don't have what a customer wants immediately they don't have systems to continue managing the enquiry, and it just gets lost.

“An e-mail enquiry from a prospect needs to be dealt with quickly and efficiently, just like a phone call. It is easy to be overwhelmed.”

Mr Horwood believes a web presence should aim not only to provide information for prospects and an easy route for e-mailing dealers. It should also provide an electronic link between customer and the dealership as a key part of customer relationship marketing. “The customer should virtually park their car there and have their servicing and other needs taken care of,” he said.

Steve Ricketts, national sales manager of AutoLocate, said websites could be a valuable source of incremental business but only if they are correctly structured and effectively managed. “The biggest mistakes that people make are in spending a lot of money on creating a site without getting the foundations right,” he said. “Those foundations are: telling people about it, and training staff to give it sufficient attention.

“You would not dream of opening a second showroom without marketing it and training staff to handle the enquiries it generates. Yet that is what people do with a web site, time and again.”

Having dealt with hundreds of dealer websites, Mr Ricketts is clear about the key elements of success. Dealers need to train people to respond quickly and to update the information on the site as frequently as possible. He believes an e-mail enquiry has a conversion rate twice as high if the dealer responds quickly. If the response takes longer than 48 hours the rate drops dramatically. Get it right and the effects can be impressive.

A Bristol Street Motors dealership turned 288 e-mail enquiries into 106 sales, a conversion rate of 37% . Marketing is also critical, with the website address on stationery, advertisements, car number plates, parts vans and every other possible medium. The site should also include appealing content, said Mr Ricketts, such as a facility for people to compare used cars they were considering. Posting a digital picture of the used car for sale (not a library shot of the model) could generate twice as many enquiries, he said, and research in France has found it resulted in a much better conversion rate.

“The evidence is that actual transactions on line are still a small number,” Mr Ricketts said, “but people are using it more and more.” (David Sumner Smith, TME editor. September 21, 2001)