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Exploring online auto retailing

Last November, eBay Motors and AM magazine invited auto retail and web experts to join several big-player dealers at a round table session to discuss the health of online auto retailing in the UK.

The first of its kind, the aim of the conference was to explore how the internet is changing the retail landscape for dealers. Delegates shared candid insights and company figures to show how auto-online is breaking new ground for them, both as a direct sales channel and a powerful marketing and information medium.

Having launched its new Classified Ad service and eBay Motors Pro, a package designed specifically for dealers last year, eBay Motors is keen to open up a dialogue with the dealer community and share knowledge. The aim of this pullout brochure, independently written by AM magazine, is to bring the learnings and leadership shown at the conference to a wider audience so that retailers can continue to drive growth online and harness greater business opportunities in the future.

An explosion of internet activity in the late Nineties preceded a near collapse as thousands of newly-fledged dotcom companies went out of business. In the motor industry a plethora of new-start internet-only ventures were launched, ranging from stock location businesses for private and trade buyers/sellers to direct sales operations like Virgin Cars. Many have since exited the market.

But they have been replaced by new companies that have tapped into the internet’s role as a marketing and relationship management tool, while dealers have also started to grasp the opportunity via their own websites. Some manufacturers are selling cars online, while all are privately looking at how the internet might alter the distribution structure.

People are buying and selling more cars online as initial scepticism about the internet, not least security fears, subsides. The story so far has been boom to bust to boom, and retailers are increasingly leading the charge.

Businesses like eBay Motors, who launched online classifieds last July, are acting as facilitators putting customers and dealers directly in touch, thereby giving dealers increased potential to boost sales among a wider customer base (an average of 3.5 million unique visitors a month).

So, how do retailers view the development of the internet over the past 10 years, and how has it changed their business?

Mark Squires, chief executive of the 26-site Benfield Motor Group, points to the failure of the newcomers to make any real impact, despite claims at the time that the role of the traditional dealer would become defunct.

“You barely hear anything about those online retailers today,” he says. “They might be around, but they’re not the significantly scaled players that everyone was predicting from the outset.

That’s because the internet is a new medium rather than necessarily a whole new channel to distribution, at least for our marketplace.

“It’s given us, as retailers, a new channel to exploit to access customers and the marketplace. It’s a new basis of competition, but probably no different, although much more significant, than direct marketing was four or five years back or, indeed, classified advertising was forty or fifty years back.”

#AM_ART_SPLIT# It’s a view shared by Eddie Hawthorne, managing director of Arnold Clark. He believes the Virgin Cars approach failed because it didn’t have a mechanism of distributing the cars or access to stock – it was an incomplete model.

“The internet is a medium to reach customers who are far better informed and know exactly what they want,” says Hawthorne. “They are time poor and don’t want to be traipsing around six or seven car dealerships. It also means our salesmen are more productive and our conversions are better because the customers are informed and our salesmen are dealing with someone who is hot to trot.”

Research from General Motors shows that customers now visit just two or three franchises before purchasing a car; five years ago it was five or six dealerships. The need to visit showrooms to research cars has been replaced by browsing online. And if the browser finds something they like, they are willing to travel huge distances to buy it.

“If you ask salesmen ‘how many of your customers have used the internet before they’ve walked in the door?’, they look at you as if to say ‘well everybody has’,” says Adrian Hill, dealer support director at Sytner Group.

Some dealerships can find that up to one-third of their business comes from outside their territory, particularly in rural areas, by exploiting the internet. And popularity is not marque-specific: it’s down to the individual buyer.

Customers are increasingly willing to travel nationwide for cars costing less than £6,000.

Squires, whose group is based in the North East, says: “Selling further afield works for the oddballs; those cars which are a bit of an unusual spec and that are hard to find in your home market. We sold a car to an old lady in Devon – a £6,000 used Polo. It surprised me, but then it was a high spec Polo that had everything she wanted and the price was obviously attractive. She was prepared to travel 350 miles rather than five miles down the road.”

Simon Rutherford, managing director at Camden Corporate Fleet Services, claims that any type of car can be sold at any distance: nothing is off-limits. “There are a group of consumers out there that will buy product – and we’ve sold everything from £35,000 sports cars to some nearly new small cars all over the UK – and the only thing that connects them is their buying process. It’s their thought process rather than their income or their desire to have a BMW or a Nissan Micra.”

#AM_ART_SPLIT# There are potential issues for customers who buy cars outside their local area in terms of aftersales. A handful will take their car back to the original dealer, but most won’t. That’s where the franchised network really works: dealers are tied into their manufacturer’s customer service programmes, which means they have to give the same standard of service regardless of whether the car was bought at their site. This level of security will encourage more people to buy online, broadening their search outside their locale.

Rural revolution
The internet can revolutionise a rural dealership’s business, possibly more so than that of an urban dealer. Benfield has a couple of rural showrooms whose survival is down to the level of sales volume they generate online.

“A typical volume dealership might do half a dozen deals a month so it’s significant incremental volume,” says Squires. “But we have one or two rural sites that have become specialists over the internet because they’ve got to. I’ve got a dealership in Morpeth where 38% of his enquiries are coming from the internet and over a third of his sales are pumping out to the wider locale. For these smaller dealers, the internet has become very significant.”

Hawthorne adds: “It’s infinite, the number of people that you can market to on the internet, that’s one of the major differences. I sold a car to a customer from Newcastle two or three weeks ago. He came on to our website, saw the car he wanted and travelled to Glasgow to buy it.

“It’s all about generating footfall. But if you have a large volume dealership that, say, sees 300-400 people a week, then they are not as focused on the internet leads as perhaps a dealership that sees 20. You have to involve the salesman with these leads because they are in control of the product. If you don’t bring them into the process they can easily sell the car to somebody else before the internet prospect has turned up.”

In addition to breaking down the traditional territories, the internet is changing the dynamic of the industry by giving manufacturers the opportunity to connect to the customer through their own websites and capturing data.

#AM_ART_SPLIT# Relationship between manufacturer, dealer & customer

Simon Rutherford says: “Go back 10 years and the manufacturer made the product and did the advertising and it was the dealer’s responsibility to attract the customers in and sell the cars. The manufacturer had virtually no relationship with the customer.

“Now through their websites they have direct contact to create their own demand and pass it to dealers.”

Rutherford points to the example of Nissan, which is advertising the Qashqai on its website, a product that is not available until March.

“By launch they will have generated a great deal of interest and potential demand for Qashqai and that will be fed down to us via a controlled process. The way they have created opportunities for the dealers is superb but given they will monitor every lead and link our handling of these leads to our margin puts a huge emphasis on our sales process.

“The potential danger to the dealer network is that we’ve got some Manufacturers thinking that now they are in direct contact with customers through the internet why don’t they sell them cars direct”.

Renault and Vauxhall both sell cars online via their websites with the dealer a conduit for carrying out the handover. This re-balancing of the relationship could be dangerous for dealers, but lead generation also shows the manufacturers just how effective dealers are at selling the car.

Dealers need to counter this by making their websites a more obvious destination for customers, according to Jay Nagley of spyder automotive, a website and automotive analysis company.

“Manufacturers’ sites aren’t that great. They are big and clumsy and they’ve been done by committee. A dealer site could be better but it needs to be a brand destination in its own right, rather than just a fulfilment operation.”

However, there are website elements that the manufacturers do extremely well, according to dealers. The data is near perfect, as you would expect – independent sources will not provide as comprehensive or accurate car configurators as the carmaker.

“There’s a very big place for the manufacturer’s sites and the dealers have got to lock into what the manufacturers don’t do quite as well, but let them carry on doing what they do very well,” says Hill.

Improving your website
So, what are the key tips for ensuring a successful retail website? First you have to get noticed, and this comes through search engine optimisation.

But there is no magic solution, according to Nagley, who warns dealers to be wary of companies that guarantee results on search engines.

“Search engines constantly change their algorithms to ensure no-one can trick the system into putting a particular website at the top of the results page and they de-list sites that are caught trying to cheat. Typical cheats include using hidden key words to try and stress particular areas of content,” Nagley says.

Success comes from following best practice. Choose keywords carefully - keywords are the words visitors are likely to search on like ‘car leasing’ or even ‘Ford Fiesta’. However, don't just throw 100 keywords at the site: the law of diminishing returns applies, so 15 good keywords are far more effective.

Make sure the keywords and tags reflect the content of the site so that a search engine is being told what the subject of the site is. Then make sure the keywords appear in the text on the home page (the higher the better), as search engines validate the tags against the content of the home page and assign more weight to higher positions. Site maps are useful as search engines do extract information from them.

“Finally, search engine robots can only crawl hyperlinks, so drop-down lists raise an issue,” adds Nagley. “It is advisable to include a link to the contents of drop-down lists so that robots can see them.”

#AM_ART_SPLIT# Photography is crucial. Customers need to be able to view the car from every angle – inside and out – with high quality pictures which allow them to zoom in to check the bodywork. Viewing the car on a 360-degree plinth is already possible: the next development will be video images, which might also include a virtual test drive – ideal for the Nintendo generation.

“It’s definitely about the photos and good descriptions,” says Jody Ford, senior manager at eBay Motors. “If you put 12 photos up on your classified ad on eBay Motors, you’re more likely to generate more sales leads than if you put up one shot. But you also need loss leaders to generate footfall to your site because people will do a search for all Ford Focuses within 50 miles at a certain price before choosing which dealership to visit.”

Ford believes customers can be divided into two groups: those who value the name of the dealership and those who go for the price. Retailers need to ensure their website is a natural extension of their business to attract the former.

“It’s about your brand on the forecourt and within the dealership and the professionalism of your sales staff. You have to do exactly the same on the internet with your listing,” he says. “The professionalism of the website and the photographs is the same as the professionalism of the dealership.”

Relevant Content
Squires says dealers should pitch their websites against other retailers and internet-only businesses. Content should be driven by the individual dealership, not at head office level.

“It’s about each stock unit that you present. How well is it presented? How well is the specification presented? How good are the pictures – are they presenting the car beautifully, or making a bad job of it? Have you priced cars in line with your internet competition? Have you priced it to sell at a good margin for you, but in a way that is going to be attractive, that’s going to pop up in the right places on the search listings. You can’t replicate that at group level, it’s got to be done by the guy who’s overseeing the stock.”

Internet as a promotional tool

Most dealers view the internet as an important promotional tool, one of a number of ways to raise awareness of their business and their products. Benfield has reduced its press budget by 30% over the past 12 months in order to direct more funds to its website, which it sees as a more cost effective method of advertising.

“It’s efficient and there are no space constraints,” says Squires. He laments the fact that manufacturers persist with their media advertising requirements in local newspapers as part of the franchise standards. “They need to look again at that,” he adds. “Why would you create a paper list which is already out of date the moment that it’s printed when people can get a much more accurate and richer level of information, detail and description by going to our own internet site?”

Squires has found that the cost of advertising on the internet is significantly cheaper than traditional press classifieds. He is currently in the throes of testing the effectiveness and reach of each channel by reducing Benfield's press advertising and upweighting its internet spend. From this, he expects to gauge the most cost effective ratio for the group's promotional spend.

Arnold Clark, which has taken responsibility for the internet out of its computer department and into its marketing department, has set up an internet business called ABC Motors, while Camden Motors has Quick Click Cars. Both are intended to appeal to customers interested in price and who perceive dealer groups as being too expensive.

“We offer them exactly the same on ABC and get the customers who want the price,” says Hawthorne. “We also found that business customers would buy from the cheapest website because it’s a very functional purchase and they just come straight in and buy online.”

Rutherford adds: "When we launched Quick Click Cars .... . As soon as we added a page that identified Camden it reinforced the credibility but customers still saw it as a better offer because they were dealing with a different part of the business."

Credibility and trust between the site and the customer is critical says Emma Parfitt, trade manager at eBay Motors. “Dealers need to be much more adept at database capture (opt in) and marketing to database, they need to think about how they build a relationship without physical contact. At eBay.co.uk we have built a trusted relationship with 15 million registered users. It won’t happen overnight, it can be a slow burn, but the eventual pay-off is hugely worth it in terms of driving business growth.”

#AM_ART_SPLIT# Online sales

The trick to securing sales driven via the internet is to be persistent. Often these customers are captured on the sixth, seventh or even eighth time of contact - but they will buy. Arnold Clark has an 85% conversion rate on its website enquiries.

“And we aren’t selling these cars cheaper online than in the showroom, unlike other products sold on the internet,” says Hawthorne. “It’s a perception that the internet is cheaper.”

Retailers cannot simply translate the physical selling of cars and apply it to the same metrics as the internet. They cannot rely on a set conversion ratio and believe that by increasing their advertising to get more people in, it will naturally translate into more sales.

“Earlier in the year, we were getting 200 hits on the website to one enquiry, and it took 25 enquiries to get a sale. So we thought let’s do some search engine optimisation,” says Rutherford. “The hits went through the roof, but the hits to enquiry went from one to 200 to one to 300 and the enquiries to sale went to something like one in 30. What we ended up with was a load of spurious enquiries. Because what it allows the consumer to do is dabble.

“Just because they’re online doesn’t mean to say they’re in the sales process and we’ve got to learn to weed out very carefully, who is actually in the sales process.

“And you’ve really got to pursue these guys over the internet. They send you an email, you have got to contact them four, five, six or seven times to nail the sale. It’s not as simple as when you can just go, ‘please come in, we’ll make you an appointment’. Once you’ve got them there, they’re almost captive; they’re never captive in an internet email buying process.”

It’s been a similar experience at Arnold Clark, but the group has got around the problem by requesting information from the customer in exchange for sending them more details.

“If somebody wants to know something, they have to give a bit of commitment. They have to give us a name, telephone number or contact address. And once you get that, then you’re virtually back into the normal sales,” says Hawthorne.

“When you give that to a salesman, he can either email the customer back or phone the customer and then you’re into your normal route. We’ve moved from the start of the year where our sales staff were not interested in internet prospects, to ‘can I have one?’. They are now highly sought after because we’re at an 85% conversion on anything coming through the web.”

Workforce savvy

Staffing is an industry-wide issue for retailers, but the internet has created the need for a different type of employee with new skills, according to Jim Saker.

“There’s an issue about the qualification process. What you have is almost a different training need or a different type of recruitment,” he says. “Historically, we have recruited people who are very good verbally but often are almost illiterate when it actually comes to doing paperwork.

It’s been learning by stealth at Sytner, “One of the key learnings we’ve had is getting our sales execs to accept they are going to have to talk to these people via email on two or three occasions before they actually get the opportunity to do what they want to do, and that’s pick up the phone”, Hill says.

“As the internet grows, the ability to qualify somebody by email is a different skill set than qualifying somebody face-to-face. How that becomes integrated could be a challenge going forward.”

This issue can be partly off-set by integrating the process into the point of sale system. Then it simply becomes another prospect in the accepted sales structure.

Saker adds: “The kids of today are very different. There’s this stat that a 14-year-old girl actually has 34 hours in her day, because she multi-tasks - she can do her homework, do this, do that, all the rest of it. She’s actually doing 34 hours in her 24. You know it’s really kind of interesting the way those kids will become consumers.

“At this moment in time, we’ve still got the mindset in the general public that nine to five is ok when we’d expect to be open. I think it will change.”

Hill also predicts the future generation of buyers will fundamentally change the way cars are bought and sold. “When those people get to be our customers, then our lives will change significantly, he says. “Those people could well become very confident consumers and think ‘well actually, if I buy that three-year-old car on the web and it isn’t as it’s described when I get there, I’ll just say I don’t want it’. Whereas today, people are nervous about doing that.”

Hawthorne doesn’t see this evolution as a major concern, pointing out that the sales people in 10 years’ time will also be part of that generation.

“They will understand these customers a lot better than we actually will, so I don’t see it as a huge problem, provided the business can evolve to transact,” he says.

#AM_ART_SPLIT# Internet as a relationship management tool

A website should be about more than simply selling cars, however. It’s an opportunity to impress the dealer’s brand values and to put a public face on the dealership by giving points of contact for sales and service.

It also has a vital role to play in customer relationship management (CRM).

“I’ve got a pal who has a dealership in Michigan, USA, and he’s done some research on his customers’ use of his website,” says Squires.

“Research on his used car stock or his new car offers was actually only the number three reason why people came to his website. Number one was directions to the dealership - might have something to do with the geography of the States – and number two was service appointments; people creating their own service booking online. Number three was about selling cars.”

Arnold Clark is already using its website for online service bookings, although it concedes that the facility has been slow to take off, largely due to a lack of profile on the website. “We’re changing our website and putting this facility on the homepage to make it more visible, just promoting the fact.” Hawthorne says. The ultimate service booking facility is real time. Dealers that offer this function are finding bookings are being spread out more during the day as people choose times to suit them, alleviating the traditional morning log-jam.

But this does take a lot of organising and many retailers have found it easier to rely on email requests that they can then schedule into the rota.

Whether sales, service or brand awareness, the role of the internet is set to increase with the growth in broadband and WiFi wireless connection. “This increases access and usability because customers can search for a car while they watch TV or do something else,” says Squires.

But, ultimately, the key to a successful internet business is the website. “Building a good website and running a good website is not that difficult,” says Nagley. “It’s about consistency, concentration and having one person who’s really focused on it.”

Attendees at the Round Table

  • Mark Squires, managing director, Benfield Motor Group
  • Eddie Hawthorne, managing director, Arnold Clark
  • Simon Rutherford, managing director, Camden Corporate Fleet Services
  • Adrian Hill, dealer support director, Sytner
  • Jim Saker, director, Ford Professor in Automotive Retail Management.Loughborough University
  • Jay Nagley – spyder automotive
  • Jody Ford, eBay Motors
  • Emma Parfitt, eBay Motors
  • Stephen Briers, editor, AM

    Online Pitfalls

    Rutherford: “You can’t think of your internet or your website as a tick box. You’ve got to try and apply some fresh thinking, some different retail thinking to it; starting to look outside the motor retailing environment seeing what other people are doing.”

    Nagley: “A lot of websites can’t decide what’s important. Everybody in the company has an idea of what’s important. And, the trouble is, if everything’s important, then nothing’s important. You have to have priorities, agree them and stick to them. Also, because the internet is so flexible, there’s always a temptation to go for ‘because we can’.

    ‘We can do this fantastic huge Flash Animation on the Home Page. Why? Because we know how to do it, it’s going to look great’. It’s balancing what you can do with what somebody might actually be interested in seeing or using, and you can get carried away with gimmicks that don’t actually appeal to people. It’s knowing when to stop, as much as knowing where to start.”

    Hawthorne: “I wouldn’t put any registrations on the internet, because I get congestion charge fines and speeding fines from all over the country. People clone the registration plates and drive through the City of London. I have an awful job convincing Mr Livingston’s friends that the car’s been sitting in my showroom for three weeks.”

    #AM_ART_SPLIT# Future developments

    The internet opportunities are limitless; the technology opens up new creative possibilities to appeal to customers and to reduce dealers’ costs, particularly with use of imagery. Jay Nagley points to the fact that most websites are currently used to send information and prices in text form.

    “In 10 years time there’s going to be much more imagery, it’s going to be videos and virtual test drives,” he says. “That’s what people are used to now, with the whole success of YouTube; it’s because they want to see things, they don’t want to read things, and that has to be a huge shift in the way that cars are presented by manufacturers and dealers.”

    Jim Saker agrees: “Virtual test drive on the internet is being done a lot in the States. You just click on, choose your route and choose your city. Also, the Google Earth’s searches of dealerships, which is where the dealer comes out and actually introduces you, that sort of stuff is much more prevalent in the States, and I think something which will take off here.”

    Nagley: “We manufacture videos and put them on our website. About a year ago it was the new Lexus IS, which hadn’t been launched in Britain. We had a manufacturer video from Japan, we edited it down and put it on the site, and one day I was looking at the stats, and it said that over half the videos seen in the last month were for this one Lexus. We had thousands of people coming just to look at the video of the car that wasn’t yet launched.

    It’s a hint of what’s to come here in the UK.”

    Mark Squires believes dealers can strengthen their relationships with customers by making their personal information available to them online.

    “How many customers know what their chassis number is, but how many times do we ask them for it?” he asks. “How many customers ring up for the security code on their radio? Why couldn’t we provide that information in a secure area? That would be a nice way to continue to build a relationship with them and we’re adding some value from a relationship point of view, not just a selling point of view as a retailer.”

    Retailers could exploit Google and other search engines, which hold vast amounts of information about users’ viewing habits.

    “Given the power of the information Google has about what you and I are looking for through their portal over the internet, they have the ability to contact me as a consumer because it seems by my searches that I’m in the market for a car,” says Squires.

    “Obviously data protection act wise they couldn’t then send that to interested retailers but they could send a message to the consumer to say ‘it looks like you’re in the market for a new car, there’s these guys Benfield or Sytner in your area - I’m sure they would be interested in talking to you’. It turns the whole world of advertising upside down.”

    #AM_ART_SPLIT# Quotes of the Day

    “The internet is quite an instantaneous form of media, and people expect to have their enquiries handled pretty rapidly. I know that there are retailers that now employ a dedicated internet staff just to handle the growing number of online enquiries that are coming into the business.”
    Stephen Briers

    “At the moment the internet is a medium to reach customers who are far better informed and know exactly what they want. I mean our customers of today are time poor and don’t want to be traipsing round six or seven car dealerships. It also means our salesmen are far more productive and our conversions are better, because they are informed, and they’re dealing with somebody who is, hot to trot.”
    Eddie Hawthorne

    “If you ask dealerships, if you ask salesmen ‘How many of your customers have used the internet before they’ve walked in the door?’, they look at you as if to say ‘well everybody has’.
    Adrian Hill

    “We’ve already reduced our press and media budget by 30% over the last 12 months. There are a lot more people going online, so why would I carry on spending the same amount of money on press to what is a diminishing audience?”
    Mark Squires

    “We’ve taken responsibility for our internet out of our computer department and put it with our marketing department. We need the IT skills for the HTML links and all the script behind etc., but, how you market your stock, how you present yourself is down to your marketing department, and that’s what we’ve done. It’s had a great effect.”
    Eddie Hawthorne

    “I think eBay is fascinating, because it has created this trusted source for buying and selling almost anything, including cars.”
    Simon Rutherford

    “Accessible broadband facility has been a key driver of growth in online retail. With wireless capability now becoming more widespread, I’m guessing that the next 12 months will see significant trends and changes to consumer purchasing habits online.”
    Emma Parfitt

    The conference raised several ongoing challenges for dealers:

  • How can dealers upweigh their websites to draw traffic?
  • Filtering online queries – how to sort the serious buyers from the time wasters
  • Building relationships with customers online - pushing them down the sales process to conversion
  • Improving customer trust in transacting with dealers online
  • Adapting workforce and back end systems to effectively handle online queries
  • How to effectively manage manufacturers’ direct relationships with consumers
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