Consumers Steering Toward Online Car Shopping

The Internet already is causing profound changes in auto retailing and will continue to shift power to consumers while endangering dealers that refuse to embrace cyberspace.

Auto dealers and manufacturers generally agree that the World Wide Web is a potent force that is rapidly changing their business, but they are torn over how best to react to it.

“No one knows how it will evolve,” said Rik Kinney, research director for Dohring Co., a auto retail consultant. “Because of its reach and interactive feature, it can’t be underestimated in terms of its power.”

Already 25% of consumers who buy new cars use the Internet before completing the transaction. Most of these new-car purchasers use the Internet to gather price and product information before going to a dealer.

Within three years, 60% to 75% of consumers will be using cyberspace in some way to buy a new car, estimates Mark Lorimer, president of the Irvine-based Autobytel.com, an Internet car-buying service.

“Internet selling will be mainstream,” Lorimer said.

The explosive growth of electronic commerce was a main topic of debate during the weekend, as many of the nation’s 22,400 car dealers gathered for the National Automobile Dealers Assn.’s annual convention.

One example of how the Internet is changing the retailing landscape came last week when Daewoo Motors announced that it would become the first auto maker to sell vehicles online directly to consumers.

General Motors Corp. already is rolling out a nationwide online-buying service to help consumers get pricing information, order vehicle options and even arrange test drives through dealer-owned Web sites.

Ford Motor Co. and DaimlerChrysler last week announced enhancements to their Web pages. Ford launched an online pilot program to make off-lease used cars available to consumers before they go to auction.

Still, many dealers, particularly smaller, independent franchise operators, remain wary of the Internet and are reluctant to make significant investments in the unproven technologies.

“What’s the Internet but a fancy auto broker,” said Kevin Rinke, owner of Rinke Auto Group in Warren, Mich. “It’s a computer screen that may or may not offer useful information.”

Industry experts agree that many dealers have ventured into the Internet but have failed to provide the investment, systems, personnel and training to make it work smoothly and pay off.

For instance, although two-thirds or more of all dealers have Web sites, many of those do not have access to e-mail that would enable them to communicate online with Internet customers.

Also, few dealers have sales staff dedicated solely to handle Internet queries, and they often take days to answer customers’ e-mail. Only 16% of dealers respond to Internet queries within eight hours, according to a survey released Sunday by EDS, a data processing company.

“Ideally, an Internet inquiry should be answered within several hours via e-mail,” said Matt Parsons, marketing manager for EDS’ auto retail group. “One of the reasons the [prospective buyer] is using the Net is to save time.”

The larger publicly owned dealer groups are embracing the Internet more rapidly than smaller franchise operators because they see online commerce as providing a competitive advantage.

Republic Industries, the nation’s top dealer group with 380 franchises, designed a Web page for its 17 John Elway AutoNation dealerships in the Denver area. It provides consumers with information on its entire inventory, regardless of brand, and has staff dedicated to handling online queries. More than 36,000 visits to the site were recorded in the first three weeks of January, resulting in 2,000 price requests.

“Our strategy is to be the dominant Internet player in the market,” said Steve Berrard, Republic president and co-chief executive.

As the Internet is changing the negotiations game by empowering consumers with information, auto makers say that smart dealers will adapt to the new environment and provide more services that consumers want.

“The dealer has to adjust and be as sophisticated as the consumer,” said John MacDonald, senior vice president of sales and service for DaimlerChrysler.