The traditional car-buying experience of going to three or four dealerships, kicking tires and getting wined and dined by a series of sharply dressed salesmen is going the way of the travel agent and the video rental store.
Dealerships will still exist, for sure, but how customers are treated and the way sales staffs work are being fundamentally altered by rapidly evolving technology and customers who are more knowledgable than ever.
The first struggle for dealerships? Getting people to come to the lot. Before the advent of the Internet, people would visit several dealerships to check out deals and see what was available before making a decision. Now, customers visit an average of 1.9 dealerships before making a purchase, having done much of their “shopping” online before heading out.
The battle now, said Jeff Dyke, executive vice president for operations at dealership chain Sonic Automotive (SAH), is for dealers to make themselves one of those 1.9 visits.
“The websites for automotive are mediocre at best,” he said. “You’ve got to have a website that’s engaging. The pictures of the vehicles have to be spectacular.”
Eventually, of course, people do come into the dealership to actually look at cars. This creates a sort of “reverse showrooming” effect that sets autos apart from other retail industries. If you want a Blu-ray player, you go shop at Best Buy and then actually buy the thing online. For cars, you do all your shopping online and then go to the lot and tell them the exact car you want to look at.
“It has to be a seamless transition from the website,” Dyke said.
This means that when someone comes in with a car from the site they want to look at, someone can take them right to it. Dyke said all the salespeople at Sonic’s dealerships carry iPads to make it easier for them to look up data and start finalizing the sale.
One of the scariest parts of buying a car for some people, especially younger people, is the financing. A lot of numbers are thrown around, and unless they buyers has a high degree of financial literacy, they may have no idea what they all mean. Dyke said again that streamlining the process and being transparent is the key.
“What [customers] hate is to be handed off and put in a so-called finance box,” he said, referring to the traditional practice of a salesperson finalizing a deal and then sending the customer down the hall to the F&I department.
Sonic also only allows deals to be done through the dealership’s iPads, eliminating any sort of secrecy.
Of course, one of the longest-held prejudices against car salesmen is that they’re pushy and manipulative because their commission depends on getting you to pay the highest possible price for a car. Sonic, though, says it is starting to take the radical step of changing the way its sales staff is compensated.
The dealership group is moving to put sales associates on a payment scheme in which 75% of their pay is a base salary, with the rest made up of bonuses determined not by sales, but how well they do in customer reviews.
Of course, for now, car shopping isn’t quite like buying a Blu-ray player. Customers still have to get to the dealership and test drive to see if they like the vehicle. One dealership group, though, will be making an industry-first effort this fall to bring car buying as close to one-click shopping as possible.
AutoNation (AN), the country’s largest automotive retail chain, will be introducing a retail website this fall, said Marc Cannon, the company’s vice president for corporate communications.
“You’ll go on and you’ll be able to pick it out right from the inventory,” he said. “That vehicle will actually be reserved for you.”
Shoppers will get the car’s VIN, and the dealership will hold it for up to 72 hours, during which time shoppers will be able to come in and test drive the car before finalizing the sale. Cannon said dealerships will have a special team of Internet sales associates who operate separately from the traditional sales team.
The website is set to be unveiled in November, with actual sales beginning at a few dealerships in November. Additional features will be added over the next few years including financing and used car trade-ins.