MAX Systems: Is the Internet Pressuring Gross Profits?

            



   MAX Systems: Is the Internet Pressuring Gross Profits?       
February 21, 2012 | CHICAGO By Jacob Solotaroff                    
In a pre-NADA convention survey of dealers nationally, more than two thirds indicated that they are concerned about the Internet pressuring their Gross Profits. Are you one of them?
According to the survey, 67 percent of dealers are concerned about the Internet putting pressure on their gross profits.
Many in the industry feel that the explosion of online car listings and research tools — and the strong adoption of them by car consumers — is commoditizing their inventory.
But there are ways to make the Internet work in your favor, and in order to maintain volume and gross profit, dealers have to get with the program.
To succeed in an online-driven world, dealers must differentiate their inventory; not only to drive traffic to their lot, but to prove the value they add and therefore justify the price.
Online listings must not only answer consumers’ most pressing questions, but also prove that claims about a car and dealership are true, with awards, expert reviews and ratings, book data, and dealership accolades.
This builds trust, which in turn has the power to increase profit margin. Despite these ongoing challenges, the future looks bright, and dealers are excited about the year ahead: 89 percent of respondents are optimistic, very optimistic or extremely optimistic about the impending performance of their dealership in 2012.
To see this column and others from the "Get Relevant or Die" blog from MAX Systems, visit here.


Printer-friendly version Comments Submitted by Anonymous (not verified) on February 22, 2012.
The Internet has essentially made consumers feel that they actually know what vehicle values are in the used market. It gives them information and a false sense of transparency. They are not looking at hundreds of vehicles per week, seeing the decrease in quality supply, spending 300% more in recon costs to maintain a quality used inventory in order to statnd behind that inventory for the maintenance of a 23 year reputation for honesty, quality and integrity. In my experience, some consumers are only beginning to realize that there is a shortage of low mile desirable units to chose from, particularly among small independent dealers servicing the middle class. Most consumers, not believe that they have valid knowledge about the value of the kind of vehicle that I sell. 23 years of repeat customers still trust us bu outsiders, now coming from greater distances, haven't seen the reviews or our website. They go directly to the third party sites like AutoTrader, Cars.com and Craig's list and then pick up the phone or come in and often tell us the car is over priced because they got their values from Kelly Blue Book rather than the NADA guide or they have no clue about what the wholesale market is doing. It's amazing how many people walk up to a frontline ready, 100% green light unit that's valued at $10,000, balk at the price and then say they were looking to spend three thousand. They then assume we have thoussands of dollars in the margin to negotiate, when in fact we have perhaps a few hundred if we take the free service contract off. Your article is spot on correct. We must adapt but the small independent is spending more time than ever trying to find and put out a unit that he is proud to put his name on plus, he's spendiing more time than ever trying secure financing for the credit challenged consumers, who are rapidly becoming the majority rather than the minority they once were. Two years ago, a dayspent shopping for inventory could yield 8-10 of our kind of inventory. It now takes four days to do the same thing and we have to go further to get them. The problem is that that the consumer thinks that they know more than the dealer. Not knowing the truth about the market and having a lack of experience in the market, while being armed with too much information that they cannot possible assimilate accurately, is making an already difficult business even harder. Those with deep enough pockets will survive but the future of the industry in my estimation, is one where the franchise dealer will control the consumer's future. They will be the used car dealer, with access to the best trades. The rest will be Buy-here-pay-here dealers to service the credit challenged population. I read that there are about 22,000 franchise dealers nationwide and 33,000 buy-here-pay-here dealers recently. I the end.....the consumer will have plenty of tools but fewer options. We are trying to adapt in all the ways you mention and the reasons you mention in other articles regarding our challenges are correct but yet there is so much more to adapt toward. Thanks, former senate aide, global circumnavigator, legal analyst, journalist, MPA turned independent car dealer.
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