All Star Auto Exchange in Tucson, Arizona (number 475 on the Hispanic Business 500) doesn't have the advertising budget of much larger dealers. But All Star does have a snazzy and easy-to-navigate Web site proclaiming, "Easy Application! Fast Approval! Drive Today!"
That site is helping the dealership attract customers and grow amid bigger competitors. Its revenue increased 14.8 percent in 2005, from $5.3 million to $6.1 million – 70 percent of which is driven by the Web site, CEO Edmund Marquez says.
Of course, large dealers have attractive, full-service Web sites, too. The site of Independence, Missouri-based Cable-Dahmer Chevrolet (number 56), for example, boasts, "#1 volume Chevy dealer and the only dealer to give you 4 year/$75,000 warranty at no charge." Larger dealerships usually have greater pricing power and deeper inventory as well. The downside is that higher overhead costs can eat into profits. Cable-Dahmer posted a modest 1.6 percent gain in 2005, up from $118.4 million to $120.4 million, of which only 5 percent was Web-generated, according to CEO Carlos Ledezma.
Sold on e-Sales
Large and small, dealers across the country find they are competing in a profoundly changing industry. Among the many challenges they face are foreign automakers, who continue to take market share away from U.S. companies, as well as large dealership conglomerates, regional and national, that dominate auto sales. Even giants such as General Motors aren't immune: GM announced plans to cut 30,000 jobs by 2008 after Delphi Corp., the largest U.S. auto-parts supplier, filed bankruptcy in October.
In response, auto sellers are beefing up their Web sites to improve customer service and, hopefully, grab a larger share of the market. Fully 61 percent of all dealership sites will allow customers to apply for financing online, and 52 percent invite users to schedule sales appointments, according to the National Automobile Dealers Association. The best minds are devising sales hooks such as e-coupons, site-based lead generation, targeted newsletters, and interactive surveys.
Avoiding Growing Pains
But even the most brilliant Web presence can't completely level the playing field for small dealerships. Large dealers have boosted sales of new autos with promotions and incentives, and are now doing the same for used vehicles, says All Star's Mr. Marquez. To better compete, he is trimming profit margins to pay for the rising costs of used vehicles sold at auction and increasing the inventory of more expensive used vehicles, hoping to boost profits.
Both All Star and Cable-Dahmer are focused on well-supported growth. Mr. Marquez says he's learned from competitors who invited growth with heavy advertising, but didn't have the sales force, online technology, and inventory to manage it. The ensuing scurry to hire staff and implement processes to handle a sudden surge in sales can hurt business and damage a dealership's reputation, he says.
Cable-Dahmer manages growth with procedures and systems for everything from training and stocking parts to meeting customers who take test drives. Mr. Ledezma feels it's best to prepare for growth before it arrives. "Put the infrastructure of a larger company in place and make sure employees develop the mentality of a larger company," he says. "Once that happens, you can reach for the stars."
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