16 Oct

Car Dealers Aim to Curb Online Rivals

New-car dealers are sharpening their Web-sales skills, angling to cut out the middlemen in online transactions—companies such as TrueCar Inc. and AutoTrader.com—that funnel customers to their stores and have grown into potential rivals.

These websites attract shoppers looking for car information, reviews and pricing guides, and then charge dealers to steer would-be buyers to their stores—a fee that in some cases costs up to $400 a referral. Today, they are sizable businesses in their own right, generating hundreds of millions of dollars in annual revenue. TrueCar went public last year and has a market value of more than $1 billion.

Now, after years of embracing these online firms, top car retailers such as AutoNation Inc., want to cut back on using third-party shopping sites in favor of their own online sales. Others want to curb the sites’ rising influence and revenue—which they see undercutting their own brands. Some have filed lawsuits challenging the businesses.

AutoNation Chief Executive Mike Jackson says his own brand- building efforts are being compromised by the growth of the online middlemen that use his money to build their own reputations.

“I pay them for traffic. They take money from me, run more ads to attract more traffic to their sites—and then I pay them more,” he says.

In some ways, sites such as TrueCar, AutoTrader, Cars.com and others grew by being the antithesis of old-line dealers: offering information on a variety of makes and brands, providing easy access to pricing details—and no hard sell. Customers have grown to trust them because they don’t represent one manufacturer or dealer.

Lito Espinosa, a 40-year-old registered nurse in Massillon, Ohio, says he used TrueCar to help him research and price a 2015 Subaru Outback. He was attracted to the site because “I’ve been burnt by a couple of dealerships.” The website helped him determine a fair price for later negotiations, he feels.

Retailers see that kind of reliance on the websites as a potential threat to their businesses. A group of dealers is suing TrueCar in New York, alleging the service engages in false advertising by claiming to offer “negotiation-free” car buying. The California New Car Dealers Association also sued the car-buying firm, charging it is acting like a dealer but operating without a license.

TrueCar has denied the charges and said its business conforms to state laws.

Matching their services isn’t easy. AutoNation is spending $100 million to overhaul its website, aiming within a year to allow buyers to complete nearly the entire transaction online. The Fort Lauderdale, Fla., company, which owns and operates 293 new-car franchises, currently spends one-third of its advertising budget on third-party.

Other big retailers, including Penske Automotive Group Inc., the nation’s second-largest chain, and Sonic Automotive Inc., also are bringing similar online buying tools to market. Penske launched an 11- store pilot this spring called Preferred Purchase that allows potential buyers to research vehicles, then start and complete much of the purchase from home.

Some dealers say the online companies are already an entrenched part of auto sales. Doug Waikem, president of Ohio-based dealership chain Waikem Auto Group, says the consumer trust these firms have built make them allies to smaller chains. “It’s part of doing business; we can’t change the rules,” he says.

‘If they can acquire customers for less than $300, they should do that until the cows come home. ’

—Scott Painter, TrueCar CEO

Still others are trying to go it alone. Lenny George, general manager at Berger Chevrolet in Grand Rapids, Mich., said he recently quit doing business with several of the third party lead-generation sites and hasn’t seen any sales drop-off. “I’m better off generating leads through my own website,” he said.

In April, Mr. George received 35 referrals from third parties, spending an average of $313 for each one. The leads resulted in three sales. Through the dealership’s own website, he gained 556 leads, spending $17 for each and netting 86 cars sales as a result.

The online referral companies think their niche in auto sales will be hard for dealers to replicate.Jared Rowe, president of AutoTrader.com, an auto information and referral service owned by Cox Enterprises, said dealers who walk away from third-party sites “are trying to force customers into buying the way they want to sell.”

TrueCar CEO Scott Painter pointed out that his site currently works with 9,000 dealer franchises and only charges when a sale is complete. The fee is $300 for a new-car sale and $400 for used.

“If they can acquire customers for less than $300,” says Mr. Painter, “they should do that until the cows come home.”

Write to Christina Rogers at christina.rogers@wsj.com

 

Related Post

29 Oct

DEALERSHIPS LOSING 84% OF PHONE-UPS

Analysis by IHS Automotive, Commissioned by CallSource, Reveals Auto Dealers are Missing Out on Important Phone Leads Westlake Village, CA – August 18, 2015 – Over eighty percent (84%) of a dealership’s inbound sales calls are not converted to a sale[1] by that dealership, according to recent IHS Automotive analysis commissioned by CallSource. The performance […]

Read More
19 Oct

Autotrader inflated vehicle views, New York dealership group’s lawsuit says

http://www.autonews.com/article/20151015/RETAIL07/151019915/autotrader-inflated-vehicle-views-new-york-dealership-group’s

Read More
 

Leave a comment