AutoNation recently announced the creation of their first Digital Storefront – which allows the website to transition from purely informational to transactional – offering customers the opportunity to do the majority of their auto sales transactions from the comfort of their home or office. I don’t see any reason why you can’t transform the automobile purchase by creating your own Digital Storefront.
Probably the biggest hurdle most dealers face is the reluctance of sales management to embrace a more transparent and efficient method of auto retailing.
Two of the key factors that need to be addressed when establishing a Digital Storefront are:
- Vehicle pricing. Approximately 80% of dealers don’t put a new vehicle price online, even though this is a primary reason prospects visit your website. The reason most dealers don’t put a competitive price online is their “fear” of customers using their price as a “shopping tool.” This somewhat convoluted logic is “I will cost myself leads in order to protect potential gross.” An old mentor of mine once said, “When you try to protect something you don’t already have you’re likely to wind up with nothing at all!” Virtually all of the third party website providers (TrueCar; Edmunds; etc.) have told me that most often their customers don’t select the lowest price. Their primary drivers are convenience in proximity to their home and what appears to be an excellent, transparent sales process.
- Salesperson Empowerment. This is real thorn that sticks in sales managers craw. They want to be in control of pricing/desking and are often loathe to empowering salespeople with the ability to provide price quotes for customers that aren’t at the dealership.
Think about it. Everyone is used to shopping online and when they do, they expect to see prices. If they don’t see prices, they will shop elsewhere.
So – you see the logic of a Digital Storefront. What is the first step?
Create a separate Digital Sales team. Hire people with the skill sets to handle incoming phone calls and internet leads.
A bonus is that this will reduce transaction costs significantly: You don’t need a BDC when you have a dedicated Digital Sales team. Secondly, you don’t need the same level of management supervision with this model. The salespeople are empowered to discuss all aspects of the transaction including payment and trade-in estimates.
Depending on the size of your store you’ll need around one Team Leader for every 6-8 Digital Sales associates. Most traditional stores today have around one manager (including BDC) for every 3.5-4 sales associates.
The next step?
Establish a very clear vehicle pricing strategy. For new cars, I’d suggest either a pure One Price or Limited Negotiations sales model. If you’re going to use a Limited Negotiations model you need to determine:
- How much you will negotiate from the quoted price. I’d recommend no more than $200. You’ll need a third party reference to share with the prospect. A word track is, “We get our prices the same way you do. Using third party websites like Edmunds or Kelly Blue Book.” Also, there needs to be a financial penalty if sales associates or management negotiates the $200 of “wiggle room.” You’re going to post competitive prices and you need to train your people to overcome a $200 objection (about four dollars a month) rather than cave on the pricing.
Before launching a Digital Store there are other factors to consider including:
- Sales and management compensation plans
- Recruiting sales associates with the right skill sets
- Developing a well-documented and regimented sales training program
- Developing a Scorecard that measures metrics for each associate
- And more….
It is pretty hard to ignore the numerous benefits of creating a Digital Storefront including:
- Salesperson retention. You should be recruiting a younger, well educated sales force that has high levels of empowerment and training. The minimum performance standard should be 12 units. 12-14 unit sales should create an annual compensation of between $40,000-$50,000. If I’m a Gen Y’er and making this kind of money I’m the “richest kid on my block.”
- 5-Star Reviews. Due to a transparent, time efficient and customer-centered sales process you should receive a significant amount of 5-Star reviews. 5-Star reviews generate more leads including expanding your “sales footprint.” Research tells us that many customers will drive 20 miles or more to get what they perceive to be a great sales experience.
- Sales associate efficiency. The Digital Sales department works solely off of appointments. No more sitting around or standing out front of the dealerships waiting for “something to happen”…. Also, arguably the biggest complaint of most customers is the time it takes to buy a car. Due to the transparent nature of this sales process, a significant amount of information has been shared or gathered during the process. Most often a firm purchase price has been established. By the time a customer arrives at your store, you should have collected trade-in data, customer information, determined if the vehicle is affordable, have the vehicle ready for a test drive, etc. Sales cycle time plummets when the process is done correctly.
It is time that dealerships embrace a 21st century customer-focused experience. To create a Digital Storefront means embracing change and dedicating resources to establish a new sales department. Dealers who develop a Digital Storefront will have all kinds of competitive advantages and will no longer be competing primarily on price alone.
If you want to learn more about how to establish a Digital Storefront and employ a Digital Sales team, let me know and I’ll set up a webinar for you. manderson@rikessgroup.com or 404-805-5009