Is a Digital Storefront Right for Your Dealership?

Digital Storefront

Creating a digital storefront could give you the competitive edge you need in today’s market. BY MARK RIKESS

AutoNation recently announced the creation of its 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. There’s no reason why you can’t transform the automobile purchase in your dealership by creating your own digital storefront.

While there are plenty of benefits to launching a digital storefront (see sidebar) many dealers are hesitant to jump in. Probably the biggest hurdle most dealers face is the reluctance of sales management to embrace a more transparent and efficient method of auto retailing.

But for those who are willing to delve into establishing a digital storefront, there are two of the key factors that need to be addressed:

Vehicle pricing. Approximately 80 percent 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 such as TrueCar, Edmunds, etc., have said 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.

But when you stop to think about it, today’s consumers are used to shopping online, and when they do, they expect to see prices. If they don’t see prices, they will shop elsewhere.

digital storefrontSteps to Creating a Digital Storefront

If creating a digital storefront makes sense for your store, what is the first step? Create a separate digital sales team. Hire people with the skill set to handle incoming phone calls and Internet leads. By doing so, you will significantly reduce transaction costs because 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 six to eight digital sales associates. Most traditional stores today have around one manager (including BDC) for every three and a half to four sales associates.

The next step is to create a very clear vehicle-pricing strategy. For new cars, it is suggested to adopt 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 – which translates to about $4 a month – rather than cave on the pricing.

Some other factors to consider before launching a digital store are:

  • 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

 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 accruing to them and will no longer be competing primarily on price alone.