As a young man working in his family's Oldsmobile dealership in the mid-1950s, Jack Pohanka remembers having to convince his father that the lowly Volkswagen Beetle represented the future of the auto business. It was a vision not widely shared at a time when Detroit was producing huge cars with big engines and even bigger fins.
"I thought the Beetle was a poor excuse for a car, but the car was attracting a younger, brighter, better-educated buyer," Pohanka said. "My dad didn't know what to make of it."
Back then, the Beetle helped persuade the Pohankas to start buying foreign car dealerships. Today, Jack Pohanka's son, Geoff, views the Internet much as his father saw the Beetle: a potential sea change in the world of selling cars. But he is less sure about exactly where that tide will carry his business.
"We're trying to figure out how it works," said the younger Pohanka. "We're still finding our way."
Indeed, Pohanka said, "it may not be very different from what we've been doing."
But whatever the ultimate impact, the Internet is changing the way they sell cars at Pohanka, which moves more than 16,000 cars a year at a score of dealerships from Frederick to Fredericksburg.
Although purchases over the Internet still represent a tiny portion of sales nationwide, an estimated 40 percent of the customers who arrive at dealer showrooms today are armed to the teeth with information gathered through their computers, according to J.D. Power and Associates, a California-based market research firm.
That percentage of Web-informed shoppers is expected to double by 2003, Power analysts predict.
Geoff Pohanka estimates the share of his customers using the Internet to gather information at 60 percent.
So far, no one at Pohanka has completed a sale from start to finish over the Internet. Customers still seem to want to drive the car, kick the tires and check out the color before they actually buy.
However, auto industry analysts warn that the touchy-feely approach to car buying may be a dying bit of romanticism in the new age of automotive retail. Car quality has increased dramatically over the past two decades, alleviating many consumer concerns about picking lemons.
There is also the matter of automotive sameness. So many cars are so similarly styled and equipped that they have become virtual commodities, requiring no more buyer emotion or angst than purchasing a book via Amazon.com, analysts say.
Already, General Motors Corp., through its Vauxhall subsidiary, is using the Internet to sell cars directly to consumers in Britain and Taiwan.
Efforts to establish similar direct-sales programs in the United States have met with fierce dealer resistance in courts and state legislatures nationwide, and, for the moment, the dealers are winning. For example, they have forced GM to drop its plans to set up 770 company-owned, Internet-linked dealerships in America.
Nevertheless, dealers are changing the way they do business as they are confronted by these new threats. At Pohanka, the biggest change has taken place just downstairs from the Marlow Heights corporate headquarters on the selling floor of Pohanka Honda. Within the past few months, the dealership has assigned its top two salespeople to the Internet full time, where they monitor Autobytel.com and their own Web site, electronically pursuing sales leads by using computer terminals in much the same way they formerly used the telephone.
So far the results have been inconclusive.
Sitting in the far corner of the Honda showroom behind a portable office divider, Victor "Vijay" Sareen presides over the new world of electronic sales. He monitors inquiries coming to the dealership through Autobytel.com, a car and truck buying service that directs Internet inquiries to dealers who subscribe to it.
Subscribers to Autobytel.com are dealers, not customers. A local or regional dealership pays Autobytel.com to be listed. Once it subscribes, the dealer becomes what the service calls an "Autobytel.com accredited dealer," eligible to receive inquiries from retail shoppers who explore the Autobytel.com Web site.
Autobytel.com dealers are supposed to respond to shoppers' queries within 24 hours. The type of response varies according to information or requests submitted by the shopper. The dealer and customer can work out practically all of the details of a prospective purchase before the buyer visits the showroom.
Autobytel.com is just one of a number of buyer Web sites that include information from both dealers and manufacturers. Manufacturers also have Internet services for locating dealers, but like the General Motors service, for example, these may simply list all of their own dealers nationwide.
Waiting at the Electronic Front Door
As online inquiries arrive, either through Autobytel or through other avenues such as Pohanka's own Web site, Sareen is ready, monitoring the computer screen instead of watching for customers entering the showroom.
The moment someone steps over his computer doorstep, Sareen sends a prepared computer response that acknowledges the inquiry and informs the prospect that he is working on a reply. The trick for the online salesman is to keep Internet customers engaged until they eventually come to the showroom to close the deal. Typically, a customer making an Internet inquiry is set to buy, and will usually make a purchase from one dealership or another within 72 hours.
In the industry, the process has come to be known as "e-tail."
At first glance there is nothing high-tech about Sareen, a fiftyish native of India who remains a coat-and-tie man in a showroom of polo shirts. As the dealership's top salesperson for much of the past decade, Sareen traditionally sat at the desk closest to the front door of the showroom, a reward for his sales prowess.
In that position, he consistently sold 20 to 25 cars a month, hall-of-fame numbers in the car business. Today, at the opposite end of the showroom, Sareen is maintaining that sales pace using the dealership's new, electronic front door.
But the rules of the new game are somewhat different.
For starters, Sareen lets the customer take the lead. One of the benefits of car-shopping via the Internet is that a customer never has to deal face-to-face with a salesman unless he wants to. So Sareen and others in the Pohanka organization allow the customer to set the pace, even deferring telephone calls until the customer says he's willing to talk.
The one exception to the exchange of information by Internet is price. Sareen gives that out over the telephone. "I never give the price by e-mail," he said. Once a dealer provides a price in writing, the customer can take it to other dealers who, with that verification of a competitor's offer, can try to match it.
Still unclear, according to the Pohankas, is how much of Sareen's continued success represents net new business and how much reflects sales that would have happened anyway the old-fashioned way.
Whatever the uncertainties, the Internet has begun to force other changes within the dealership.
Unlike the other salespeople, whose commissions are based on a percentage of the selling price, Sareen is paid according to a formula based on the number of cars he sells each month. In part, this reflects the generally lower prices for cars sold to Internet customers, who have done more research than their walk-in cousins and tend to drive a better deal.
On the plus side for the dealership, according to Honda Sales Manager Ray O'Bryhim, Internet customers tend to spend much less time in the showroom tying up salespeople. By the time they get to the showroom to kick the tires and test-drive the cars, they usually have a realistic view of the selling prices and are ready to buy, he said.
Across the Potomac River at Pohanka's three dealerships in Chantilly, e-tail is off to a slower start. Like all the other Pohanka dealerships, customers there are using the Internet to research prices, options and safety ratings before they come to the showroom to buy, but only a comparative handful are doing their haggling electronically.
"People use the Internet as an information tool," said Scott Crabtree, co-owner of Pohanka's Virginia operations, but it's hard to measure the impact on sales. "There are a lot of hits, there's a lot of activity, but what does it mean? People still need to get into the car, feel it, drive it, smell it."
At the same time, Crabtree acknowledges, "you can't afford not to have a Web site."
Reality Still Beats Virtual
With an estimated 1.5 million Web sites being created every day, Geoff Pohanka worries that potential customers will have a hard time finding the Web sites of individual dealerships like his. "The big question is how are they going to find you," he said.
Despite his concerns, Pohanka said the company Web site receives about 5,000 hits a month, with the Acura dealership in Chantilly getting the highest number. This would indicate that Internet use is still most popular among the more affluent buyers. Pohanka also subscribes to Autobytel.com, which allows customers to pinpoint the area where they want to buy, to make it easier for potential customers to find his dealerships.
At Pohanka Chevrolet in Chantilly, Jim Key, who oversees Internet sales, said the Internet triggers about two or three vehicle sales a month. "I consider it found business," he said, meaning business the dealership would not otherwise have attracted.
Key said the dealership has a couple of designated salespeople who monitor the Internet for customer queries. Although sales are still small, Key echoed the thought that the Internet has made customers much better prepared.
But, for the moment at least, Key said he isn't sure the Internet will ever be "a driving force" in the auto business. "The Internet isn't going to replace the test drive," he said.
www.autobytel.com is a global online sales company specializing in new and used cars and trucks, as well as direct sales of auto components and accessories, such as batteries and wheel covers.
Auto dealers sign up with Autobytel to have access to online customers shopping for vehicles in their market area. Consumers can arrange pricing, financing, and insurance through Autobytel. They also can use the service to conduct extensive vehicle research before purchase. Ultimately, the deal is closed and the vehicle is delivered by a dealer.
www.carsdirect.com is one of the fastest growing online sales companies specializing in new and used cars and trucks. Like Autobytel, CarsDirect has contracts with many dealers, 1,700 in this case, who ultimately close the deal and deliver the product. But unlike Autobytel, or most other online vehicle shopping services, CarsDirect keeps dealers in the background, thus giving the impression that the buyer is engaging in a factory-to-customer Internet sales transaction. If the consumer chooses, CarsDirect will deliver the new or used vehicle directly to his home or office, allowing the customer to complete the entire purchase without visiting a dealership. There is a fee for the service, as there is for many online shopping companies.
www.carpoint.com is Microsoft's entry into the growing field of online automotive marketing. The service's most notable characteristic is its extensive, upfront provision of detailed information, including pricing and recall histories, on new and used cars and trucks. Financing and other car-buying needs can be arranged online via CarPoint. But as with many similar services, the dealer ultimately handles the deal.
http://buypower.vauxhall.co.uk/ has U.S. dealers nervous. It provides direct factory-to-customer sales, via the Internet and General Motors Corp.'s Europe-based Vauxhall subsidiary, to customers in Britain and Taiwan. U.S. dealers, so far, successfully have resisted manufacturers' efforts to establish Internet-based, direct sales operations in America.