The number of U.S. dealerships has declined by 27% in the past 25 years and now is at 22,000, according to J. D. Power and Associates. Moreover, according to NADA, the productivity of the average retail salesperson has not changed in 18 years, though labor and overhead costs have continued to rise. Last year the pretax profit on the average new car sold was a slim $77 on a purchase price of $21,974.
Ericksen of Boston Consulting thinks the dealer population could fall to as low as 10,000 by the year 2005. He points to metropolitan Chicago, which has 67 Chevy dealers and 70 Ford dealers. "That's way too many. It's ridiculous," he contends, noting that a successful superstore like Home Depot has just 19 locations in greater Chicago. "People will drive half an hour to buy a hammer from a Home Depot," he notes. "There's no reason to think they won't go as far to buy a $20,000 car."
Ericksen says that if Pete Ellis selects five high-volume, high-quality dealers for each brand of car sold in the Chicago area, he could capture a disproportionate share of the market and, in effect, become the auto-retailing equivalent of Home Depot. "In a Cincinnati or Charlotte it could be done with just one or two dealers," says Ericksen.
But for now, the car-selling process remains notoriously inefficient. Automakers and dealers spend $10 billion a year advertising their wares--and then another $10 billion inducing people to buy the product through rebates and assorted other programs. Pete Ellis, for one, knows there's a better way. His company is really more than a restructuring play. It's an agent of cultural war.
In his mind the car world as it is currently ordered is dysfunctional. Salespeople, he says, "are trained to be short-term thinkers," while the manufacturers, driven by greed, have created a marketplace oversaturated with dealers. The net result is that both margins and ethics have been under pressure for years.
Ellis says that ABT's mission is "to put ourselves in a consumer-advocacy position"--and "to give our dealers a total survival package to keep them in business and profitable for years to come."
Gill, the Atlanta dealer whose $12,500 ABT sign-up at the NADA conference delivered 230 purchase requests in his first three weeks alone (and who is now revamping his sales force around ABT's soft-sell model), describes Ellis's mission in a way that's a little less delicate. The powers that be don't like it, he says, "but this is what's coming down. A lot of these second- and third-generation dealers are chuckling and saying, 'Get out of my face with this computer stuff.' Well, the new blood's gonna take this thing and shove it where the sun don't shine."
Edward O. Welles is a senior writer at Inc.
Resources
At its core, the Auto-By-Tel story is about the blossoming of the Internet as a novel and viable venue for business. In Auto-By-Tel's case, what's being offered is a place to price, select, and actually buy a car at any time of the day from the privacy of one's home. To see what that process entails and what a radical shift it embodies, visit the company's Web site or see related sites that provide detailed pricing information on automobiles ( www.edmund.com and www.carpoint.msn.com).
International Data Corp. estimates that the dollar value of goods and services purchased over the Web will increase from $318 million in 1995 to $95 billion in the year 2000 as the number of Web users rises from 16 million to 163 million in that time. No surprise, then, that there's been an explosion of books related to doing business on the Net. Two useful texts on the practical side are Growing Your Business Online: Small-Business Strategies for Working the World Wide Web, by Phaedra Hise (Henry Holt, 800-488-5233, 1996, $14.95), and Guerrilla Marketing Online Weapons: 100 Low-Cost, High-Impact Weapons for Online Profits and Prosperity, by Jay Levinson and Charles Rubin (Houghton Mifflin, 800-225-3362, 1996, $12.95). Hise, a former Inc. staff writer, brings to the task a reporter's eye for the issues that are real, immediate, and specific. Her book is replete with case studies of small companies that solved particular business issues with creative use of Web sites. Guerrilla Marketing Online Weapons is drier, yet still rich, offering a compendium of simple, low-cost tactics for making it on-line--a reminder, perhaps, that in most cases a business rises or falls depending on how much common sense its management exercises. Net Gain: Expanding Markets Through Virtual Communities, by John Hagel III and Arthur G. Armstrong (Harvard Business School Press, 800-338-3987, 1997, $24.95), is denser, more jargony stuff. Part overview and part manifesto, it nonetheless speaks cogently to the authors' belief that thanks to the Net, we're in the midst of a radical transformation: buyers have wrested power from sellers. Identifying, understanding, and gaining the loyalty of the "virtual communities" of customers out there is the name of the game. Finally, Webonomics: Nine Essential Principles for Growing Your Business on the World Wide Web, by Evan I. Schwartz (Broadway Books/Bantam Doubleday Dell, 800-223-6834, 1997, $25), strikes a balance between being academically theoretical and everyday practical. It's an original and penetrating look at what really matters in successful Web commerce. Written by a journalist, it's also far more readable than most business books.
AUTO-BY-TEL, Pete Ellis, 18872 MacArthur Blvd., Irvine, CA 92612-1400; 714-225-4500 66
AUTONATION, Republic Industries, One Financial Plaza, Suite 1700, Fort Lauderdale, FL 33394; 954-627-5100 66
