By Alysha Webb, Editor and Publisher
When RFJ Auto Partners Inc. acquired Idaho-based Dave Smith Motors a few months ago, it gave Texas-based RFJ a footprint in the Northwest. RFJ acquired something more valuable than real estate, however. Dave Smith is an internet–sales powerhouse. RFJ wanted to tap into that expertise.
“It is our intention to adopt a lot of the operating process that the Dave Smith brand has been so good at developing,” RFJ President Rick Ford told Automotive News.
Location has always been a critical factor in determining a dealership’s value. Now, however, internet sales are allowing dealerships to sell to customers over a much wider geographic area. Having a super-hot internet sales department still isn’t having a huge impact on a dealership’s valuation, industry professionals told Automotive Buy Sell Report. But that may change.
“When I am valuing a dealership, if there are either excessive online sales or completely under an online average, I would not adjust the valuation,” Nancy Phillips, owner of dealership buy sell advisory firm Nancy Phillips Associates Inc. told Automotive Buy Sell Report. “My reason for that is that the practice is totally re-creatable.”
The fact that other dealerships could adopt the same process and have similar results makes an online sales ability not tangible to the value of the dealership, she said. Also, the online sales get funneled through other franchisors, said Phillips, and other factors, such as state regulations or manufacturer restrictions, may impact a dealership’s online sales ability in the future.
“The value of the franchise is that franchise,” she said.
Dealership groups are already having success at duplicating online sales processes. Speaking in June in Los Angeles at the Automotive Customer Centricity Summit, hosted by Thought Leadership Summits, Jerry Winder, vice president in charge of digital operations for Utah-based Larry H. Miller Dealerships, discussed LHM’s strategy for converting “clicks to sales” by implementing a group-wide customer relationship management process that melds online and in-store customer experience.
A key element is appointing a CRM process director at each store who reports to the general manager.
The process directors at 16 of its 54 stores attended a three-day workshop on the principles and practice of online customer relationship management. “You would see lightbulbs going off in their heads,” said Winder. After that training, those 16 stores “significantly” outperformed other stores, he said.
Also speaking at the Summit, Kevin Frye, e-commerce director of Arizona-based Jeff Wyler Group explained its training process for personalizing its online sales customer experience.
“We can replicate it within acquired dealerships within one year,” he told Automotive Buy Sell Report after his presentation.
Not all of the manufacturers are keen on having their franchises become online sales powerhouses, however.
Dave Smith Motors is, according to its website, the world’s largest Chrysler Ram Jeep dealer. Through its website it sells to customers all over the Northwest, not just in its own territory, or in its home state of Idaho.
Chrysler has no problem with that, a Chrysler spokesman told Automotive Buy Sell Report before Dave Smith was acquired by RJF. “FCA US has no policy regarding online sales,” said Scott Brown. “Dealers can sell online to anyone. There are no constraints. That is why Dave Smith Motors, in Kellogg, Idaho, is consistently one of our highest volume dealers.”
Luxury brands, for whom the dealership experience is an important part of ownership, are not so nonchalant, said Mark Johnson, president of MD Johnson, Inc., a dealership buy sell advisory firm in Seattle.
Luxury brand manufacturers “don’t support dealers selling into other markets,” he told Automotive Buy Sell Report. “They dis-incentivize dealers from shipping cars into other dealers’ market areas.”
Environmental factors
Online sales ability is slowly seeping into dealership evaluation, however. He has to at least think about the impact of huge online sales when he appraises dealership real estate, Brad Carter, a principle at Greystone Evaluation Services, told Automotive Buy Sell Report.
“We used to look at unit sales and use that to guide us in the value of the location but today you can sell a lot of cars without a good location,” said Carter.
Location is still very important, he hastened to add. Having access to traffic is good even for savvy internet marketers. And being near other dealerships, such as in an auto mall, means a dealership can share a competitor’s traffic.
In any case, the current hot sales environment might not be the best time to calculate the value of good internet sales, said Carter.
“When things are good, unconventional approaches can sometime work very well,” he said, “Whereas they might not in in a different environment.”
When the market slows down, as it almost inevitably will given the cyclical nature of sales, the value of a good internet sales process will be clearer, said Carter.
“Sometimes a downturn can the determining factor of what makes sense in the long run,” he said.
