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Car dealers yield sales to Internet

September 3, 1998
Web posted at 10:15 AM EDT

by Bob Wallace

(IDG) -- The Internet is changing the competitive landscape for auto dealers, with an impact so deep it is affecting how many vehicles they can get from automakers to sell. Chrysler Corp., for example, allocates more cars to dealerships that sell more -- a policy that can reward dealers who exploit the Internet to boost sales.

But that allocation policy has caused some friction in the Chrysler family.

The Federal Trade Commission recently said 25 Chrysler dealers threatened to boycott Chrysler because one small-town dealer was successfully using the Internet to sell more automobiles.

"Dave Smith Motors of Kellogg, Idaho, was attracting customers from around the Northwest and taking substantial sales from" other dealers, an FTC statement said. "The goal of the boycott was to limit sales by car dealers that market cars on the Internet and for low prices," said William Baer, director of the FTC's Bureau of Competition.

The FTC ruled the boycott illegal on grounds that it was anticompetitive. "Consumers need to have access to this new and innovative form of marketing," Baer said. And Chrysler refused to change its car-allocation policy.

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The attorney representing the 25 dealers said they didn't admit to the alleged boycott, which was never proved.

"We were trying to negotiate with Chrysler to make a change to their allocation system," said Jim Sewell, a lawyer at Smith Law Firm PC in Helena, Mont. "And this had nothing to do with Internet selling. We were totally dismayed with what was in the [FTC] release."

But the squabble underscored the fact that using the Internet to market cars is becoming a competitive necessity.

"The 'net is a major communications and marketing tool, and those who embrace it will be rewarded, while those who resist will eventually be noncompetitive," said Tom Libby, a director at J. D. Power and Associates in Southfield, Mich. "Dave Smith Motors was quick to implement this technology, and the dealership is benefiting from it."

The dealership unveiled its site in October 1996.
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Chrysler has been working hard to develop an Internet-based service that will enable consumers to pick a dealer, configure a vehicle, request a price quote and get a response within 48 hours. The unnamed service will go nationwide in October.

"We believe this is the way to go. And, through training, we are making sure dealers are ready to be responsive," said Rich Everett, director of strategic technologies at Chrysler. The automaker will monitor the E-mail system to make sure consumers get a response as promised, Everett said. "If they don't, we'll deactivate the [dealer's] button. That's how serious we are."

The lion's share of Chrysler's 4,500 dealers already have World Wide Web pages, but Everett said it will be better to have Chrysler's corporate site, with 1.3 million hits per month, be the central interface. "No dealer on their own can bring in the traffic and exposure that brings. People look on the 'net for the Chrysler [site], not for an [individual] dealer."

One Chrysler dealer has already given up its Web page in deference to the corporate site.

"Chrysler provides a great [listing] for us," said Tom Peretzian, general sales manager at Framingham Chrysler-Plymouth, Inc. in Framingham, Mass. "We rely on that link and also use a whole host of things, including an [online] auto referral service."

"Automakers and dealers have to work together to provide a seamless service to the customer," said Jay Houghton, manager of automotive marketing at A. T. Kearney, Inc. in Southfield. "And information technology is the key because it makes this service flexible and efficient," he said of the Internet.

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