Each year Auto Dealer Monthly and AutoDealerDaily.com present the Internet Achievement Awards, naming the Internet Dealer of the Year, the Pre-Owned Retailer of the Year, the Top 100 Internet Retailers and the Top 50 Pre-Owned Retailers. Additionally, all applicants are surveyed as to their preferred source of third party leads, their CRM tools, and the size of their departments, the use of Business Development or Call Centers, and finally, their use of online auctions to retail vehicles.
The criteria used to rank all the organizations submitting applications remains the same from year to year. Any dealership is eligible whether franchise or independent. A “dealership” is defined first by its financial statement, then by its management structure, then by its “rooftop”. If it is run as a stand-alone operation, especially with its own service and parts department, it will be considered separate.
An internet sale is defined as having originated through a 3rd party internet lead generator, a dealership’s own web site, and a phone call tracked to an internet advertisement or transacted through the use of the internet, including all online auctions.
All entries are scrutinized, with dealerships being asked to verify as necessary. As a result, you may notice a significant difference in our rankings and others published annually in our industry. With the inclusion of independents and the elimination or reclassification of top applicants during the auditing process, some were not dealerships but really dealer “groups”, these rankings truly salute the best of the best.
Every year the Auto Dealer Monthly/AutoDealerDaily.com Internet Achievement Awards has offered increased insight as well as surprises into the internet retailing efforts of the U.S. auto industry, and 2006 was certainly no exception.
2006 Internet Dealer of the Year
As Auto Dealer Monthly and AutoDealerDaily.com Internet Achievement Awards celebrate their fifth anniversary the question remains the same as it has been for the past four years, can anyone knock off the king of the hill from the first year, Dave Smith Motors (www.USAutoSales.com), of tiny Kellogg, ID?
The answer is a resounding, “No!” For the fifth consecutive year, dealer principal Ken Smith, and his entire Dave Smith Motors team raised the bar and captured the 2006 Auto Dealer Monthly Internet Dealer of the Year Award, by selling a remarkable 7281 units via the Internet. As always, they were heavily biased toward new vehicle sales. The dealership sold 6106 new and 1175 used units via the internet in 2005, and remained the largest retailing Dodge dealership in the country for the third consecutive year. If there is any good news for the competition, their rate of growth slowed a tick, as they increased their total from the previous year by “only” 548 units. To put that in perspective, their monthly internet sales are almost equal to 25% of the town's total population while their annual internet sales are more than three times the total populations.
Top 100 Internet Retailers
While Dave Smith Motors dominates the headlines year after year, there are many other noteworthy stories, especially in the top five positions of the Top 100 Internet Retailers. Finishing in the top 10 every year they have submitted, and this year rising all the way to the runner-up position was the Koons Automotive Tyson Toyota Scion dealership in Vienna, VA. With 626 additional internet sales in 2005, the dealership became just the second store to log over 5000 retail deliveries with a total of 5148 internet sales in 2005.
Posting an increase of 2892 units, the largest of any dealer in this year rankings, Paragon Honda, Woodside, NY, stormed from 50th in 2005 to the third position this year with a total of 4136 units. Adding to their impressive display their sister store, Paragon Acura, which sits aside the Honda location, added 1618 total units ranking them 29th.
Fourth place went to Beau Townsend Ford of Vandalia, OH. Their organization remains a pillar of strength. Since their first submission in the 2003 rankings, Beau Townsend Ford has never finished lower than fourth, with two second place finishes and a third. Tallying over 4000 internet sales for the third consecutive year, they logged a total of 4040 units in 2005, split nearly even between new and used units. While not able to capture the top ranking in the 2006 Top 50 Pre-Owned Retailers, their proficiency in used vehicle sales allowed them to earn the runner-up honors this year.
Leaping into the top five for 2006, with a whopping 48% increase over their previous year’s total was Galpin Ford, North Hills, CA. Their 3782 units represented an increase of 1231 units from last year when they earned a 10th place finish. The balance, of the top 10, was made up of five stores that have been perennial top ten finishers. Sixth and seventh place finishers in 2005 traded places in 2006. Sixth went to Conicelli Autoplex; Conshohocken, PA (3385 units), and was followed by AutoNation’s highest ranking location, Maroone Toyota; Davie, FL (3206 units). Eighth place for the second consecutive year went to UnitedAuto Groups’ highest ranking store, Hudson Toyota Scion; Jersey City, NJ (3091 units). Ninth place finisher Capitol Ford; Raleigh, NC (2530 units) slipped a few notches this year, a trend frequently found among Ford retailers, and was followed by a second AutoNation store - Power Toyota Irvine; Irvine, CA (2407 units) in 10th place.
In all, 25 new dealerships joined the Top 100 Internet Retailers for 2006. The highest ranking newcomer, a first time submitter, Bonham Chrysler; Bonham, TX; Eugene Knies, dealer, nearly broke into the top ten as they finished a strong 12th. Their total of 2294 units was made up of a surprising mix for a franchise dealer – 420 new units and 1824 used. Their used total was so strong that they finished third place in the Pre-Owned Top 50 rankings. A prominent newcomer to the Top 100 Retailers in 2006 was Bill Heard Chevrolet Sugar Land; Sugar Land, TX (2095 units - 16th).
Making notable gains in 2006 were two AutoNation dealerships. Their Autowest Honda Fremont; Freemont, CA, location nearly doubled their previous year’s sales and jumped from 82nd to 19th (1923 units) and their Tempe Honda; Tempe, AZ (1785 units) location increased their internet output by 590 total units moving from 59th to 25th.
Trends Continue Among Top 100 Internet Retailers
With 25 newcomers in the rankings, some prominent names from previous years had to disappear. When contacted by the magazine, many dealerships reported the inevitable industry turnover as the cause of their decline. In many cases key personnel had been lured away undermining the ongoing success of stores that had previously enjoyed benchmark performance.
The 2006 Top 100 Retailers sold 7.5% more vehicles than their 2005 counterparts, ringing in 166,950 retail units. New vehicles once again led the way with 119,197 total sales, an average of 1192 sales per store. Pre-owned units also increased within the Top 100 Retailers netting a total of 47,753, arriving at just under 40 units per month.
For the second straight year the ratio of new to pre-owned units has increased. The 2006 Top 100 average new/used ratio is still inching upwards. View the Changes. However the upward trend does not reflect a drop in used internet sales, since the 2006 Top 100 sold nearly 3500 more pre-owned units than the 2004 Top 100, meaning that the growing disparity in the sales ratios simply indicates dealers are relying more on the internet than they were two years ago for new vehicle sales.
With increased reliance on the internet for new vehicle sales, independent dealers found it more difficult to find their way into the Top 100. Independents hit their high-water mark in the 2004 rankings when 12 were named to the list. Last year their ranks shrunk to nine and for 2006 only six were able to climb into the Top 100. One factor that has added to the thinning of the independent ranks is that some of the strongest and highest ranking dealers have added franchises over the past two years.
Top 50 Pre-Owned Internet Retailers
For the second straight year independents found their numbers sliding among the ranks of the Top 50 Pre-Owned. Just two years ago independents held a majority in the Top 50 by a 26 – 24 margin. Last year franchise dealers claimed 30 spots in the Top 50, and their grip strengthened even more in 2006. This year the margin favors franchise dealers by a 34 to 16 margin. It is not due to weakening skills of the independents, but instead franchise dealers have finally zeroed in on internet sales success.
For the past two years independent dealer City Auto Sales (www.CityAuto.com); Memphis, TN, David Anderson, dealer, has been climbing up both the Top 100 and the Top 50 Pre-Owned rankings. In 2004 they failed to finish in the Top 100 but finished 29th in the Top 50 Pre-Owned. Last year as the top independent they climbed to 17th in the Top 100 Internet Retailers, and all the way to 3rd place in the Top 50 Pre-Owned. For 2006 they were once again the top independent dealer, missing the top ten spot by just 30 units in the Top 100 Internet Retailers but hitting their all time high ranking of 11th. With the additional 354 retail sales from last year taking them to a total of 2377 pre-owned units they earned the title of Pre-Owned Internet Retailer of the Year. Second and third place went to Beau Townsend Motors and Bonham Chrysler respectively.
The balance, of the top ten in the Top 50 Pre-Owned category, was comprised of dealers that had placed in the top 15 last year. Fourth and fifth place were independent dealers TexasCarsDirect.com LTD, Dallas, TX, Peter Bulban, dealer (1738 units); and Miami Master Cars, Miami, FL, Saeid Nikour (1350 units); each moving up one position from last year’s rankings. Sixth position went to Bobb Chevrolet, Columbus, OH, Jeff May, dealer principal. Bobb Chevrolet has consistently moved up the pre-owned rankings the last three year, breaking into the top ten with 1318 units. eCarLink, an Independent dealership based in Addison, TX, Len Critcher, dealer, moved up two spots from 2005 into 7th place with 1292 units. Following in eighth place was 1st Gear Auto, Inc. dba North Coast Auto (1257 units), another Independent dealer located in Cleveland,OH, dealer principal Gary Grinberg. The final two in the top 10 were members of the Top 100 Internet Retailers. Capital Ford who ranked 9th overall equaled that with a 9th place ranking in the Pre-Owned category, with 1257 units, followed closely by our Internet Dealer of the Year, Dave Smith Motors (1236 units) for a 10th place finish.
Looking at the 2006 Top 50 Pre-Owned Retailers, it took 411 units to break into the Top 50, with the average dealer on the list retailing 811 units last year. While franchise dealers outnumber independents by more than 2 to 1, the independents averaged selling more units. Ranked independent dealers average 943 units while franchise dealers averaged only 749.
Online auctions continued to be a significant factor in the business model for our Top 50 Pre-Owned, with 26 stating they were an eBay Motors seller. That has been a common characteristic of the Pre-Owned Top 50 for the past three years – the only significant difference is that more franchise dealers are now taking advantage of the opportunities on eBay Motors.
19 dealers in the Top 50 Pre-Owned were not ranked in 2005, as always, there was movement both up and down from last year’s ranked dealers. The most significant improvement was by sub-prime specialist Gorges Motor Company (535 units), Wichita, KS, Scott Pitman, operating partner, which leapfrogged all the way from 48th to 31st position.
Top Dealer Groups
While the Auto Dealer Monthly Internet Achievement Awards were designed to focus on dealerships (in most cases, rooftops), certainly the results of dealer groups cannot go without note.
Of the six publicly traded companies, and to the surprise of no one, AutoNation, Inc. once again took home the honors of the Top Dealer Group for 2006. With 145,351 total units, they delivered nearly as many units as the entire Top 100. With 269 dealerships, they placed 33 in the Top 100 Internet Retailers, and their average store delivered 540 units. UnitedAuto Group and their 182 U.S. stores scored heavily by placing 8 stores in the Top 100. They did not submit complete corporate data for all of their stores. Three other publicly traded companies placed dealerships in the top 100. Both Group 1 Automotive, Inc. and Sonic Automotive, Inc. placed two stores in the Top 100. While Sonic also did not submit complete corporate data, Group 1 Automotive did, listing 25,352 total group sales among their 95 dealerships. Finally, Asbury Automotive Group placed one dealership in the Top 100, and also did not submit complete corporate sales. Lithia Motors, Inc. did not submit any internet sales data.
Privately held companies comprised 54 of the Top 100 Internet Retailers. Hendrick Automotive Group. Charlotte, NC, James Huzl, CEO, took top honors on units sold among privately held companies selling 20,211 internet units. Additionally, they posted five dealerships in the Top 100. Jim Koons Automotive, Vienna, VA, James Koons, chairman, fell short of the top rung selling 15,561 units; however, they did take top honors for the privateers in number of stores with six stores ranking in the Top 100.
The Earnhardt Automotive Centers, Chandler, AZ, Hal Earnhardt III, placing four stores within the Top 100, took third place among the privately held companies in units sold, falling just short of the 9000 mark with 8992 sales. Their Special Finance division, known as Mr. Ed was a heavy contributor to the group’s success with over 2300 internet based sales alone.
Fourth place went to The Herb Chambers Companies, Somerville, MA, Herb Chambers, chairman. They tallied 8473 internet units among their 24 locations, and placed one store in the Top 100.
Two other privately held groups must be recognized for placing dealerships in the Top 100. Both Paragon Automotive Group (5754 units), Queens, NY and the McCombs Automotive Group (4620 units), San Antonio, TX, Gary Woods, president each placed two stores in the Top 100.
Automobile dealer websites have come a long way since they were first launched in the late 90’s. Originally not much more than an electronic billboard, websites are now true virtual dealerships where most of the shopping and buying process can take place. Over the past 18 months Search Engine Marketing (SEM) has become the industry buzzword. The ability to both attract customers to a dealership’s website, then entice them to respond either electronically or via phone can mean the difference between success and failure on the Internet. Mark Bonfigli, president and CEO of Dealer.com, offers that, “Solid conversion rates including phone calls for organic website traffic should be in the 8-10% range [of all visits to a dealer’s website]. Dealers that are doinghighly successful SEM campaigns see 15-20% of visitors converted to phone calls and website submissions.”
Bonfigli adds, "Dealers must consider SEM as an integral part of their overall marketing campaign since it is where 80% of their customers are starting their vehicle research and it is one of the forms of advertising that can pull customers away from competitors while tracking every lead that is generated for every ad dollar. In the past 24 months SEM has progressed to the point where a dealer can now track every phone call that is generated bythe search engine ads as well as every form submission from their website through the use of dynamically ‘swapping’ phone numbers and forms. This technology has allowed the reporting and "proof" of SEM to become the new standard to which all advertising will be judged."
Reynolds Web Solutions, used by 44 dealers in the Top 100, was the predominant web provider this year, largely because they are the web provider for AutoNation, who has 33 stores among the top 100. BZ Results, a newly acquired division of ADP ranked second with 12 dealers in the Top 100. Third place went to Dealer.com, who was used by nine members of the top 100.
Certainly flexibility for the dealer/user is important. Paul Miller, Internet Director for perennial power (#9) Capital Ford, offered this about their 33 store Capital Family of Dealerships, "Dealerskins has given us the versatility and on demand tools that the customers want and have been a great addition to the Capital Family of Dealerships. They allow us to changewebpage content and specialsusing an easy to learn page editor. This keeps the websitesfresh and up to date."
Closing Ratios – Surprises Abound!
One of the biggest surprises in the 2006 applications was that of closing ratios and the use of Business Development Centers (BDCs). One might assume as the size of operations increase, that BDCs become more popular (they apparently do) and that closing ratios improve. Based on input from this year’s respondents, that however would be incorrect.
Only 23 members of the Top 100 and only two of the top 10 reported using a BDC. None of the independents did. What was even more surprising was the disparity among closing ratios (leads-to-sales). Of the Top 100 reporting BDCs, the average closing ratio for new vehicle leads was 22% for leads through the dealer’s website, and 19% for new car leads from a lead provider. This compares to non-BDC users with a 32% closing ratio on new vehicle leads through the dealer’s website, and 19% through lead providers. While the closing ratio through lead providers was the same, the closing rate of nearly 50% better at dealerships without BDCs stands out like the pink elephant in the corner of the room.
Results for the used vehicle leads were even more disproportionate. Again, looking at only the dealers reporting in the Top 100, those dealers using BDCs reported a 20% closing ratio on used vehicle leads generated through their own website, and just 13% on used vehicle leads through lead generators. Non-BDC users reported a 33% closing ratio on their own website leads, and a whopping 28% on used vehicle leads through lead providers – more than double that of BDC users.
When looking at all reporting dealers this year, the numbers play out much the same. Factoring in those dealers with BDCs and not in the Top 100 the closing ratios increase a point to 23% on new vehicle leads generated through the dealer’s own website and down a point at 18% for those acquired through lead providers. Non-BDC users were much the same as those in the top 100 with 30% and 18% ratios, respectively. The used vehicle side is where those not in the top 100 and without BDCs shine. This was largely due to the independents that submitted, who with a smaller volume of leads, worked them very effectively. For all non-BDC users the closing ratio on used vehicle leads generated through their own website was a whopping 35% (reported at 51% by all independents) and 30% (reported at 42% by all independents) on leads acquired from providers. This was significantly higher that the new vehicle leads by any other grouping. BDC users reported closing ratios of just 21% and 15%, respectively, on used vehicle leads.
While noting this, consider two points. First, this is not an indictment of BDCs, but rather a summary of the top Internet dealers in the country. Certainly, BDCs are used with great results throughout the industry every day but the internet department, which grew mostly from one person positions in its infancy, had to fend for itself, on a page different from the other sales departments. Today, as internet marketing becomes more mainstream, it likely shows where opportunity remains as the two sides grow together.
Additionally, many dealers still struggle to handle the sub-prime leads. Dealers working with a large number of sub-prime leads, where the benchmark closing ratio runs at just 17%, often work through BDCs which can ‘water down’ their closing percentages – especially on the used vehicle side. In any case, these statistics certainly provide fodder for discussion over the upcoming 12 months.
While dealers certainly report better closing ratios through their own website they still report that better than 50% of their leads are coming from lead providers. With some dealers it is nearly 95%. As in years past, dealers were asked to list the lead providers in use at their stores. The rankings do not necessarily correlate with closing ratios or quality of leads, but with which providers are used most often by the Top 100 dealers. As would be expected, the results are heavily skewed toward new vehicle lead providers, given the overwhelming bias in new vehicle sales by the top 100.
Leading the pack for 2006 was Dealix, a division of Cobalt at 72%. AutoUSA, owned by AutoNation ranked second followed in third by Autobytel. Manufacturer’s sites, while not really third party grew in importance. From that point, there was a large drop off to the next group of three companies – none of which really think of themselves as lead providers. eBay Motors, the online auction company, was listed by 29 members of the Top 100 and 30 members of the Top 50 Pre-Owned dealers. Two online classifieds were next, with AutoTrader.com named by 27 of the top 100, and 29 of the Top 50 Pre-Owned, followed by cars.com, at 16 and 20 respectively.
Following the top seven providers, there were 27 other providers named by the Top 100 – 23 of them named once. The only other provider to be named by five or more dealers was TMotors, named by six different organizations.
Other Trends and Statistics
Certainly Internet marketing and retailing is becoming a staple to the majority of dealers. Indeed, in the five years of the Internet Achievement Awards the prowess and effectiveness of the Top 100 dealers have steadily increased to the point that the total number retailed in 2005, 166,950, was more than double the 82,270 posted by the top Top 100 in 2001.Part of this increase in abilities is due to the experience level of the departments. Dealers who were ranked have had their departments in place for an average of 6.25 years.
As sales have increased, so have department sizes. The responding franchise dealers in the top 100 have internet departments staffed with an average of 11 people, selling an average of 12.5 units per month per employee. The independents ranked in the Pre-Owned Top 50 have an average of six people in their departments/dealerships, and average 13 units per month per employee.
The trend to online auctions, in particular eBay Motors, continues for the third consecutive year. This year the highest percentages of dealers ever stated that they were using eBay to market inventory. Those dealers that responded stated that they close 24.5% of the listings that they post on eBay but 49% of those sales transact offline from leads gathered during the auction. With the number of companies offering dealers listing assistance for their vehicles, and with continued eBay site enhancements such as “Make an Offer” it is likely that the number of dealers using eBay Motors will continue to increase their success ratio in the years ahead.
Summing up one thing that has not changed was Capital Ford’s Internet director, Paul Miller. “We have been doing this for so long, we have tried everything, and have been trained by everyone until finally I realized this is not rocket science. It is truly just people selling people. After changing the way we target these customers and changing the way the salespeople thought about the internet customer, we became more effective and closed more deals. Our key to success is getting the customer on the phone as soon as possible and then in our door.”
With that we look ahead and wonder what success lies ahead for our team of super achievers for the balance of 2006?
Brian Reed will depart F&I Express, the company he co-founded in 2008, four months following its acquisition by Cox Automotive.