Jd Power Online Automotive Review Fixed Op Web Marketing

Online Automotive Review—Dealer Edition April 2007

Moving Accessories from the Back End to the Internet
By Bill Williams

As OEMs continue to improve product quality and extend useful parts life, the nature
and timing of service engagements is changing to fewer visits and lower parts sales. At
the same time, vehicles are becoming more technologically sophisticated, so owners
are increasingly reliant on dealers to perform a number of specialized repair and
maintenance operations. Additionally, many customers are interested in customizing or
personalizing their vehicles.

With all of these forces impacting fixed operations, some dealers are successfully
changing their perspective on parts and accessories and discovering the Internet as a
means for moving their businesses well beyond the boundaries of the bricks-and-mortar
store—and well beyond their local market.

Redefining the Role of Accessories
At one time the Parts Department served as handmaiden to the Service Department.
The key was to ensure parts inventory was in line with service throughout to keep a lid
on unsold inventory. The focus was internal: serving the Service Department and the
needs of ambient in-store parts customers made up largely of DIY owners. Viewed from
this perspective, the primary competitor was the local Auto Zone or PEP Boys facility
and they, frankly, did a better job of stocking, displaying, pricing, and marketing parts
than the average dealer.

The traditional defense against the local competition was the often-used notion
that customers should insist on genuine OEM parts—the veiled threat being that
aftermarket parts bought elsewhere put the vehicle, and the owner, at risk. Whether true
or not, vehicle owners were faced with a choice between that veiled threat and having to
go to a dealer, likely having to order and wait for a part, and in most cases having to pay
more. And that’s just for necessary parts.

When it came to accessories, the alternative of going to a dealer was rarely even
considered. Dealer accessory inventory was rarely displayed, hard to find, limited in
range, not in stock, and, again, more expensive. The difference between accessories and
options was really only a matter of when the items were installed and by whom.

Accessory marketing, like other dealer operations, was servant to the front end and to
service—useful when it could add some margin to a vehicle or close a deal. But typically it
was not seen as a stand-alone profit center with significant revenue and profit contribution.

Copyright © 2007 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved.
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Moving Accessories (continued)
Today, that view is changing. Small, medium, and large dealer groups have recognized that
accessory marketing is a whole new ball game. Consumers’ attitudes toward their vehicles
are changing. OEMs are offering vehicles that embrace customer personalization (such
as Scion and Chevrolet SSR); and the range of appearance, performance, comfort, and
convenience accessories has exploded as their quality and affordability have improved.

Small, medium, and large dealer groups have recognized that
accessory marketing is a whole new ball game.

Moreover, dealers are now able to use the Internet to fashion a separate business that
creates virtually boundless sales opportunities and uses the best practices of other
Internet-based marketers to reach prospects who might never shop the store when
considering a new vehicle.

Dealers Have to Pay to Play
The new accessories ball game means dealers have to get their marketing game on
because online accessory sales brings with it a new set of marketing disciplines. It’s not
enough to decide to sell accessories online; successful online marketing means getting the
store vision and the organization in place to support it.

A good example of this can be found in the way three stores are approaching online
accessory marketing.

One is Longo Toyota in El Monte, California. As do most dealerships, Longo Toyota
includes Parts in the overall store menu, along with a special Parts icon (Figure 1).

Figure 1: Bottom Portion of Longo Toyota Figure 2: Longo Toyota Parts Online
home page (www.longotoyota.com) (www.longoparts.com) home page

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However, Longo also has a separate URL for parts, so automotive Internet shoppers
looking for Toyota or Scion parts and accessories—separate from new- or used-vehicle
shopping—can search exclusively for accessories at www.longoparts.com (Figure 2). The
Longo Parts section has 23 different categories, including make and specific product
types. Also included are Best Sellers, Specials, What’s New, Product Reviews, and a
Quick Find search function that operates on broad product descriptions. Make-level
Toyota accessories include exterior and interior convenience accessories, while accessories
for Scion—which is fundamentally designed for higher levels of customization—include
a supercharger, lowering springs, sound system, and exterior applications.
Two other examples of stores focusing on accessory sales are Gary Rome Hyundai
Accessory Store (Holyoke, MA), www.hyundaiaccessorystore.com (Figure 3) and
Courtesy Nissan (Richardson, TX), www.courtesyparts.com (Figure 4).

Figure 3: Gary Rome Hyundai Accessory Store
home page (www.hyundaiaccessorystore.com)

Figure 4: Courtesy Nissan’s Parts home page
(www.courtesyparts.com)



What makes these sites interesting is their positioning of the online accessory categories
as related to, but independent from, the main store. Each bears the obvious brand linkage
to the dealership, but each uniquely addresses the interests and shopping behaviors of
accessory buyers:

■ Multiple close-up photos of accessories

■ Easy navigation—two clicks—to a detailed photo, description, and price

■ Fun, exciting, motivating text—not just a part number

■ E-mail registration for online offers and savings

■ Shopping carts

■ Prominent online pricing with “today only” pricing

■ Last-minute impulse items (like those found at a bricks-and-mortar checkout
register)

■ A Wish List section so others can buy gifts for a vehicle owner

■ A reassurance of quality and confidence by tying into OEM information, material
or support

These are examples of the kind of merchandising dealers need to engage in to compete
in the online accessory marketing space, where shoppers need to be enthused and
excited about products. Featured items range from pure appearance to drivetrain and
suspension. Particular attention is paid to giving shoppers clear visual depictions,
including close-up photos where required. Some sites offer the ability to share photos
and descriptions with a friend.

Some of these sites allow the shopper to calculate item costs before checkout, so that
taxes and shipping can be computed; others require registration and log-in prior to
calculating costs. There is a benefit to the latter in being able to collect online shopper
information even if an online engagement is aborted. That being said, it’s likely more
appealing to customers to be able to shop and compute total costs prior to divulging
contact information.



Importantly, each of these examples addresses other vital aspects in developing an online
accessory program. Marketing online means retailers have to confront key considerations
affecting both sellers and buyers:

■ Order handling: Make clear how long before the item will be shipped

■ Shipping: Provide details on how will the item be shipped, the expected delivery
time, and make clear up front who pays the shipping

■ Returns: Include a clear policy on items that cannot be returned, any costs for
returned items, and time limits on returns

■ Refunds: Clearly state restrictions, if any, on what can be returned

Handling, shipping, and returns are both a policy and a marketing tool, as other online
marketers have demonstrated. E-marketers can use shipping as a purchase inducement
by offering it free as either a standard policy or attached to certain sale or time period
conditions (e.g., Free shipping for orders over $200 or Free shipping on items purchased
before June 1). Marketers of large items often assess a return or restocking charge against
refunds on items returned. Longo has a 10% handling charge on all returned parts; Gary
Rome charges a 20% restocking fee; and Courtesy applies a 25% charge on all returned
parts. There is typically a time limit on returns, ranging from 10 to 30 days, and some
items are identified as non-returnable.

These kinds of restrictions are crucial to the dealership in order to protect it. And,
they are common practice among Internet marketers and online shoppers who are
accustomed to these kinds of restrictions. However, to avoid any surprises and minimize
post-purchase problems, it is important to make absolutely certain the restrictions are
easily found, clearly articulated, and repeated at various stages in the purchase process.

What’s important is to note the different dynamics that accompany online business.
Most dealerships bend over backwards to ensure in-store transactions lean to the
customer’s benefit. But in online shopping, pricing transparency (including related
costs of tax and shipping), delivery speed and dependability, as well as detailed
product descriptions, are crucial—and attention has to be paid to the delivery process,
including e-mail alerts to advise purchasers of ship dates. Management needs to make a
commitment to maintaining access to accessory supplies: online customers won’t tolerate
excessive wait times for their purchases.




A Separate Marketing Unit
The upside of all of this is that any store can decide to be an aggressive player in the
online accessories (“personalization”) business. A dealer could decide to be the truck
or performance car specialist in an area, or more generally focus on capturing more
accessory business for their make and model lineup. Once a dealership has organized
internal operations around an Internet accessory business—particularly in lining up
product and delivery operations—a marketing specialist can focus on issues such as
pricing, merchandising, and communication.

Key to all of this is a new way of thinking about the business.

Key to all of this is a new way of thinking about the business. While the bricks-
and-mortar dealership has fixed hours, often includes price negotiation, is based on
protracted consumer shopping, includes face to face relationships, and measures
performance in terms of geographic penetration, online marketing runs full time all the
time, and often involves long-distance relationships that might never include a face-to-
face component. Bricks-and-mortar sales require considerable front-end representation,
while online is more backend. Traditional marketing involves fewer and larger
transactions, whereas online there more likely will be multiple, smaller-level purchases.

And, while vehicle marketing often means taking a share of existing demand, online
accessory marketing offers the dealership an opportunity to create demand. Consider, for
example, holiday-related accessory marketing (Father’s Day, holiday gifting); avocational
marketing (golf, ski, fishing); or community-related marketing (car clubs, enthusiasts,
youths). Each of these offers accessory marketers a venue for creating and packaging
accessories and marketing them online.

It’s also important for customers to be able to find the accessory site. As with bricks-
and-mortar stores, accessory sites need promotional support. Dealers can create unique
URLs that describe the site and link it to the primary store (www.longoparts.com), and
separately promote it in offline and online media. The advantage of an online accessory
store is that it can be merchandised in highly targeted media: specialized magazines or
special print or broadcast environments and online with links and banner ads. Media
selection should be driven by the overall positioning of the store: for example, a focus
on enthusiasts would lead to media that reach that target (car clubs, DIY media,
youths). Again, an online store can be created, designed, and promoted—and even
repositioned—very quickly, so long as the key back-end operations (pricing, availability,
shipping, returns, etc.) are very carefully considered.




The opportunity is limited neither by geography nor dealer size.

Indeed, the biggest obstacle isn’t what must be done to create a successful online
accessory store—it’s overcoming traditional thinking about how parts and accessories fit
in the overall dealership operation, and how consumers shop and buy accessories.

The opportunity is limited neither by geography nor dealer size. Think Dell, think
Amazon, think eBay—just don’t think like the dealer down the street.

Dealer Action Notebook
1. Parts are one thing: accessory marketing is a whole new ball game. Parts make a
vehicle operate, accessories make a vehicle “mine.”
2. Dealers must plan, think, and operate like a merchandiser: make accessory
shopping fun, easy to find, and safe to buy.
3. Cover make-level accessories, but also include general and impulse items. Put
some thought into captivating interest (e.g., Last Minute Buys, Gift Ideas,
Internet Only, OOPs Department [overstock or return specials]).
4. The audience is diverse: some visitors are gear heads, some are pure appearance
buyers—give visitors a chance to choose how much detail they want. Obviously, the
larger, more complex accessories require additional detail, so make sure you show it.
5. Ensure policies for shipping, returns, etc., are very clear and repeated for clarity.
6. Make sure pricing, delivery times, the ability to track shipments, and
communications during the delivery process are all clearly relayed to customers.
7. Some shoppers just want to shop: be wary of asking them to log in/register
too early in the process. Consider offering price information (including tax and
shipping) without requiring registration.
8. Don’t overlook the opportunity to use OEM-provided information on your Web site.
9. Your online accessory store can and should have its own personality—not every
online shopper will have visited your dealership and many never will. Your online
store can create its own unique “personality.”
10. Always meet online promises: word travels extremely quickly when a consumer is
disappointed in delivery, pricing, etc.



Fixed Operations Marketing: Dealer’s Perspective
By Bill Williams

Fixed operations face many of the same changes and challenges as front-end operations.

Some of the challenges facing the industry today include:

■ Changes in product design, quality and technology

■ Demographic shifts

■ Advances in communication

■ Finding and keeping qualified technicians

■ Managing parts inventory

■ Vehicle personalization

Successful dealers are finding and creating ways to take advantage of these changes and
challenges in the back-end operations.

Online Automotive Review—Dealer Edition asked two Group 1 Automotive experts for
their views on how they see these changes impacting the business and how they are
dealing with them. Wade Hubbard, Vice President of Fixed Operations and Steve
Richardson, Parts Manager at Courtesy Nissan, Richardson (TX), share their opinions
on how Group 1 views the market today.

OAR: What are the major changes you see that have impacted Parts and Accessories during the
past few years?

Wade Hubbard: In the last several years, there have been some significant changes that
appear to have shaped our dealership parts and service business. For starters, it seems
that cars and trucks are “cool” again. Custom and performance parts and accessories
are everywhere. High-tech electronics are no longer exclusive to high-line vehicles and
styled wheels rule. We have seen so much of this migrate from the aftermarket to the
new-vehicle portfolios—it’s pervasive across our business. Hot rod and custom shows on
television, car clubs, Web sites, and showrooms have been instrumental in this surge. For
instance, have you noticed the attention that the OEMs are now paying to the annual
SEMA show in Las Vegas?



Fixed Operations Marketing (continued)
A second development is that vehicles of all brands have enhanced their level of quality
and sophistication. Not only is the technical architecture of all vehicles increasingly
more complex, but better build quality and design for durability have extended service
intervals and reduced the number of conventional contacts we have with our customers
These strides mean the nature of work that dealerships are performing in their service
departments is polarizing towards more maintenance on one end and technical
diagnostics on the other. The Internet enables us on both accounts. E-mail helps us
to keep in touch with our customers, and intranet access to manufacturer technical
information aids us with complex diagnostic matters.

Steve Richardson: One of the changes we have seen over the last few years would be the
quality of the systems and the parts used to assemble new vehicles. What may have been
cable- or vacuum-controlled in the past now has been replaced with complex electronic
systems that tend to perform flawlessly. These systems have replaced mechanical parts
that would eventually lead to replacement within the life of the vehicle.

At the same time, we now see new vehicles coming out with 100,000-mile parts like
spark plugs and timing belts. Even fuel filters are rarely ever replaced now—at least with
many of the newer vehicles. The result is few visits to our service department and less
parts sales when they do visit. Most of our customers find it too difficult to repair their
own vehicles or do not have access to the tools needed to diagnose their problem. They
end up at our store when it must be fixed right.

OAR: How has improved technology affected the business?

“Now we have the ability to communicate better with the factory,
each other and most importantly, the customer.”

Steve Richardson: Another big change over the last decade has to do with the power
of computers. Five years ago our work stations in the Parts Department were centered
on a computer with proprietary hardware and software. These units were limited to
researching parts and accounting functions. Now we have the ability to communicate
better with the factory, each other, and, most importantly, the customer. The maturation
of the Internet over the last few years allows us the opportunity to communicate the
features and benefits of our store and its products with potential customers 24/7. This
new medium for communicating with customers has changed the way we do business.
Our customers now shop and buy around the clock from around the world.



Wade Hubbard: It is widely understood that consumers have access to more
information and are more accessible than ever before. Internet enablement is a wonderful
thing, but breaking through to the multi-tasking consumer—not to mention [through]
the spam filter—with a time-relevant and compelling message is challenging. Turning
your electronic communications into commerce requires that you are on top of your
marketing game. It is amazing how much you can expand your market reach, extend
your company personality, and broaden customer accessibility. However, in the end, it
still comes down to people and customer service to deliver on the product or service
promise. We recognize this!

OAR: How have these changes affected the role of the parts/service department inside the
dealership, if at all?

Steve Richardson: Actually, it’s been a blessing and a curse. On the one hand, we can no
longer count on the annual filter-and-spark-plug-changes of the past, but we can now
offer a bigger mix of products to a larger base of potential customers.

OAR: Are parts and accessories seen as a new business operation, or as a customer retention
operation? That is, are accessories a closing tool, a service satisfaction tool, or a marketing tool?

Steve Richardson: It can be all of the above. We see accessories as a new business tool.
It is up to us to show the customer what is possible on their vehicle, knowing it is their
choice whether to personalize it or not. We accessorize some vehicles on the lot to
give customers an idea of what is available to them and how it will look. They have an
opportunity to see the quality of the genuine Nissan product before they purchase. We
also have displays in the showroom and the parts department showing accessories and
performance parts that we offer. The customer will drive away without accessories unless
we can show them how they can personalize their vehicle. If we miss them while they’re
here, they can find us online later when they are ready, where they can see every accessory
we offer for their vehicle.

OAR: How has the Internet impacted fixed ops in general and accessory sales specifically?

Steve Richardson: In our case, the impact has improved all facets of our business.
Our Internet-related sales make up a significant portion of our parts department sales
monthly and we have customers arriving for service from all over the region because they
know about us from our Internet presence. Because of the reputation we have developed
from our parts Web site, some of our customers choose to buy their vehicles from us as
well. As a result of our user-friendly Web site, our accessory sales have led the nation for
the last 10 years, according to Nissan North America’s figures.

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OAR: Are there opportunities to specialize or segment in accessory sales (e.g., performance, trucks,
commercial, women or youth)?

Steve Richardson: Absolutely! The opportunities are boundless to create and structure
your Web site to appeal to almost any market niche.

OAR: What can be done to drive traffic to aftermarket accessory sales online?

Steve Richardson: Most ideas that work in a typical bricks–and-mortar environment
should work on the Internet.

OAR: What’s worked in terms of online/Internet accessory or parts marketing?

Steve Richardson: We believe the customer wants to see just what is available for their
vehicle. Many of our competitors’ Web sites throw everything out there and you have to
pick through. We’ve made ours easy to navigate by grouping all items by vehicle model,
cutting down on clicking and keep focused on what means the most to [the customer].

OAR: Can accessory marketing be used as a lead generator for new/used-vehicle sales?

“From our experience, it is best not to mix parts...
with new-car sales on our Web site.”

Steve Richardson: From our experience, it is best not to mix parts and accessories sales
with new-car sales on our Web site. There are too many variables that might interfere with
the relationship we try to establish with our customers. Our one attempt to merge the two
departments online created mixed results. We accepted pre-orders for the new 2003 350Z
many months before release and accumulated orders from all over the country. In the end,
we sold more vehicles than we were allocated, resulting in cancelled orders.

OAR: Do you envision a situation where a dealer could be marketing accessories regionally or
nationally (or at least well outside their trade area) using the Internet?

Steve Richardson: It’s more than a possibility; it is exactly what we do.

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