 Buying Cars Online
First Published: October 1999
Last Update: April 2004
Author: Computer Partners
When consumers go out to purchase a car, a good percentage of
them could care less if there is a sales representative there to help them.
Latest market research shows that although most online
shoppers miss sales people and would like to see them built into the online
shopping experience, online automobile purchasers are content without them.
A recent survey by NFO interactive, which was reported in
CyberAtlas in April, shows that almost half of 2,321 online shoppers surveyed
said that they would use auto online sites to search for information on dealer
invoicing and pricing. Close to 45 percent said they would use auto Web sites
for reviews, and 10.6 per cent said they would consider purchasing a car online
without ever seeing a dealer.
The findings spell important news for the auto industry
according to President of NFO, Charles Hamlin. Since online shoppers are an
affluent segment of the population, it makes the Internet one of the strongest
mediums automobile manufacturers can use to convey product information, Hamlin
said in CyberAtlas.
Similar findings were reported by Martha Stone in ZDNN in
September. In a study done by J.D. Power & Associates of Los Angeles, it was
found that 40 percent of all new car buyers and 25 percent of all used car
buyers used the Internet to research their buying decisions. Only 2.7 percent of
car buyers had actually purchased vehicles over the Internet, but that number
was expected to almost double by 2000.
One of the biggest players in the online car buying game is Autobytel.com.
It was launched in March 1995, and has sites available in the U.S.,
Canada, the United
Kingdom and Sweden. In May,
InternetNews.com reported that the California based Autobytel.com said that
purchase requests to its Accredited Dealer Network were resulting in car sales
of more than $24 million per day, or $1 million an hour.
Not all car manufacturers are happy with the way the online
car industry is taking shape. In June, Internet Correspondent Chris Nuttall of
Sci/Tech reported that Volkswagen had sent letters to its UK dealers warning
them they could lose their franchises if they tried to sell cars over the
Internet.
He reported that Dealers had paid Autobytel a fee for
advertising their cars. Even though the UK site had just been created in May it
had already sold six hundred cars. Dealers were finding that they could save
money on both sales and marketing.
Consumers were also happy because they could compare car
prices and features. They were guided through the car buying process, which
included finance packages and insurance.
A Volkswagen dealer, who was quoted in the article said that,
'"Retailing over the Net is coming. Car companies can try to dissuade
dealers, but ultimately the whole dealer network is going to come under strain
and the days of the exclusive franchised dealer are numbered," he said.
"This is all about losing control. Every other industry would love to
control distribution the way the car manufacturers do."'
A closer look at the way cars are sold around the world,
indicates that there is a great deal of truth to the VW dealer's statement. For
instance Carol Teegardin a Detroit Business Writer wrote a recent article about
the frustration that Americans face in trying to purchase cars in Canada. Quite
often a particular color or type won't be available in the US so Americans go
into Canada to find what they are looking for there. With the favorable exchange
rate Americans are not only hoping to find what they want but to get a bargain
at the same time.
What Americans discover is that Canadian subsidiaries of U.S.
domestic automakers have franchise agreements with their dealers and they aren't
able to sell to Americans.
"I turn away Americans daily who offer cash for
vehicles... They come over, go to the Casino Windsor, want to buy something with
their winnings, and I have to say no," Teegardin quoted Jim Ouellette, a
salesman at Ken Knapp Ford in Windsor, as saying.
If a dealer is caught knowingly selling cars for export, he
or she could be fined by the manufacturer or lose the dealership. Teegardin
reported that before the mid-80's trans border auto sales was a natural
phenomenon. It changed when US manufacturer's dealers complained about the
practise because it affected sales on their own lots.
In the US there are also state laws that require that all
cars must be sold through car dealerships.
There are signs in the industry that this is all about to
change. All indicators show that the change will be good for consumers. How
these changes affect dealers remains to be seen.
The recent deal between Microsoft's online Carpoint
site and Ford have industry experts anticipating an elimination of the
middleman.
Although the purpose of the joint venture has been touted as
a means for Internet consumers to get a car built to order, there are others
that see it as something far more. As Stone reported in her article, there is a
lot of money to be made by completely eliminating the dealer.
She quoted Denove as saying that, "I see these laws
changing, eventually;...If the franchise laws went away, it appears
they(manufacturers) would own the technical side and customer interface side of
the distribution process. Microsoft would be Ford's direct link to the
consumer," he said.
Ephraim Schwartz of InfoWorld Electric sees it as a trend of
manufacturers who sell high priced products. He believes that Internet customers
are driving towards mass customization telling companies, '"you make what
we buy."'
He quoted Scott Painter, CEO of CarsDirect.com
as saying that "If you are going to change a market, you have to control
the money... You get a certain amount of respect when you start accounting for
1,000 transactions a Month. The average dealer sells 50 [cars] per month.
CarsDirect.com sells more than that every Day."
According to Painter the key to Internet commerce is to
control the transaction so that you avoid becoming just a referral service. He
believes in completely changing the way customer relationships have been in the
past. Part of the new change is allowing the customer to order exactly what it
is they want. In addition it is now possible to arrange auto leasing
online. LeasePower.com allows you to calculate and seek pre-approval for your
vehicle lease immediately on-line.
The online car selling technique seems to be effective for
most online ventures. Schwartz reported that AutoNation.com,
another online car-buying service with its own network of car dealerships, is
also racking up big Internet sales numbers.
Schwartz points out that other indicators that the market may
be changing direction is the fact that Jerry Greenwald, former CEO of Chrysler
recently joined the board of directors of CarsDirect.com
and also made a significant investment in the company.
AutoNation.com, also
recently announced that Mercedes Benz U.S.A. President and CEO Michael J.
Jackson would be its new chief executive officer.
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