The prospect of buying a car online always seemed like a long shot. Now, little by little, the Big Three American automakers appear to be backing away from the “buy your new car online” business model.
Last week, General Motors (NYSE: GM) nixed AutoCentric, an idea it introduced 11 months ago. AutoCentric would have paired GM dealers and manufacturers in a venture to sell both GM products and other vehicles via the Internet.
The reason for GM’s corporate change of heart? In a statement from the company, all that was offered was that the new venture “is not viable at this time.”
Consumers and investors are left to wonder why GM chose this moment to cast a dark shadow over what seemed to be a progressive move to incorporate newtechnology into one of the country’s oldest industries.
There are two possible reasons for GM’s decision that AutoCentric is not viable. First, because the economy is in a recession, this might not be a very good time to be spending $50 million (split evenly between dealers and the parent company) on a venture that is highly experimental.
Second, manufacturer-based B2C e-commerce initiatives in the auto industry have so far shown mediocre results. Is the country ripe for another? Perhaps not.
Chances are that GM’s move has less to do with the recession than it does with market analysis showing that consumers are not exactly flocking to the Web to buy vehicles.
AutoCentric was supposed to be a $50 million venture. That’s pocket change in some auto manufacturing circles.
Upon announcing the idea last February, Michael Grimaldi, GM’s vice-president of field sales said, “If the idea has broad dealer support, we’ll proceed. If it doesn’t, we won’t.”
Most dealers still consider manufacturer-based Internet initiatives to be a real threat. It was a stretch for GM to believe that its dealers would sign on en masse.
Consumers use the Internet to figure out what to buy, but when it comes time to make the deal, a test drive, tire-kicking and price haggling still rule.
Meanwhile, behind the scenes, automakers’ efforts to establish strong supply chains and delivery mechanisms via business-to-business initiatives appear to be holding their own.
There’s a lesson in there somewhere. Could it be possible that purely Internet-based auto sales do not appeal to American consumers?
And if so, why do automakers seem hell-bent on finding a business model that would encourage consumers to change their buying habits?
Instead, it would seem smarter and potentially more profitable for auto manufacturers to use the Internet to steer consumers to brick-and-mortar dealerships.
Last fall, for example, DaimlerChrysler (NYSE: DCX) initiated a system of allowing Internet users to see dealer inventories online.
FordDirect.com is Ford Motor Company‘s (NYSE: F) similar effort. It allows a consumer to “build” a vehicle by selecting colors, options, etc., and then search by zip code for the desired vehicle at local dealerships.
Adding to the convenience of shopping online, automakers offer features such as calculators that allow consumers to determine what they can afford and what their payments might be. Information on financing options is also available.
As for GM, from May through October it tested a system of pairing Chevrolet dealers in the Washington, D.C., area with Autobytel.com, apopular consumer auto buying site.
According to GM, about 25 percent of sales were closed using this partnership. That’s roughly the same percentage of dealer walk-in sales that close.
Building on the Obvious
The Internet was never intended to replace traditional American commerce. The auto industry is about as traditional as commerce can be.
Why it is taking auto manufacturers so long to understand this is a mystery. As one who bought a car via a working relationship between an auto manufacturer’s Web site and a local dealer, I can vouch for the increased efficiency and convenience.
Would I have bought the car without some involvement from an established brick-and-mortar dealership?
In a word, no.
What do you think? Let’s talk about it.
Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.
Yes, I did go to the dealer to test-drive the car and close the deal. But, I was glad about the price commitment made online before visiting the dealer, and the “haggle free” experience it promised at the dealer location. Maybe there are a few more people out there who would like to keep haggling out of the car buying experience.
I couldn’t agree with you more. Dealerships are virtually the only way to purchase a vehicle for a good reason…they work. Customers need to see, touch and drive before they purchase because of the significant financial and emotional ramifications of their decision. There is no way to duplicate that experience in a pure Internet transaction.
All the naysayers, who rant about dealers standing in the way of progress, never realize the value-added dealerships bring to the car buying experience. Fortunately, the internet-using, car-buying public does perceive the dealers’ value.
It sure does look like the Big Three are finally looking at the Internet as the place where they get the consumer to their dealers. The purchase of a large item product will not be easy for the consumer to make. However, when it comes to doing the research the consumer will make their choice, then they will head to their “local” dealer to purchase the vehicle.
That is the Internet. It is an information source for the local large item purchase. These auto sites should be steering the consumer to their local dealerships and work with the dealership to make the consumer happy about the choice they have made. Why spend $50 million when the local dealership is where the consumer wants to be.