When we launched Internet Retailer five years ago, we were not thinking about the auto industry. We were watching fast-moving trends that were converting to the web the sale of items sold in retail stores and catalogs. The auto web sites that were popular back then-and remain so today-allowed sellers of used cars to advertise their vehicles online but not to sell them in true e-commerce transactions.
While sales of new cars account for fully 20% of all retail sales in the U.S., easily the largest segment of the American retail economy, the idea of buying a new car online seemed to face too many barriers. The ticket was too big, and financing did not fit the card-based payment model of the web. As important, new car buyers have always wanted to kick the tires and take a drive before they purchased. Then there are the 20,000 auto dealers-hardly an innovative lot when it comes to merchandising. The local television ads starring auto dealers haven’t changed much since the 1950s. The dealers have had little incentive to change, because they are locked into co-dependent franchise agreements with automotive manufacturers that keep the automakers from selling directly to consumers and keep other dealers of the same car brand from poaching on their turf. Such cozy relationships do not encourage dramatic changes in retailing.
But this month’s cover article clearly indicates that a revolution in auto retailing is just around the corner. Consider, for example, that eBay Motors, the fastest growing segment of the giant shopping portal, will sell $10 billion of autos and accessories online this year, fully one-third of eBay’s total volume. Innovative dealers are following its lead-allowing consumers to view their new car inventory online and to buy and finance the car they want at the dealer’s web site. Online auto sales from dealer sites-a recent phenomenon-will account for 1% of new car sales this year.
The driving force behind this change is the American consumer, the one with the love affair with new cars but not with the conventional process of buying them. It comes from the 80% of new car buyers who now research cars on the web before they visit a dealer. There they find a car’s crash test results, insurance ratings, customer satisfaction scores, and every conceivable factoid relating to its equipment and performance. Such knowledge is power, and auto dealers, who once held all the cards in that deck, now find themselves confronted by powerful consumers.
Some of them are demanding a new way to buy cars that doesn’t involve a sales process that even today has too much hustle. After researching online to choose the make of car they want and confirming that choice with a test drive they can get from any dealer, why shouldn’t consumers be able to search online for a dealer who has that car in stock at a price they can accept and complete the transaction on the web, including arranging financing and insurance? And why can’t they turn to dealer web sites to schedule service and access their vehicle’s service records?
In fact, they can do that now at some dealerships, and before long they will be able to do it at most. Dell proved we were ready to purchase personal computers on the web, and today computers and electronics comprises the largest segment of Internet retailing, accounting for about one-quarter of that market. This month’s cover story marks the beginning of our increased coverage of online auto retailing, because we believe that automobiles will some day be bought online as frequently as computers are today and eventually will surpass computer gear as the king of the web.
Jack Love, Publisher