Make your own free website on


'Big Three' Try to Woo Customers
Away From Web Buying Services


Disintermediation? Not when it comes to car sales -- at least not so far.

Third-party buying services such as Inc. (, Inc. (, and Cendant Corp.'s ( have proved popular with customers and been embraced by dealers (see last week's column), but for auto makers they're another layer between the makers and their customers. So it's understandable that auto makers consider the buying services a nuisance, siphoning off even more customer mind share.

But if you don't think the third parties serve a legitimate purpose, compare the buying services' sites with auto makers' offerings and see if you change your mind. The third parties offer consumers unbiased information and reviews they can't find on auto makers' sites, which are cluttered with propaganda. At Microsoft Corp.'s MSN CarPoint (, for instance, you simply pick the make of car and drill down from there with little hoopla. Reaching the Chrysler models from, on the other hand, requires at least four clicks -- one of which takes you to a page that hypes Chrysler as Motor Trend "Car of the Year."

Learn more about John Dodge and search past columns in the new Dodge's E-conomy Center.

This isn't to say that the inclusion of a full-page ad makes Chrysler's site worthless -- but it does illustrate the problems auto makers face. "They are hampered by political tensions with all the brands they have to deal with," says James McQuivey, an analyst with Cambridge, Mass., market-research firm Forrester Research Inc. "They've done a poor job of integrating them."

Both auto makers and buying services "want to feel like they are end solutions," Mr. McQuivey says -- and both have succeeded with at least some consumers. More than half of all auto buyers last year bought the same make they had previously owned, Mr. McQuivey says, which suggests some degree of trust in auto makers. But on the other hand, he adds, "there are consumers who distrust the industry so much that they will always prefer a third party." And investors certainly like third-party buying services: AutoWeb went public in impressive fashion a week ago, surging to $40 in their first day of trading after being offered at $14 each, while Autobytel went public Friday at $23, traded as high as $58 and closed at $40.25. On Monday, AutoWeb shares slipped $3 to $29.75, while Autobytel's shares skidded $4.875 to $35.375.

So forget any notion that because the auto makers are catching up, third-party buying services will evaporate. But auto makers are still fighting back -- here's a rundown on the efforts of General Motors Corp., Ford Motor Co. and DaimlerChrysler AG.

The biggest news recently has been the introduction of General Motors' site, which made a splashy debut March 10. GM was smart to break its new offering out from its uber-site,, thereby minimizing distractions from serious shopping. The company will spend a reported $25 million this year to promote it.

The site has the usual buying-service features for researching models, locating dealers and applying for financing. But it also offers some new twists, such as the ability to search dealer lots from the same database the dealer uses. For instance, I found eight Cadillac DeVille d'Elegance Sedans at a dealer lot within 10 miles of my home, which suggested I could probably get a pretty good bargain on that model.

Which sources of auto information have you used online? Which do you trust? Join a discussion with me and other Interactive Journal readers.

On the other hand, the feature that recommended alternative models wasn't all that helpful. For instance, when I asked what might compare to the Buick Park Avenue, the site suggested 53 models including pick-up trucks, vans and sport utility vehicles. To its credit, GMBuyPower has engaged a third-party service that lets customers comparison-shop with other auto makers' offerings, but I had to call the company to figure out how to use it. Still, the expert reviews I find so valuable on MSN CarPoint, for instance, were missing.

GMBuyPower has the most dealers of any buying services -- though that's meaningless unless you want a GM product. More than three-quarters of the company's 7,800 U.S. dealers have signed up with the site, says Ann Noel Blakney, national director of Los Angeles-based GMBuyPower, adding that they must adhere to strict rules about response times, resources dedicated to the Web, and training.

She correctly points out that GMBuyPower is free to its dealers, while third-party services charge fees. "They add cost, and customers want exclusive relationships" with the auto maker, she says, adding that GM views third-party services as interim solutions until customers learn that they can have exclusive relationships with auto makers in the Web age.

Third-party services, Ms. Blakney says, "are in the information business. We are in the car business."

In its first six days of operation, GMBuyPower attracted 140,000 unique visitors who stuck around for an average stay of 18 minutes, generating about 1,000 leads a day, according to Ms. Blakney. The service could become very powerful as GM Acceptance Corp., for instance, diversifies into online mortgages and other types of loans. The site will shortly add used cars, says Ms. Blakney.

Thor Ibsen, manager of Internet and New Media at Ford in Dearborn, Mich., isn't a fan of third-party services, either.

"We obviously don't appreciate them because they do not promote our brand -- they fill more of an interim need," he says. "Now we have the waking up of the giants."

Ford's BuyerConnection is a more basic site than GMBuyPower; unfortunately, it's woven into, offering something of a stovepipe approach to researching, configuring a vehicle, finding a dealer and haggling over a price. There's little prioritizing or help leading the customer through the process, as there is with GMBuyPower.

Mr. Ibsen acknowledges that Ford needs to accelerate its efforts, adding that expanding its Web presence is one of Ford's top five corporate initiatives. However, he's pleased with the 1.2 million visits and 300,000 unique visitors BuyerConnection racked up in February, noting that "that's with no promotion."

Eighty-five percent of Ford's 4,500 U.S. dealers use BuyerConnection, he says, adding that BuyerConnection plans to add comparative information in three months.

DaimlerChrysler's (the name doesn't exactly roll of the tongue, does it?) "Get-a-Quote" is straightforward, and for that reason, I liked it. It's easy to research a vehicle, but as with Ford, the company would be wise to break out its own buying service the way GM has. The comparisons were selective and not remotely objective, always pointing out where DaimlerChrysler's vehicles were better. Nothing will drive customers to a third-party site more quickly than this kind of approach.

Thanks to the recent merger, of course, DaimlerChrysler has some other matters to attend to. The immediate challenge is to merge the Daimler-Benz and Chrysler sites. The corporate home page has been integrated, but most of the product information underneath still reflects separate companies. The "Get-a-Quote" system, for instance, only applies to original Chrysler brands.

What's more, the program is small. Chrysler works with only 1,400 of its 4,500 U.S. dealers -- though those dealers are "five-star" dealers responsible for half of the company's overall sales. Next on DaimlerChrysler's agenda is merging vehicle configuration and the price-quoting function, according to Mike Morton, manager of interactive communication overseeing the original Chrysler brands in Auburn Hills, Mich.: "My charge is to make sure you never have to ask yourself, 'Where do I go next?' "

From a strategic standpoint, "Where do I go next?" is the never-ending question on the Web. For all the obstacles facing them -- size, politics and old habits -- auto makers are looking for an answer.

Newt stumps e-commerce: Former House Speaker Newt Gingrich was in Boston last week at Internet Commerce Expo talking up e-commerce. He warned that if the technology community does not help shape government policy, the "unknowing" bureaucrats will do it instead. He also urged an extension of the three-year moratorium of regulating and taxing e-commerce by another five years and cuts in the capital-gains tax.

Mr. Gingrich said he is currently both a student and a teacher at the Georgia Institute of Technology and is working with the American Enterprise Institute, a conservative think tank. He said his desire not to hold public office won't keep him out of public life.

Correction: In last week's column, I mistakenly attributed a 15% to 25% lead-closure rate to Autobytel Chief Operating Office Ann Delligatta. The statistic should have been attributed to AutoWeb co-founder and executive vice president Payam Zamani.


Receive e-mail notifying you of the lastest publication of Dodge's E-conomy. See the Personal Journal e-mail setup page for details on how to subscribe.


The Net Has Changed Car-Buying,
With Dealers Along for the Ride


EIGHTEEN MONTHS ago, a couple stopped in front of Dave Thomas's car dealership in The Dalles, Ore. The husband went inside and asked where his Internet department was located. As Mr. Thomas tells it, the customer's wife, still in the car, was so anxious at the mere sight of a car dealership that she felt nauseous.

Mr. Thomas brought the couple across the street to a special office dedicated to closing deals on vehicles sold over the Net. "It's an office and looks nothing like a dealership," says Mr. Thomas, who adds that he believes if buyers don't loathe car dealers outright, they fear them.

"We rate about two notches above terrorists," he says. "Buying a car is not a joyous thing."

Mr. Thomas, who has 16 dealerships, is among thousands of U.S. auto dealers who realize the Internet has radically changed the car-selling game. He's sold cars to customers as far away as Boston, and -- like 60% of all American dealers -- has his own Web site (, though it's better than most.

Learn more about John Dodge and search past columns in the new Dodge's E-conomy Center.

His "Internet Dept." is staffed by eight full-timers, who disclose auto invoice pricing and negotiate deals in the first 10 minutes of face-to-face contact. This month, 70 of his estimated 350 new-car sales will have originated on the Internet. "It will be 120 cars in a year," says the friendly, self-deprecating businessman.

His father, Fred, nabbed a Toyota franchise in 1965 for bottle of Seagram's V.O. and two used cars worth $50 each. "Everyone told him he'd never sell Japanese cars," Mr. Thomas says with a chuckle. That was the same thing colleagues told him when he signed with the fledgling ( three decades later at the annual National Automobile Dealers Association convention in Las Vegas.

The rest is history. In 1998, more than two million consumers used the Internet to research their car purchases, according to Cambridge, Mass., market-research firm Forrester Research Inc. In five years, the group predicts, the volume will be 50% of all auto buyers. And the third-party buying services such as, ( and Inc. (, all of which plan IPOs within the next 10 days, have led the way, neutralizing dealers' secrets and leveling the playing field for the buyer. Only now are car makers and dealers adapting to the new cyber-order.

With the characteristic zeal of Web businesses, the buying services are on a jihad to make customers happy. They can even love you too much, bombarding you with e-mail and calls to make sure the dealer responded quickly, with a honest price, before attaching a suction hose to your bank account (the average spent on a vehicle is about $22,000, says Forrester).

But if you thought the Internet and the buying services were driving dealers to extinction, think again: They're in cahoots. The buying services -- AutoWeb, Autobytel and Microsoft Corp.'s MSN CarPoint ( claim to be the most popular -- rely on dealers every bit as much as the Big Three auto makers do. (Priceline is a notable exception -- more on it later.) Dealers subscribe to them as lead-generation services, paying around $25 per customer inquiry -- or, alternately, an inclusive monthly fee. They also sign detailed contracts, spelling out what resources they will devote to Internet selling and how quickly they will respond to inquiries, usually with pricing on a specific model.

Differences in these services boil down to dealer execution: The chances of closing a deal rise dramatically with the quickness of the response, and today, acting within the contractually demanded 24 hours is viewed as too slow. "You have to get back to the customer within hours," says Ann Dellagatta, Autobytel's chief operating officer. Most services claim they won't hesitate to fine or drop laggard dealers.

Some buying services claim the Internet means cars will cost less. I say bull -- sticker shock is as resilient as death and taxes. What's your car-buying experience? Join a discussion with me and other Interactive Journal readers.

Who's fastest? Again, that depends on the dealer, but what follows is the result of an experiment I conducted last week with MSN Carpoint, Cendant Corp.'s AutoVantage service ( and Autobytel. The responses are from dealers in the greater Boston area. (Bear in mind, the results could be vastly different in other parts of the country.)

No one I talked to knew I was an Interactive Journal columnist until they were informed at the end of the phone call. As a semi-serious buyer, I said I planned to buy within 30 days. (Though the uncertain may hesitate at pressing the "ready to buy" button, there is no obligation for making inquiries.)

Autobytel (2,700 dealers, started in 1995) -- Within five hours of my request via the Internet, Mark Fries called from Route 128 Volvo, saying I could have an S80 for $200 over invoice, and asked if I'd like a car sent to my house (25 miles away) for a test drive. I was impressed: His approach was low-pressure and direct. This dealer was the closest to my house in my experiment.

Mr. Fries says 40% of the leads he receives are "serious" and adds that he closes about a third of those. Autobytel's Ms. Dellagatta says Autobytel dealers close between 15% and 25% of the leads.

MSN CarPoint (2,500 dealers, launched Web site 1995, buying service, 1997) -- The response from two CarPoint dealers into my inquiry about a Ford F150 pickup truck was slow and uneven. The first dealer responded 27 hours after the inquiry and only by e-mail. However, he offered the truck for 2% above invoice plus a $95 fee. Maybe he needed $95 for dinner -- unexplained fees are a turn-off. Another Ford dealer called three days later. Both were the dealers CarPoint informed me via e-mail would call, but they were 30 miles and 45 miles from my home. A CarPoint inquiry I made on a Mercedes SLK 230 yielded no dealer calls in more than three weeks.

In February, CarPoint generated 110,000 leads and is on track for 130,000 in March, says Alex Simons, CarPoint Group Product Manager. Between 18% and 25% of those leads are closed by its dealers, he adds. (Mr. Simons expressed disappointment about my experience.) CarPoint also has 248,000 vehicles "under management" -- that means these owners have signed up for a "personal auto page" that offers maintenance reminders as well as information on recalls, trade-in value and other stuff that I don't usually pay much attention to.

AutoVantage (1,800 dealers, Web site 1996) -- I never caught up with AutoVantage officials, but the service acquitted itself respectably in my quest to find a BMW M3. Joe Santamaria from Foreign Motors West, which unfortunately was 43 miles away from house, called within 12 hours. He knowledgeably described the models I was interested in, and, sensing I was a tire kicker, didn't give me an exact price. Mr. Santamaria said half the AutoVantage leads are serious and that he closes 40% of those.

If you try service Web sites, there are more questions to consider than are reflected by my impromptu experiment. Do they offer used cars and from whom -- dealers or individuals? How are warranties handled? Can you get financing and insurance online? Do they offer benefits like maintenance reminders, trip planning and recall information? Can you look at previous inquiries? How private are these services? Will you get overwhelmed with ads, reminders and offers for other products?

The most important question to ask, though, is whether you'll get the exact car you want at the right price. I'm struck that, for all the information and services offered over the Internet, the basic sales model is still the same -- you negotiate with a dealer. There's nothing new about that.

That's why I'm intrigued by, which is aimed at hard-nosed bargainers, exceptionally knowledgeable buyers and extreme dealer-phobes. Only serving the New York area, Priceline is for the buyer who is certain about what he or she wants. They fax your signed offer to every dealer in a specific area, and if they get the exact car at the agreed-upon price, you buy it and pay Priceline $25 for the location and negotiating services. If you renege, you pay a $200 escape fee.

"New York has 125 Ford dealers and we'll go to all of them -- we favor no dealers. When amateurs go up against professionals, we know who wins," says Jay Walker, vice chairman and co-founder of the Stamford, Conn., company. Priceline's service will be rolled out nationally later this year.