Cars Online: Miles To Go Before They Sell

Lesson No. 1 for online sellers: Just because you build it does not mean they will come.

Exhibit A: the automobile. Whether U.S. car customers will eventually settle for a few keystrokes instead of tire kicks depends on at least three things that have not happened yet.

First, industry consolidation. For an e-commerce sector hanging on by a thread, there are way too many players hawking cars on the Net. The most likely scenario this year for online car sites is a number of mergers and acquisitions.

Second, marketing that is convincing. That automakers and dealers are offering a new way and place to buy a car is not enough to drive online sales. The person who’s ready to buy a book or CD online is probably going to need a significant boost of confidence buying a car on the Web.

Third, government cooperation. Several states have laws that have become pretty imposing roadblocks to online car sales.

Stuck in Neutral

A study released late last year by Greenfield Online surveyed 2,000 people who had recently bought a car. Of the respondents, 53 percent said they were not comfortable buying a car on the Internet, and 41 percent said they considered the transaction too large to take place online.

Until somebody finds a way to change the minds of those in the driver’s seat, most online cars will stay quietly parked in the virtual garage.

Why are auto sellers having a tough time finding an online audience? It depends on whom you ask.

Easy Street

Flush with a century of corporate survival behind them, major automakers such as General Motors and Ford still subscribe to the brick-and-click model. Rather than letting car buyers complete the deal online, GM and Ford have consumers research and order their vehicles online, but require them to visit a dealership in the end.

Non-manufacturing Web sites such as Autobytel, Autoweb and CarPoint have clung to the Internet for a couple of years already. Those sites remain optimistic, singing the “Little Engine That Could” song. “I think I can, I think I can, I know I can” — if only the public would jump onboard. However, CarPoint has since questioned itself, revising its dealer service features this month.

Most encouragingly, analysts are throwing out some big numbers for online auto sales. Forrester Research, for example, says that by 2004, the Internet auto market will swell from last year’s measly US$400,000 to a whopping $16.6 billion.

To make that giant financial leap, someone must be counting on middle America to experience a sudden epiphany. To date, if you ask a car buyer to spend what sometimes equates to about half of a year’s salary on a car, he or she will first want to see it, smell it and hear it purr. Potential buyers often want to take the darn thing out for a test drive, not just look at pretty pictures on the Web.

Take the Other Carrot

That “show me” attitude among consumers may be the greatest hurdle online auto sellers have to overcome, but little by little that obstacle is being addressed.

GM and Ford, for example, are banking on convenience and innovation to assuage consumer doubt about buying cars online. Yes, say they, we understand how tough this is for you, but to make up for that, we will dangle new carrots.

Ford is playing with a build-to-order proposition that would deliver an individualized vehicle to the buyer within 15 days of the time it is ordered. This could work on several levels, including the much-coveted personalization factor, as well as our consumer penchant for rapid gratification.

GM is touting a similar plan that would deliver within 20 days. Additionally, GM is testing a plan that allows online customers to enter a maximum price they’re willing to consider for a car and work from that point forward in ordering online.

Gimmicks or viable new paradigms? Time will tell.

Don’t Mess With Texas

So if the new marketing ploys start to work and the industry trims the number of players, then selling cars online will take off, right? Well, no.

Major automakers, and even pure-play online auto sellers such as AutoNation.com and Greenlight.com, can forge ahead as aggressively as they please, but until governmental regulations lighten up, selling cars online will still face a major roadblock.

The most publicized of the individual states that prevent online car sales is Texas. Last year, when Ford decided to sell cars online there, the Texas Division of Motor Vehicles claimed the automaker violated a state law prohibiting manufacturers from acting as dealers, and prohibited Ford from selling autos directly to consumers.

However, even though Texas got all the ink in that case, 33 states have laws that effectively prevent the sale of automobiles online. If the auto industry ever hopes to claw its way to online profitability, it is going to have to find a way to unravel all the governmental red tape.

So, in the end, this is how it lays out for online car dealers. If they beat customer resistance, if they overcome marketing challenges, and if they navigate government potholes, the customers will come. Maybe.

What do you think? Let’s talk about it.