July 12, 1999
Cover

Cars: Sales on the Web could soon lead to custom-ordered cars

BY WARREN CARAGATA

Dale Arthur, a retired Edmonton businessman, is the proud new owner of a 1999 Chevy Silverado two-tone truck -- white with pewter accents. He and his wife, Gloria, have long wanted to travel, and needed something that could pull a large trailer. He got a good price on the Silverado, and the options he wanted, including a bigger engine -- without spending hours traipsing to dealer showrooms. Instead, he bought his truck over the Internet.

Car and truck sales on the Net are just starting to rev up. Last year in the United States (Canadian data is not available), about 800,000 new cars, worth $28 billion, were sold through online sites. That number is expected to reach 5.2 million cars and $200 billion in sales by 2003, according to a study by U.S.-based Forrester Research. As the change takes hold, the entire industry -- from manufacturer to local car dealer -- will be turned upside down. Bobbie Gaunt, president of Ford of Canada and an ardent believer that the Web is not just a passing fancy, says companies will have to redo the way they do business. If not, she warns, "you are not even going to survive."

Arthur bought his truck through a service known as Autobytel.ca Inc. (www.autobytel.ca), one of several car-purchase sites. People use the site to research their purchase, get reviews and information on prices, safety issues, fuel economy, and options. When a user decides to buy, California-based Autobytel passes the customer referral to a dealer in its network -- in Canada, this includes about 150 new-car dealers in every province except Newfoundland.

Arthur knew he wanted a Silverado. After making his selection online -- a process that took about 30 minutes -- Autobytel sent his request to Don Wheaton Chevrolet-Oldsmobile in Edmonton. Bryan Jewell, the dealer's Internet sales manager, called and offered a set price of $39,900. That was the best price Arthur found: he was glad to avoid negotiating because, like many people, he hates to haggle. Services like Autobytel offer prices that can only be beaten by aggressive shopping and bargaining. After a few more phone calls and some e-mail, Arthur's deal was done.

Microsoft's CarPoint site takes the service a few steps further. (While it is run by Brantford, Ont., native Lindsay Sparks, a network of Canadian dealers will not be established until next year.) CarPoint's databases list the available options for each vehicle. The site also provides a video, so a customer may look over the inside and outside of the vehicle. But like Autobytel, purchases are handled through affiliated dealers -- 2,700 of them in the United States.

About five per cent of U.S. cars are now being sold through the Internet, but many car dealers remain skeptical that this poses a threat. Rick Gauthier, president of the Canadian Automobile Dealers Association, points to the fact that Autobytel and CarPoint still refer customers to dealers. "At the end of the day," says Gauthier, "the customer still needs to go into the dealer and touch the car."

But even that appears to be changing, and fast. In mid-May, the newest of what may be a new breed of Internet car sites set up shop on the Web. At CarsDirect.com, based in California, the entire transaction is completed without the buyer ever contacting a dealer. "We take it a step further," CEO Scott Painter told Maclean's. The service, which will be available in Canada by year's end, can even deliver the car to the buyer's home or office. CarsDirect, which gets its auto inventory through brokers and dealers, also handles financing.

Some customers will always want to take a test drive. But Painter and CarPoint's Sparks say, increasingly, new-car buyers feel less need to touch the upholstery and check under the hood. Because the Internet sites offer so much data, Sparks says online customers visit an average of 1.2 dealers before buying, compared with between three and five for off-line sales. Boston Consulting Group estimates one-quarter of car purchases are now researched on the Internet.

The volume of auto sales on the Web already shows promise. At Don Wheaton, Jewell has sold 60 or 70 cars over the Net in the past seven months, a sales rate he calls about average for the business. At CarPoint, Sparks says the service generated about 130,000 U.S. sales leads a month in the last three months of 1998: 20 per cent of them lead to purchases.

The real revolution could come when a Web surfer can order his or her car or truck online and made to order, as Dell now does with computers. Ford employees in the United States already use the company's internal Internet to order cars off the assembly line. The public could begin to custom-order cars in "months to maybe a year," Gaunt says. It now takes between 20 and 70 days to manufacture and deliver a vehicle. Ford's goal: 10 days.

Perhaps sooner than they realize, many buyers will be clicking, rather than kicking new tires.