| More buyers turn to the online marketplace in search | | | | eliminate the traditional used car dealership setup as |
| of their next used vehicle purchase every day. | | | | we know it, resulting in significantly lower selling prices |
| Nevertheless, this new marketing channel has | | | | of vehicles purchased via this channel. |
| increased supply while demand has remained relatively | | | | The Savvy Online Customer |
| stable. What is the end result? Lower prices of | | | | But who are the customers they are competing for? |
| vehicles offered through the online channel relative to | | | | Some argue that the online dealers are taking |
| those offered at the traditional dealership. We have all | | | | customers away from the local dealers, but are they |
| seen the "internet only pricing" or "online specials" tactic | | | | really? I doubt it. It's not very easy to convert a car |
| employed by dealers for marketing their virtual listings. | | | | buyer who prefers to kick the tires into a pure online |
| New Vehicles Online | | | | buyer of used cars sight unseen. After all, we're talking |
| Easy access to information on the internet has | | | | about what is arguably the second largest purchase |
| precipitated the advent of an ever expanding online | | | | the average consumer makes after buying a house. |
| new vehicle marketplace. Private sellers now have | | | | Yet, a considerable number of these "conventional" |
| access to an increasing pool of potential buyers, far | | | | used car buyers have found a myriad of ways to |
| beyond the limitations of the local newspaper | | | | harness the power of the ever expanding online |
| classifieds section audience. It is the vehicle dealers, | | | | automotive resources and tools available at their |
| however, who have discovered the power of the | | | | disposal to make informed buying decisions. Although |
| online marketing channel and are now achieving a | | | | this doesn't completely eliminate the face-to-face |
| significantly higher reach compared to the traditional | | | | contact with the dealer to seal the deal, it certainly |
| means of local advertising. Expansions of the reach | | | | ensures that the dealers with solid online presence |
| radius to 30 miles via the online channel compared to | | | | have a considerable advantage over their brick and |
| conventional reach of 10 miles are more or less | | | | mortar only counterparts. |
| standard these days. This phenomenon is due not in | | | | The Savvy Online Used Car Dealer |
| small part to the much lower cost of online marketing. | | | | Dealers love to see customers walk in carrying folders |
| Used Vehicles Online | | | | with web printouts indicating that they had done their |
| This new expansion of the geographical reach dealers | | | | homework and have more or less made a decision to |
| have achieved through the online channel has had an | | | | buy. They know these savvy buyers are not spending |
| impact on used vehicle pricing as well. This is especially | | | | their weekend driving around to different dealerships to |
| true for those units listed outside the traditional | | | | find the used car they want. These have seen the |
| customer reach radius accomplished via the traditional | | | | inventory online; they have researched prices and |
| marketing methods. This comes as no surprise. Local | | | | checked the target vehicle's history. According to a |
| dealers now have to compete with the online used car | | | | J.D. Power and Associates August 2004 Used Auto |
| dealers encroaching on their turf resulting in outright | | | | study, 36 percent of all used vehicle buyers are |
| price wars. | | | | influenced in their make/model decisions by information |
| The Middleman | | | | they find online. As a fellow dealer so eloquently put it - |
| This begs the question: Will the online channel bring the | | | | "most of the work is already done, so the only thing |
| dreaded (at least from the dealer's point of view) | | | | that we need to do is get them in a car and get their |
| disintermediation in the used car business similarly to | | | | hearts pumping!" The same J.D. Power and |
| what Dell did in the computer industry? Not just yet. | | | | Associates study also found that 22 percent of all |
| Manufacturers won't be bypassing their networks of | | | | used vehicle buyers are influenced in their dealership |
| franchised dealers to sell new vehicles directly to | | | | selection by information found online. |
| customers anytime soon. They just can't. For the most | | | | Minimizing the face time seems to be a common goal |
| part, this holds true in the used car market as well. | | | | for both dealers and buyers alike. Let's face it; there |
| There is one small exception to the rule, however. | | | | are very few buyers that enjoy the time spent at |
| Some pure online outfits have adopted the brokerage | | | | dealerships buying a used car. Dealers, too, know this. |
| model and are now offering public access to the | | | | The online channel has enabled them to move the |
| otherwise restricted wholesale car auctions, while | | | | research and decision making phases of the |
| avoiding holding costs of inventory altogether. Though | | | | car-buying process from the confines of the dealership |
| this isn't quite true disintermediation per se, it does | | | | to the computer screen of the potential buyers. |