The Internet's Changing the Auto Retail Business For the Better

10 years ago we all heard how the internet was going to cause the disintermediation of the car dealer. But "consumers like to kick the tires" we were told. And so now everyone has given up on this idea of the internet. When Jack Welch asked how many dealers were concerned about the impact of the internet and price transparency yesterday at the General Session of the National Auto Dealers Assocation [NADA] Convention, I didn't notice one hand go up (in a room full of thousands of dealers!).

Clearly, the world was completely off it's rocker with this idea of the internet and buying cars, right? I wouldn't be so sure. I always see the role of a physical retail establishment (for accessorization, parts and service, learning about the vehicle including test drives, etc.). But I think this could also be the "sleeper period as the players reassess, and refine the model."

The other week I was surprised to learn that many of the large public dealers are seeing anywhere from 5% to 20% in actual transactions coming form the internet now (granted I probably need to do a better job in understanding the definition of transaction).

And yesterday, I sat in a press conference for Ebay Motors as they announced their new local market product. Basically it is a subscription model (something like $1,000 a month and $50 a transaction,) where dealers can put their entire lot of used vehicles onto Ebay (EBAY).

What they found in the test markets? Well first of all, something like 20% more than they had expected signed up. But also, dealers that used to put 10 or 15 of their vehicles were now putting their entire inventory online (so it was increasing Ebay's inventory offering by 10x). Did you catch that, this means they could potentially go from tens of thousands of units online to hundreds of thousands!

Now when I asked about who this competes with (dealers, online wholesalers, etc.,) they said it was really more of a new way of advertising. I tend to agree, and that fits in well with the shift that is on from print and other traditional source of media (but mainly print) to the internet. But they had a dealer in the room who said he would usually sell 40 - 50 used vehicles a month, and the Ebay program was adding about 10 more units of sales a month. And this is actual transactions online (not counting the people that were printing it out and bringing it in).

The sale is still coming from the dealer, but gosh, dealers are seeing 20%+ increases in actual online (retail) transactions, and it also works as an advertisement. I sure should have raised my hand when Mr. Welch asked about online impacting pricing transparency. Because it sure seems to me like the internet (over the next decade) really could have an impact on the way consumers go to market (albeit still likely being facilitated by dealers).

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