AutoNation Drives Into Cyberspace
With New Online Auto-Buying Site
By FARA WARNER
Staff Reporter of THE WALL STREET JOURNAL
June 23, 1999
interactive.wsj.com
AutoNation Inc., the auto retailer that spent the past several years buying hundreds of dealerships, is heading into cyberspace with a new Internet strategy that lets consumers bypass showrooms altogether.
AutoNationDirect.com will be launched nationally during the summer and early fall with the first test of the new Web site starting in Tampa, Fla., this month. The virtual showroom replaces about 270 AutoNation dealer Web sites. AutoNation also will offer the buying service as a licensing agreement with independent dealers in cities where it doesn't operate and may take minority stakes in some dealers in a move to finally achieve a national presence.
The introduction of a comprehensive national AutoNation car-selling site combines two of the most powerful changes affecting the auto industry during the past three years: the rise of Internet shopping and large publicly owned dealer groups.
"The significance of AutoNation on the Web is that it moves us closer to what consumers are expecting from their Internet experience," said Thor Ibsen, manager of Internet and new media at Ford Motor Co. Customers want to be able to shop and close a deal online, he said.
AutoNation, based in Fort Lauderdale, Fla., is setting ambitious growth goals for its Internet-selling venture. The company expects to sell a total of about $750 million worth of cars on the Internet for the entire year, and is aiming for $3 billion in Internet sales by 2001, or about 10% of its projected $30 billion in revenue that year.
AutoNation also is considering issuing a tracking stock for its Internet unit, but doesn't have plans to set up AutoNationDirect.com as a separate company, executives said, although that is an option.
The Internet strategies, including the tracking stock, are designed to help boost the company's lagging stock. In New York Stock Exchange composite trading, AutoNation stock fell 6.25 cents to close at $16.875.
"The end game is market share," said Steve Berrard, AutoNation's co-chairman. "This is not an industry that is always growing. We believe the Internet will help us drive huge share gains." AutoNation already sells more than 1% of the cars sold in the U.S., a share that has never been achieved before by a single retailer.
AutoNationDirect.com will launch into a cyberworld teeming with competitors. In May, CarsDirect.com (www.carsdirect.com), a venture backed by computer executive Michael Dell, said it would start selling vehicles only through the Internet starting this summer. CarsDirect.com is looking to muscle aside "lead generators," such as Autobytel.com Inc. (autobytel.com) and Autoweb.com (Autoweb.com). These sites funnel potential customers to established dealers. CarsDirect and AutoNation's new sites, by contrast, will allow customers to complete the purchase of a vehicle without visiting a dealership.
The increased competition is forcing lead generators, who were the early pioneers of online car shopping, to test out new ideas, including direct sales. Autobytel.com plans to test selling cars directly on the Web in California in July, says Mark Lorimer, Autobytel's president.
And while AutoNationDirect.com lets consumers bypass the showroom when they buy a car, Mr. Berrard hopes to keep them coming back to the real stores when they need service, repairs or even to buy gas.
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