--OT-- Dell's direct model used for car sales. Here is an article I found on the Motley Fool Web site, www.fool.com.
You Want a Beanie Baby With Your Mustang?
By Bill Mann (TMF Otter) (TMF Otter)
September 20, 1999
Microsoft (Nasdaq: MSFT) and Ford Motor Company (NYSE: F) are expected to announce a collaborative effort to build Ford vehicles to order using Microsoft's CarPoint website.
The Wall Street Journal reports that the Ford-Microsoft alliance is to be announced at a joint press conference today in San Francisco.
The collaboration will allow customers to input a car order and then have it matched with a dealer. Federal franchise law restricts car manufacturers' ability to sell cars directly to consumers.
However, this agreement once again shows the power that e-commerce has over traditional manufacturing industries. Where the car manufacturers once competed to maintain operating efficiency to build their profit margins, they are now counting on e-commerce to aid their distribution efforts by cutting inventory, profiling customers, and utilizing this information to more efficiently manage wholesaling efforts.
The deal will have Ford taking a joint venture investment position in CarPoint. CarPoint expects that other auto manufacturers such as Honda Motor Company (NYSE: HMC) will follow suit and invest as well.
This type of model has been perfected in other industries, most notably in PC's, with Dell Computer Corporation's (Nasdaq: DELL) much-copied direct sales model. This model is being replicated in other industries with significant distributive inefficiencies caused by an obsolete distribution system, including insurance, software, investments, travel products, and even chemicals. Can cars be that far behind?
Car companies have been looking to shorten their lag times between the initiation of the manufacturing process of the car and the realization of revenues. The shortening of this cycle, to the magnitude of days rather than the current weeks, would drastically improve the companies' cash flow models.
For Microsoft, this collaboration is yet another one of the items it is using to add synergy between its components. In this case, CarPoint is an independent entity under the Microsoft corporate umbrella, competing with several stand-alone car websites, most notably autobytel.com (Nasdaq: ABTL) and autoweb.com (Nasdaq: AWEB). Neither of these companies have been able to attract an alliance with a manufacturer, and as such the Ford collaboration and those expected to follow at CarPoint give it a significant competitive advantage.
Auto dealerships have long been wary of this sales model, as it threatens to make them obsolete as the point of sale to the end customer. There are a few companies offering direct sales models for autos, most notably CarsDirect.com, but this currently accounts for a tiny fraction of all car sales.
Consumers will have the ability to access the build-to-order capability through CarPoint as well as Ford's own websites. These Ford sites will be switched over to run off the CarPoint platform. In the future, consumers will be able to order a car from a "cafeteria menu," including paint colors, interior, accessories, and other customizable features. In return, Ford will have instant access to a searchable database giving them feedback as to what types of cars consumers want. |
