Dive Right In, the Water's Fine

The idea of selling cars on the Internet came from a pool boy in California.

At least that's how John Honoites, formerly of Autobytel, tells the story at a J.D. Power and Associates dinner in Las Vegas celebrating the 10-year anniversary of dealers selling cars online.

Honoites says Pete Ellis created Autobytel to sell cars on the QVC home shopping television channel — hence, the Autobytel name.

Then one day Ellis's pool boy casually mentioned the Prodigy network on the Internet to him. The pool boy said it was the up and coming thing. So long QVC, hello Internet.

While Autobytel takes credit for being the first to list a vehicle online, others aren't so sure.

A dinner participant mentioned DealerNet, now owned by the Cobalt Group, as being the first. An Autobytel employee exclaimed, “No, it wasn't!”

Cobalt President and CEO John Holt leaned over and responded, “Yes, it was!”

The so-called pioneers of the Internet traded stories of the early days and contrasted them with how things are now. Yet even though the Internet has changed the way cars are marketed and sold, the automotive retail industry has resisted change for the most part.

The industry still talks about improving dealers' response time to leads. While response times have improved, the percentage of leads getting no response (between 45% and 50%) has not changed in years.

And third-party lead providers still combat negative dealer perceptions about their business model — despite doing more to help the dealer improve sales processes and reduce costs than any auto maker can claim to have done.

Some of those negative feelings can be traced directly back to a J.D. Power roundtable in the late 1990s.

That's when CarOrder.com's 24-year-old hotshot CEO Brian Stafford proclaimed he had more lawyers than employees, and those lawyers were going to do away with state franchise laws so Stafford's dot-com company could sell cars directly, bypassing dealerships. It riled a lot of dealers.

He was soon out of business. Stafford was not at the anniversary dinner.

J.D. Power paraded several Internet types on stage, honoring them with Davy Crockett-style raccoon hats for being pioneers.

Some of them remain in the business. Holt and Gary Marcotte, formerly of Lexus and now guiding AutoNation's online efforts, recounted how they built the first Lexus dealer websites, only to take them down on orders from James Press, now chief operating officer of Toyota Motor Sales U.S.A.

Press came around though. The Lexus-Cobalt relationship exists to this day. Lexus in January is unveiling a new Cobalt-built websites for it dealers.

One interesting note about Cobalt: an early version of its website bragged about the marine and real estate listings it had. Vehicle listings, while mentioned, were an afterthought. No longer.

Scott Painter, who disappeared from the business after founding CarsDirect.com, is now back raising funding for another online automotive venture called Zag.com. Although the Zag folks are keeping quiet for the time being about their business model, judging from the capital raised so far, Painter has people believing it will be successful.

Looking back on the previous 10 years raises the question: “Where will online automotive retailing be in the next 10 years?”

Perhaps not as far as we think. We'll probably still be talking about how to improve lead response times.

Dealership website companies will play an increasingly important role as dealers leverage search capabilities that Google and Yahoo provide to drive more traffic to their websites.

Video website applications are likely to take off soon. Before long, consumers will watch walk-around sales presentations on dealer websites.

And we'll probably see new technologies emerge, as search-engine optimization has in the last three years.

For sure, the Internet will remain an important tool for selling cars.