By Joseph B. White
AutoNation Inc., the largest U.S. auto retailer, is launching a
new service this week that will let its customers get closer than
ever to buying a new car or truck entirely online and could put
pressure on other auto dealers to follow suit.
AutoNation isn't the first U.S. auto retailer to give customers
the option of buying vehicles largely online, but with more than
240 stores nationwide, it is by far the largest. The company plans
to launch its "SmartChoice Express" service later this week at
stores in South Florida and to roll the service out across its
network in 2015.
AutoNation's initiative highlights the challenges for
brick-and-mortar auto dealers as they try to catch up with
e-commerce-savvy consumers.
Buying a car is typically a complex transaction, involving not
just a negotiation over the vehicle's price but also over the terms
for financing and the trade-in value of the customer's old
vehicle--an amount that can vary widely based on local market
demand and the condition of the car or truck.
At first, AutoNation's service won't let customers secure
financing, value a trade-in or complete all the sales paperwork
online. But those functions should be available by the end of 2015,
company executives say.
Once the service is fully up and running, customers should be
able to complete a purchase online, make an appointment to pick up
their vehicle at the store and be on their way in 30 minutes,
AutoNation Chief Executive Mike Jackson says.
AutoNation's move to expand online buying comes as rival dealer
groups and some auto makers are working on new ways to cater to
consumers accustomed to buying a wide array of goods without
visiting a physical store.
General Motors Co. last year launched a service called
Shop-Click-Drive that is now being used by 1,717 of its 4,300 U.S.
dealers, with an additional 137 moving to sign up, the company said
in a statement. Still, only about 15,000 new vehicles have been
sold through the service, a tiny slice of the roughly 2.8 million
vehicles GM is on track to sell in the U.S. this year.
Toyota Motor Corp.'s Scion division is testing an online buying
program called "Pure Process Plus" at about 50 U.S. stores. Doug
Murtha, head of the Scion brand, says the company is still working
on the systems to enable complete online transactions, including a
process for valuing a trade-in and getting credit approval.
Expanding the approach to Toyota dealers is "on the table," says
William Fay, general manager of the Toyota division.
Tesla Motors Inc. looms over the traditional auto retail
network's online selling initiatives. The Silicon Valley electric
luxury-car maker has a few bricks-and-mortar showrooms, but it
sells most of its cars directly through its website, without
franchised dealers.
The process of buying a car online can be fragmented and
confusing. While most dealers have websites that let customers
browse through their inventory, as many as 80% show only list
prices, which most potential buyers wouldn't agree to pay, says
auto-retailing consultant Mark Rikess.
Dealers are reluctant to post realistic prices because they
don't want to give rivals a target, Mr. Rikess says. But the lack
of transparency backfires with younger consumers accustomed to
buying goods and services online.
"Today, Gen Y [consumers] are shopping for about 50% of cars,"
Mr. Rikess says, adding that many older car buyers depend on their
children to surf the Web on their behalf. "When they don't see a
price, they move on."
Third-party auto-shopping sites such as Truecar.com, KBB.com and
Cars.com don't really sell cars. They hand off customers who shop
through their sites to dealers. Truecar says customers who use its
service can get a firm price quote on a specific vehicle from one
of its 9,000 participating dealers.
But AutoNation's Mr. Jackson says third-party car-shopping sites
can be unreliable because, unlike dealers, they don't directly
control prices or inventory. Consumers can "build" a virtual car
online only to discover that a dealer doesn't have such a
vehicle.
"We see a great divide between what's going on in the online
world and what's going on in the store," Mr. Jackson says.
"Consumers online are lost when they make the transition to the
store. This divide needs to be unified into one seamless
experience."
Achieving that goal won't be easy or cheap. AutoNation's new
online sales system is the product of more than $300 million of
investment in data systems that can track the location and pricing
for more than 70,000 vehicles across its nationwide network, Mr.
Jackson says, as well as a rebranding strategy that brought the
company's mainstream brand stores and its online presence together
under the AutoNation name.
Building the system required to set and manage the market prices
for AutoNation's vehicles "was a massive undertaking," Mr. Jackson
says, in part because auto makers issue "a King James Bible" of
discount offers, many tailored to specific groups such as veterans
or recent college graduates. AutoNation hopes to persuade shoppers
that the prices displayed online, which are usually below the
manufacturer's suggested price, are a good deal.
Rival Penske Automotive Group Inc. has had a shopping site
called Penskecars.com that lets potential buyers see detailed
information on vehicles for sale in its network but doesn't enable
a shopper to reserve a vehicle online as AutoNation plans to
do.
"We don't want people reserving cars and taking them out of
inventory," says Penske spokesman Anthony Pordon. "We're just not
there yet."
Write to Joseph B. White at joseph.white@wsj.com
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