Quite a site to behold for Internet car buyers

Auto Trader Online and AutoConnect.com plan to merge in fall

1.5 million vehicles online


July 20, 1999|By Sean Somerville | Sean Somerville,SUN STAFF

Used-car megadealers such as Carmax will soon face a competitor with 150 times the inventory -- in cyberspace of course.

AutoConnect.com and Auto Trader Online, two of the largest used-car buying sites on the Internet, said yesterday that they will join forces in one of the fastest-growing segments of electronic commerce.

The merger, which is planned for the fall, would provide consumers one stop on the Internet to find nearly 1.5 million used-car and truck listings from dealers and individuals nationwide. That compares with 10,000 cars for Carmax. "These online classified sites are soon going to be the dominant way people search or locate used vehicles for sale," said Chris Denove, director of consulting operations for the research firm J. D. Power and Associates.

Not so fast, said some experts and analysts. Kenneth W. Gassman Jr., a retail analyst with Davenport & Co. in Richmond, Va., said Internet used-car buying levels the playing field when it comes to price.

"A consumer knows what they ought to pay when they go to the local dealer," as a result of the Internet, said Gassman, who has an "accumulate" rating on Carmax shares. "The Internet will capture some sales."

But, he said, when it comes to used cars, there can be no substitute for getting in a car and driving it. "I still believe, by and large, that American consumers are tire kickers," he said.

AutoConnect.com was started in May 1998 by Manheim Auctions Inc., the world's largest operator of wholesale car auctions, and Automatic Data Processing Inc. Manheim is a unit of Atlanta-based media conglomerate Cox Enterprises Inc. Most of AutoConnect's listings come from dealers.

Auto Trader Online is a subsidiary of Trader Publishing Co. of Norfolk, Va., a joint venture of Cox and Landmark Communications Inc. that's best known for its regional classified vehicle-ad guides. Its Web site was started in April 1996 and carries more of a balance of dealer and private-party ads, virtually all from the guides.

Analysts said the merger would be notable for the new site's potential scope. Together the two sites carry about 1.47 million vehicle listings with connections to about 50,000 dealers. "These two properties are relatively significant," said Rob Enderle, an analyst with Giga Information Group. "The merger gives them the No. 1 position in terms of total ads."

James McQuivey, an analyst with Forester Research Inc., said the merger also would give AutoTrader.com access to a tremendous amount of data on used-vehicle sales trends that can be sold to dealers. "There's just all kinds of uses for that information," he said.

Denove said each site also would bring strengths the other lacks. AutoConnect has several significant online partnerships with America Online Inc. and with Internet "portals."

Auto Trader, meanwhile, has been in the business much longer and has an established brand name among consumers. The fact that Auto Trader draws in more private-party listings is important because those tend to be for slightly older and less expensive vehicles, which gives the site a broader, more balanced inventory, Denove said.

The used-car sites allow the shopper to sort through listings by make, model and geographic area. Analysts say one of the benefits of the Internet for sellers is that Web shoppers are more apt to travel a longer distance to purchase a car if the price is right.

The used-car buyer will usually want to examine the car in person before the purchase, which limits the ability of Web sites to become directly involved in completing the transaction as some new-car sites have, said Michael May, digital commerce analyst with Jupiter Communications.

That leaves most used-car sites with the difficult task of generating profits by selling advertising to businesses that want to reach buyers, such as insurance and financing companies. "What we've found is that very few online businesses whose model is predicated largely on advertising have found a way to turn a profit," May said.

Val Brown, a spokesman for Carmax, a division of Richmond-based Circuit City Stores, said the Internet so far has proved to be a form of advertising. "Used cars have their own unique history," he said. "The consumer still tends to come in and test-drive and experience that car."

To overcome big dealers such as Carmax and AutoNation, Internet used-car sellers must make consumers feel comfortable enough to buy a car they haven't seen, said Maryann N. Keller, a former industry analyst who recently took a job as president of automotive services for Priceline.com, which has started to sell new cars on the Internet. She said a solution might include warranties, money-back guarantees and some sort of certification.

"Used cars are difficult to do electronically," she said. "Every Ford Taurus that's 24 months old is going to be different."

The Associated Press contributed to this article.

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