Ford Motor Co.'s partnership with its independent dealer network to sell cars and trucks online is a gesture that sharply contrasts with past attempts by the Big Three automakers to bring vehicle distribution inhouse through company-owned dealerships.
Starting today with California, FordDirect plans to go nationwide within a year. The site allows consumers to configure, select, price, finance, buy and schedule the delivery of Ford vehicles through FordDirect.com.
“Both GM and Ford have tried to almost exclude the dealers by going out and buying their own dealerships and adding company stores,” said Domenic Martilotti, auto analyst at Bear, Stearns & Co. “That strategy clearly backfired because it created all kinds of unrest with the rest of the dealers. So, obviously, they had to determine a strategy.
“Dealers aren't going away and sales have to go through them. Franchise laws don't allow the manufacturers to sell direct to customer. So, dealers as middle managers aren't going away anytime soon. So they thought out a strategy to get the dealer network into the e-commerce strategy. I think it's a good move.”
The Ford Dealer Council, which has 4,200 members nationwide, owns 80 percent of the new site while Ford owns the rest. Participation by dealers in the Web venture is voluntary.
John Ochs, a Ford spokesman, declined to disclose financial terms.
This latest alliance between an automaker and dealer council follows a similar attempt by DaimlerChrysler to ease into online shopping for its vehicles. The automaker in July launched the first of 2,100 transactional Web sites that will integrate with the company's corporate database.
Starting with its Five Star dealers — ones that excel at customer service — DaimlerChrysler will allow consumers to research current prices, incentives, new and used car inventories and financing through these sites. But this stops short of the one-stop online shop that Ford envisions for its FordDirect.com offspring.
Ford, Dearborn, MI, and its dealers will intentionally keep shopping on FordDirect.com simple for a car-buying process known to exasperate in the bricks-and-mortar world. Consumers visit the Web site, choose the vehicle and specs, click on the dealer of choice or type in the ZIP code, and then simply place the order. If the dealer has the vehicle, the deal is closed.
Payment can be made via credit card online or at the dealer. Alternatively, consumers can negotiate the price directly at the dealer, though Ford will try to weed out that possibility through a specially devised pricing mechanism.
“There will be an e-price published on the site,” Ochs said. “The e-price will be the average price in that [consumer's] region or area that the vehicle has [sold for] over the last couple of weeks. Consumers can click on the average price and that's it.”
Online sales of cars and trucks are slowly gaining acceptance. Internet-only players such as Cars.com, NewCarDepot.com, Autobytel.com, CarsDirect.com and now Amazon.com sell directly to consumers, albeit through automaker-authorized dealers.
According to a recent J.D. Power and Associates survey, 55 percent of Americans who purchase a car this year will go online at some stage in that process. This figure is expected to rise to 80 percent by 2003.
Auto manufacturers, however, are not too keen to let yet another distribution channel out of their hands, hence the new coziness with dealers.
“This is a way where the dealers are part of the whole sales process,” Bear, Stearns' Martilotti said. “Manufacturers like Ford basically will control the way a customer interprets Ford Motor Co. and then they can leverage the dealer network as the distribution arm.”
Volkswagen of America, Auburn Hills, MI, ran a pilot in May and June to sell 4,000 limited edition New Beetles through 500 dealers that have Web pages on the automaker's site at www.volkswagen.com.
General Motors Corp., the No. 1 automaker, last year created e-GM to mesh e-commerce with its traditional business units. The Detroit automaker's GMBuyPower.com site allows consumers to research, build and locate the vehicle chosen in the dealer's inventory and then get the best price.
This fall, GM will offer the Cadillac Deville and Seville models as its first Web-enabled-production vehicles.
Following Ford's example, GM now plans to launch its own joint venture with company dealers. But unlike Ford, the GM site also will list other automakers' cars, with details of the pertinent dealers.
Ford's Ochs expected that consumers will prefer manufacturers' online car stores to Internet-only car sales companies that still have to fulfill orders via dealers.
“For a start, they're going to get a better price,” he said. “There's no middleman [with automaker-dealer sites]. Whenever a Ford dealer takes the order from an Amazon or someone else like that, they have to pay a commission to the dot-com, which increases the price the consumer pays. With our site, you're cutting all the other things involved.”
The jury still is out on whether the automaker-dealer Web alliances will boost vehicle sales on a noticeable level. But it could streamline the buying process, Martilotti said.
“The whole idea is to improve order to delivery,” Martilotti said. “When the customer comes online, picks out his car and picks up his car at the dealer, the more pieces of chain you have operating in the system. It makes it more efficient, it can resolve a sale, but it's not going to create demand by any means.”
