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Wresting power from the dealers. Part 1

By Sept. 4, 1997 — just 98 days after Zarrella’s call — Pattyn was ready to start her most ambitious selling job: enrolling dealers in GM BuyPower. The program called for training a salesperson at each dealership in the art of email communication with customers. “It was basically put together over a short period of time. They said, you can participate or not,” recalls George Olsen, a San Francisco Buick, Oldsmobile, Cadillac, and GMC truck dealer who signed on in the hopes of getting new customer leads. “Supposedly, they had dealers they discussed this with. A lot of dealers did not like the way it was set up, things like the idea of giving your best price, a price that’s good for 24 hours. In a way, it circumvented them.”

Zarrella admits it was tough to “educate the dealers.” Pattyn and her staff made on-site appeals, eventually enlisting those dealers representing 70 percent of the volume in the four participating states.

GM went public with its program on Oct. 15. It rented a Hollywood sound studio, where reporters sitting at PCs could configure and track down their ideal vehicles. On Oct. 27, the site was officially launched with a flurry of TV commercials, as well as heavy radio, print, and Internet advertising. The pilot was due to end in April 1998.

Four months after GM BuyPower started welcoming Web surfers, trade press reports indicated the site was responsible for selling about 200 cars in a 45-day period, at costs in the millions. By April, the company felt it needed more time to test the concept, so it extended the test to October 1998. Pattyn says, “Although some products are easily sold on the Web, cars are not among them.” Since the launch last October, there have been 548,000 unique visits with an average online stay of 11 minutes. These unique visits are available only in the four-state area, which represents approximately 13 percent of the U.S. population.

GM is not giving out sales figures, except to say that the site is getting 2,200 visitors a day — it claims there is no way to accurately count the cars that are sold to people who spend time on GM BuyPower before making their purchases. In May, a survey of 200 car buyers in the four states who had financed their vehicles through General Motors Acceptance revealed that 38 percent had been on GM BuyPower before purchasing their vehicle.

The company was pleased with other findings from the survey: 50 percent of the car buyers had traded in a non-GM vehicle, and 51 percent had seriously considered a non-GM product before purchasing. Pattyn says the figures were particularly encouraging because of the dominance of imports on the West Coast. It indicated that the company was not talking only to its own customers.

But San Francisco auto dealer Olsen is not so sure. He says GM BuyPower has resulted in just 15 more sales since the October launch. And although he hasn’t objected to the $3,000 investment in computer hardware needed to participate, he is not looking forward to the possibility that GM may charge dealers for the service it now provides free. Zarrella says the company is “still evaluating” the possibility of charging dealers.

Auto-By-Tel’s Ellis already considers GM BuyPower a failure. “It failed miserably with a lot of money behind it,” he says. “We probably could have sold 10 times what they sold, for a fraction of the amount they spent. We send a Chevy dealer as many as 150 customers a month. GM BuyPower sends them five or ten.” One dealer who represents both Auto-By-Tel and GM BuyPower says that since October, he has had eight leads from BuyPower, resulting in only one sale, compared with as many as 15 sales per month with Auto-By-Tel.

But whether it’s Auto-By-Tel or GM BuyPower that sends folks to a particular showroom, dealers aren’t always impressed with the shoppers once they get there. “For most of these deals, there’s a lower than average profit involved,” says Olsen, sounding tired.

“I had a lady here this morning who had been on the Net and found out our invoice price for a Yukon Denali,” reports one GM salesman. “She said, ‘I’m willing to give you $500 over the inventory price.’ This is a $43,000 car! My boss said, ‘No way. She’s stealing from us.'” Ultimately, the woman opted to lease the vehicle — not buy it — for slightly more than the $500 markup but nowhere approaching the $2,500 markup that would be expected of a vehicle in the Yukon’s class, given its lack of general availability.

Such headaches will intensify as online shopping gains popularity. And smaller dealers will be the ones feeling most of the pain. The lower margins will hurt those who can’t make it up in volume. And the act of letting consumers search inventory could spell disaster for dealers who can’t match the stock of their larger counterparts.

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