Consumers use Web for research, not sales

Consumer preferences
  • 60 percent of new-vehicle buyers shop online.
  • 5 percent of those who shop online purchase through an online buying service. Source: J.D. Power and Associates
    Top 25
    Most visited automotive Web sites (for August 2001)
    UNIQUE VISITORS
    1. kbb.com 3,872,000
    2. Carpoint.com 3,206,000
    3. AutoTrader.com 3,197,000
    4. cars.com 2,327,000
    5. edmunds.com 2,144,000
    6. eBaymotors.com 2,099,000
    7. Autoweb.com 2,052,000
    8. Ford.com 1,391,000
    9. Toyota.com 1,315,000
    10. CarsDirect.com 1,254,000
    11. autobytel.com 1,230,000
    12. AutoVantage.com 1,199,000
    13. AAA.com 1,189,000
    14. Chevrolet.com 957,000
    15. Carfax.com 858,000
    16. JCWhitney.com 780,000
    17. Fordvehicles.com 732,000
    18. TraderOnline.com 720,000
    19. Honda.com 650,000
    20. NADAguides.com 641,000
    21. STONEAGE.com 612,000
    22. GMBuyPower.com 561,000
    23. carmax.com 556,000
    24. Honda2001.com 552,000
    25. CarParts.com 540,000
    Source: Jupiter Media Metrix

  • David and Connie Greer are like a growing number of car buyers who use the Internet to shop for a vehicle.

    The Greers evaluated their trade-in at kbb.com, which is the Kelley Blue Book site. They compared models and prices at Carpoint.com then visited Toyota.com, Ford.com and GMBuyPower.com.

    They also checked prices and searched new-vehicle inventory at local dealerships. Finally, the Greers purchased a 2001 Monte Carlo from Koons Chevrolet-Chrysler in Vienna, Va., closing the deal at the dealership .

    "We did not use a buying service because they take your name and give it to a dealership," said David Greer, 50, of Winchester, Va., "We did not want to get calls from salesmen."

    For six years, automakers, dealers, third-party buying services and informational sites have grappled over online auto sales. Now the consumer has decided how to most effectively use the Web to buy new vehicles. Consumers are comfortable with the Internet as a research tool, but they shy away from closing the deal online.

    About 60 percent of new-car buyers shop online for a vehicle, but the vast majority only use the Internet as a research tool, according to J.D. Power and Associates, a research firm in Agoura Hills, Calif. Only 5 percent of new-vehicle buyers who use the Internet to shop bought through an online buying service.

    That preference has sent traffic climbing at manufacturer and dealer sites, as well as sites such as Kelley Blue Book's kbb.com and

    edmunds.com, which focus on research. But it has left many transaction-oriented sites in the dust.

    Manufacturers gain

    Manufacturers are increasing their online traffic, in some cases passing up the third-party independent sites. The gains not only reflect the shakeout that has reduced the number of third-party sites but the growing sophistication of online shoppers as well as improvement in dealer and automaker sites.

    Auto manufacturers have an advantage over the independent sites with their access to information about dealer inventory. And the automakers are adding some of the same research tools and content that have lured visitors to independent sites.

    "The manufacturers are creating fewer reasons for consumers to go to third-party Web sites," said Babba Shetty, director of automotive research for Forrester Research Inc. in Cambridge, Mass.

    Third-party sites attract more than twice the monthly traffic as that of automakers' sites, but for more than a year, traffic on manufacturer sites has been growing at a faster rate.

    As a group, sites that handle transactions and focus on research have about 20 million visitors a month, while the auto manufacturer sites, combined, draw just over 8 million, according to Jupiter Media Metrix, a New York research firm.

    "Some 70 percent of consumers are shopping on the Internet before starting the sales process," said Jim O'Connor, president of Ford Division. "It is a major information source."

    Ford.com and Toyota.com now draw as many or more visitors as big-name Web sites such as autobytel.com and CarsDirect.com, as measured by Jupiter Media Metrix. The latest figures from August show Ford.com ranked eighth among the most visited automotive Web sites with 1.39 million unique visitors, and

    Toyota.com ranked ninth with 1.31 million visitors. CarsDirect.com ranked 10th with 1.25 million unique visitors, and autobytel.com ranked 11th with 1.23 million unique visitors.

    The most visited sites are research-oriented sites such as kbb.com,

    edmunds.com and Microsoft Corp.'s Carpoint.com. Other sites such as AutoTrader.com and cars.com also attract substantial viewers because of their online used-vehicle classified ads.

    "I wouldn't be surprised to see a flattening of the growth rate for the independent (third-party buying) sites (as a whole)," said Chris Denove, director of automotive consulting for J.D. Power and Associates. "The third-party sites had been driving people to their sites through traditional advertising in the last two years, but they are not doing that as much, and I expect visits (to their sites) to go down."

    But Jeffrey Schwartz, vice chairman of Autobytel Inc., said traffic is "very robust" at his corporation's sites - autobytel.com, Autoweb.com and CarSmart.com. Autobytel, of Irvine, Calif., boasts of 3 million visitors a month.

    More features

    Dealer and manufacturer sites have become more competitive, with features that allow consumers to research vehicle purchases, just as they can on the third-party sites.

    For example, vehicle configurators are common on manufacturer sites. Configurators, one of the most popular online features, let consumers build an image of the car they want, including color, options and often sticker price.

    Some auto manufacturer sites even compare their vehicles with competing makes.

    Manufacturer sites and dealer sites often allow customers to calculate monthly payments for various loan terms, just as independent sites do. Most manufacturers provide an online credit application, and half the dealer sites provide this service, according to the National Automobile Dealers Association.

    At the dealership, the Greers arranged to finance their Monte Carlo through General Motors Acceptance Corp. because they wanted 0 percent financing on a five-year loan.

    The Greers were drawn to the GM BuyPower site because it allowed them to search new-vehicle inventory at local dealerships and compare GM vehicles with competing makes.

    GM "has done the legwork for you," said David Greer. "It's great."

    Significantly, 85 percent of dealer Web sites let visitors browse their inventories, reports NADA. Like the Greers, other consumers want to know exactly what vehicles are in stock at local dealerships.

    "The main reason consumers visit our Web site is to do vehicle searches," said Jeff DeBoer, vice president of finance and investor relations for Lithia Motors Inc., a publicly held dealership group based in Medford, Ore., with about $2 billion in annual revenues.

    Dual strategy

    Increased competition among the automotive sites will force more third-party sites to merge or enter joint ventures with manufacturers and dealers to stay afloat.

    "To maintain their lead, third-party resource sites must not only provide a higher-quality experience to the consumer but also be a partner with manufacturers and provide enough value to dealers so they will be willing to work with multiple sources for leads," said Julie Ask, an analyst for Jupiter Media Metrix.

    Autobytel Inc. has acquired rival online referral services CarSmart.com and Autoweb.com.

    The company also has broadened its business to provide research and technology to dealers and manufacturers, two services that are in growing demand.

    "Our visitors have increased over the last six months as a combined company to 3.5 million (a month)," said Schwartz, of Autobytel.

    CarPoint has a referral business that sends dealers online leads for a fee, but CarPoint now pays AutoNation Inc., the nation's largest dealership group, to handle referrals. Instead of getting caught up in sales, CarPoint focuses on providing vehicle information to consumers.

    "We go back to focusing on what we do really well," explained Kevin Doerr, manager of business development for CarPoint.

    The strongest third-party sites will survive the shakeout and draw much of the online traffic. Julie Ask, of Jupiter Media Metrix, said, "Consumers still perceive third-party auto sites to be more impartial and innovative, offering tools, chat rooms and a breadth of links to services that were only recently adopted by some manufacturers."

    Even some automakers are convinced that the third-party buying services are crucial to online business.

    In General Motors' Washington online sales pilot with Autobytel, 96 percent of the leads that came from Autobytel were unique.

    "It is not enough to have a manufacturer's Web site or to help dealers build good Web sites," said Mike Devereux, director of business development for e-GM. "We need to have a dual-channel strategy" with a third-party site.

    But Connie Greer, a 33-year-old executive secretary, had no interest in working with an online buying service.

    "I don't feel that comfortable doing the transaction online," she said. "I had more success getting what I wanted by walking into the dealerships."

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