Car Wars

Brandweek, Oct 16, 2000 by Janis Mara

With more sites online, the auto sales and information categories unclog the road for drivers.

Since eBayMotors.com launched earlier this year, the site has gone from the proverbial zero to 60, zooming up from an early start of 240,000 unique visitors in March to 820,000 in April. But as the online auto sales and information category becomes increasingly crowded, will the online auction giant's revved up entrant continue to run laps around established auto sites like Edmunds.com?

Despite eBayMotors.com's early lead, industry sources say the answer is "no," for more reasons than one. First, the freewheeling eBayMotors.com sells only used and collector cars. This means the site is competing on an entirely different track from the majority of online auto sites, which either sell new cars or provide information about new and used cars.

"It's different from buying a new car," says analyst Rob Leathern, who wrote .New York-based Jupiter Communications' April report on the online car market. "A new car is the same product from one dealership to the next. Used cars differ widely."

In fact, Leathern says one of the reasons for the fast start of eBayMotors.com may be because "there really hasn't been one place where you can get a significant number of used car listings." EBayMotors, based in San Jose, Calif., now ranks eleventh in the field, according to Media Metrix. By teaming up in March with Atlanta-based AutoTrader, which offers listings of more than a million used cars, eBayMotors now offers users that option, Leathern says.

GETTING IN GEAR

There's a big advantage to selling used, as opposed to new, cars. By doing so, eBayMotors.com steers clear of the sometimes convoluted obstacle course of legal regulations governing online purchases of new cars. State laws make it difficult for anyone besides local dealerships to sell new cars in a given area. For this reason, many online new car sites can only refer customers to local, offline dealers.

This may be one of the reasons online car selling has yet to get out of first gear: So far, most people visit online car sites to do research, not to buy. Only an estimated 17,000 new cars were sold online in 1999. On the bright side, though, Jupiter projects that direct online new car sales will explode to more than 1.3 million by 2004. Also, major automakers such as Ford and GM are going online. These indicators, plus eBayMotors.com's rapid rise in popularity, suggest that the field is picking up speed.

Though eBayMotors launched as a separate site in the spring of 2000, customers were already hopping on the bandwagon (or the SUY wagon) in early 1999. "We didn't have a car category on the eBay site at all," says Simon Rothman, vp and general manager of eBayMotors.com. "We noticed that within our miscellaneous section people were trading cars." So in response, the company created an automotive category in August 1999, and this area soon became popular enough to get its own URL.

"We thought it would be a collector car area, but the demand for cars in general surpassed the demand for collector cars," says Rothman.

Nevertheless, the colorful collector cars section, which includes race cars and antique autos, remains one of the flashiest parts of the site. 'We sold a Ferrari for $330,000 recently," Rothman notes. "Ferrari 360 Modenas are very rare, but I've seen as many as seven on our site in one day."

Sales in general have grown "very rapidly," Rothman says. Though he will not give exact numbers, Rothman claims that sales "grew more than 10 percent last month. On an annualized basis, we list billions of dollars worth of cars per year and hundreds of millions of dollars worth of spare parts."

While eBayMotors.com appears to be doing well, it's literally not at the expense of its users. The cost to an individual selling a car is modest; the company charges $25 to list a vehicle, regardless of price or style, and if it sells, the company charges an additional $25.

Analyst Leathern notes that the value-add that distinguishes online car sales "is to take care of the pain points for the consumer, whether [that involves] organizing insurance or financing or helping to find exactly the right car." According to Leathern, the way to do this is by partnering with other companies, which eBayMotors, and almost all the other online car sites, have done.

"We just inked a deal with Saturn where a customer can take a used car from most makers to the dealership for an inspection," says Rothman. The company also has relationships with a variety of companies, including escrow.com, E-LOAN, Dependable Auto Shippers and Hagerty Classic Insurance. That way, they can offer shoppers a one-stop shopping experience where they can arrange financing, insurance and shipping for their newly purchased vehicles.

SIZING UP THE COMPETITION

Regardless of its connections, eBayMotors.com is unlikely to blow sites like Edmunds.com off the virtual highway "because it's comparing apples and oranges," says Jim Nail of Forrester Research, based in Cambridge, Mass. "Edmunds.com, for example, provides content, discussion boards and information; that's their focus, not selling cars per se."