Euro car firms gear up for Net success

CommunicationsWeek International, May 10, 1999 by Peggy Salz-Trautman

The cost of developing an e-commerce strategy has so far deterred European car makers from pushing on-line sales. But as Internet usage and spending increases, car firms are exploring how they can profit from the Web.

While broad consumer acceptance of the Internet and ambitious dealer schemes are fueling rapid growth in on-line car sales in the United States, the European automobile industry is only now entering the race to sell to consumers using Web technology.

But although the market is still in its infancy, observers believe it won't be long before on-line car sales in Europe catch up. A survey last year by Arthur Andersen, for example, forecast that the Internet would play a part in one in three of all vehicle sales in Europe by 2004.

For an increasing number of car buyers the Internet offers a comfortable armchair alternative to the hard sell of the showroom floor. A report by business consultancy KPMG's European Automotive Practice, Birmingham, England, predicts that by 2000 over 20% of new and used vehicles in the United Kingdom alone will be bought using the Internet.

Meanwhile, Forrester Research By, Amsterdam, estimates in a March report that the Internet will influence the sale of 17 million second-hand cars in the United States in 2003-some 40% of used car-sales-up from 4.2 million in 1998. Moreover, it predicts that U.S. consumers will buy more than 400,000 new cars over the Internet in 2003.

To date, however, European car makers have complained that the cost of marketing to a fragmented community of users outweighs the benefits, unconvinced that the rewards of e-commerce are worth the effort. Huge differences in telecoms tariffs, computer know-how and local language and culture male it necessary for companies operating across Europe to design a plethora of Web sites and customer support strategies.

"It's expensive to develop a coherent approach to e-commerce in Europe, and the cost of entry has held a lot of companies and dealers back," said Monique Giral, internet manager responsible for worldwide e-commerce strategy at Peugeot in Paris. "We are getting ready for the day when consumers want to purchase their cars over the Internet...I think it will be at least two years before [consumers] want this kind of service, but we are doing our homework just the same.

While many manufacturers in Europe and the U.S. have "virtual" showrooms for customers to view their latest models, few have yet taken steps to move to integrated ecommerce where orders, fulfillment, billing and payment are processed over the network.

Preparation at Peugeot includes work on a French-language on-line boutique designed to offer customers information about the company's line of car and fashion accessories. Giral hopes this will eventually he modified to appeal to customers in Scandinavia, where the market for Internet use is advanced. An on-line payment component is also planned for the second half of 1999.

At first, Giral recalls, Peugeot was slow to embrace e-commerce because its customer base in France was not surfing the Internet in significant numbers. But this is now changing.

The amount these users spend on-line is also on the rise, according to a recent survey from the Benchmark Group, Suresnes, France, which revised its estimate for revenues generated by e-commerce in France to over $66.4 million currently, up from its earlier estimate of $50 million, after conducting interviews with French on-line merchants in January.

Such increases have prompted Peugeot to sharpen its focus on its home market. To reach customers worldwide the company has also developed around 35 national Web sites that feature local content and language.

Ford-Werke AG, of cologne, Germany, is also eager to experiment with e-commerce but uncertain of the returns. "In the mid-term we can't imagine on-line car sales here would equal those in the U.S.," said Ford-Werke spokesman Paul Schinhofen. "In Europe, buying a car is an emotional action. People want to see it, feel it and sit in it before they buy," he said. "There's no doubt that car sales via the Internet will happen, but it may take another generation before [European] Internet users will consider it."

In the meantime, Ford sees the purpose of its e-commerce strategy as supplying the customer with the information needed to choose a car and build a bridge between Ford dealers and their customers.

To beat these intermediaries at their own game, Volvo cars Belgium in Brussels is running a pilot scheme to support the customer on-line through what Forrester Research has defined as the "four distinct phases of the on-line car sales market": general research, dealer selection, payment plans and insurance, and sale completion. The Volvo site provides the visitor with information about both new and used cars, related services and financing options including leasing.

Customers can use a personalized tool to construct and order the car of their dreams, from engine through to interior trim. Volvo's own audit of the Web site over a period of three months shows 25,200 hits and hundreds of requests for information and deals involving new and used cars.