I took a little break after my Autotrader posting to let things die down a bit, but that reprieve gave me a chance to think about car dealerships in general. Exploring my thoughts, about the changing nature of the industry, makes me believe the only sustainable advantage a dealer has right now is access to cars. Finance, warranty, and insurance companies are all reaching customers directly and more consumers are buying cars from other consumers than ever, eventually, and I mean maybe 20 years from now, dealers will see their inventory limited to lease, rental, fleet, and trade-in vehicles (for people who absolutely need to sell their car right away). At some point, a dealership may consider forgoing inventory altogether and just giving consumers access to vehicles still at auction.
This type of service, known as car brokers or vehicle locators, has existed for years. However, the past couple of years have seen a few more sophisticated players enter the market. One of the main issues with brokers in the past is that consumers were unable to pick out a specific vehicle; a few new companies are starting to change this. I spent some time looking at some of those companies, specifically, Evenlevel, Motobidia, and Autoauctionexpress.
Problems common to all three are marketing, inventory selection, and the buying process. However, more interesting to me is the individual challenges of their business models.
Evenlevel looks like the newest of the three, and it uses a slightly different model than the other two. It shows a buy it now price that the consumer can click on to see the wholesale price and the evenlevel fee. When I looked there were roughly 200 vehicles across all major makes. It looks like most of the vehicles come from fleet companies but there are some from other dealers as well. One neat feature is the ‘Popular models’ that shows some of their more popular cars, the number available, and the lowest price – it makes it easy for people to quickly click to the cars they like. They also show the available condition report. Motobidia is a little different.
Motobidia actually has two rounds of bidding, for example. A buyer must register for Motobidia, first, bid on a car, and then if theirs is the winning bid, Motobidia will the bid at the actual auction. Seems a little confusing, and introduces more variability in the process. They offer free shipping as well, but I couldn’t find out how much Motobidia actually charges for the service. It looks like they obtained their dealer’s license in 2005, so they must be making some money.
Autoauctionexpress is neat because it lets consumers view actual auctions as they happen. I bet this inside view gives people a better understanding of what the whole process is like. According to their site they operate primarily in Southern California and work with credit union customers, so it looks like they have some actual sales going. The site design itself is a weaker aspect – it looks like they are using clipart curtains for their virtual showroom. It’s also possible they are no longer in business since I didn’t see a single purchase of a car newer than ’01.
Of the three, Evenlevel looks to have the easiest process: see a car, like the price, and then buy it. The consumer doesn’t have to wonder if their bid will win, and it they lose, possibly wait weeks for another, comparable car to show up. Autoauctionexpress’s relationships with credit unions could drive a decent amount of sales, though.
Two big obstacles still remain though: marketing and sales process. Many of the main classified sites specifically forbid advertising a car not in the dealer’s possession, this rules out some of the main advertising sources for dealers. Of course, there are enough alternatives to classified sites that this should not be the main problem. Rather, it is likely the sales process.
In order for these types of services to be successful they will have to find a way to overcome key objections about trust, risk, and consumers delaying gratification.