Casey Stengel, toward the end of his Hall of Fame career, found himself at the helm of the hapless New York Mets during their early years in the mid-1960's. After a particularly galling loss, he turned to one of his coaches and asked, "Can't anyone here play this game?" That was the thought that struck us after watching internet auto broker/buying service CarsDirect.com in the ten days following its splashy debut in the national press (Dealer's Edge 5/24/99).
CarsDirect.com introduced itself to the public through an article in the Wall Street Journal. The company is the brainchild of computer billionaire Michael Dell and announced its intention to eliminate traditional automotive retailers altogether. Various spokesmen quoted for the article apparently hadn't spoken to each other, judging from the disjointed statements they made.
The company's chief financial officer said that CarsDirect would sell vehicles for some "average price" in a given geographical area. The company's profits would be earned by negotiating volume discounts with dealers and then competing with those dealers for backend F&I products. Another spokesman revealed his lack of knowledge about the car business by saying CarsDirect planned to buy existing dealership franchises and then close down the points, retaining only the franchise rights. Banc One Credit Company, which will provide online loan and lease financing for CarsDirect, however, counts 10,000 dealerships among its customers and certainly didn't want them eliminated or closed down.
Some damage has been done, however, at least to Banc One, which we hear caught considerable flack from some dealer customers. But the story that got us thinking of Casey Stengel came from Mike McCarville of McCarville Ford in Centerreach, New York.
Mr. McCarville, like most dealers, was aware of CarsDirect's national launch. Out of curiosity, he decided to test the system. He logged on and placed an order for a Ford Mustang Cobra V8. CarsDirect quoted him a price that was $1,500 under MSRP. That surprised Mr. McCarville, since Cobras are in short supply and dealers who have them can easily sell them right out of the showroom for full sticker or higher. But he decided to go along for the ride and placed his order.
That evening, Mr. McCarville got a phone call from a representative at CarsDirect. It should be noted that all responses from CarsDirect were prompt and professional. "Follow up was good," noted Mr. McCarville. Interestingly, all the contacts were by phone; there were no emails. CarsDirect couldn't find a Cobra in the color he had ordered, so Mr. McCarville agreed to accept some alternative colors.
The next day, Mr. McCarville received a phone call from CarsDirect telling him they had his car and needed a $1,000 deposit to hold the deal. After placing his deposit, Mr. McCarville was given the name of the selling dealer, whom he knew from his Ford contacts. When the selling dealer found out his customer was also a Ford dealer, he wanted to cancel the sale. Mr. McCarville didn't want to push the issue and the story essentially ends there, except for one interesting fact.
After Mr. McCarville had placed his deposit, the sales representative from CarsDirect revealed that the company had been unable to actually buy a Cobra at $1,500 under the sticker price. Mr. McCarville says the sales rep also told him that CarsDirect would make up the difference by delivering their own check to the selling dealer. Volume discounts indeed.
From Dealer's Edge Newsletter, 6/7/99. For a free copy of this issue, go to http//www.dealersedge.com/free_issues.shtml
Mike Bowers is Managing Editor of WD&S Publishing, Metuchen, New Jersey, producers of the industry publications Auto Retailing on the Web, Dealer's Edge, Warranty Dollars & Sense, Fixed Coverage, and The Parts Manager.