How the New AutomoBids System Affects the Car Buying Experience

[yhurg]

AutomoBids is closing a $1.2 million round of seed funding and going live with an online service that allows car buyers to haggle over price without ever seeing a sales agent. This is not necessarily a new concept as it has been talked about for a few years now, but it is the first system of its kind that I know of.

The way it works is dealers load their inventory into the system and set a floor price for each vehicle. Essentially, the dealers are creating a branded virtual sales lot on the AutomoBids system. They also have the ability to create vehicle-specific ads with search engine marketing campaigns. Consumers register their credit cards with the system and then can search for vehicles in the sales lots. They can bid up to three times on a vehicle and up to 10 vehicles at a time. The bidder can then lock in a price for up to seven days by exceeding the dealer’s floor price which is not disclosed to the bidder.

Although there is more meat to the equation, this new buying process has the potential to change the way autos are shopped and purchased, just like eBay Autos has done. This of course could take years to become a part of the consumer culture, but from what see it should have a lasting impact. This will not replace the sales rep, but it will force the sales rep to adapt to the new method by finding alternate ways to add unique value to the consumers’ online buying experience.

Source Article (http://www.bizjournals.com/washington/stories/2006/10/16/story16.html)
Original Blog Entry on BlogPro Automotive (http://blogproautomo.blogspot.com/2006/11/how-new-automobids-system-affects-car.html)

[friendinthebusiness]

Most consumers will claim to have found a similar car for a lower price. That is the nature of haggling. The most important part of the buying equation IS NOT PRICE. Haggling over price is a formality the consumer uses to feel out the honesty of the dealership. A consumer will never be legally commited to a price or a bid. There is not a Court in the world who will force a consumer to sign papers for a car they don't want after showing up to drive it. A credit card for charges gives the consumer 60 days to change their minds. Hence the reason most Dealers won't take a charge card for above a couple grand.

The Retail auction concept WILL, if properly executed, get the dealer more APPOINTMENTS. Keep in mind ALL RETAIL COMMUNICATIONS WITH A CONSUMER, BE IT A WEB AUCTION, WEB SITE BROWSING, THE YELLOW PAGES WITH PHONE CALL, THEY SHOULD ALL HAVE THE SAME GOAL: GET THE SHOPPER ON YOUR LOT TO TAKE A TEST DRIVE!!!!!!

THE TEST DRIVE IS THE PRIMARY EMOTIONAL HOOK FOR THE DECISION TO PURCHASE, not the "price". Price is that imaginary number at the top of a long list of calculations. If it were price, models wouldn't have $10k spreads between base and loaded, who would pay the extra price? Of course, 10% of shoppers will agree with that last statement and buy the cheapest equipment group of the model they have chosen, just as another 10% will buy only the best. The vast 80% in the middle is the average shopper.

A consumer may "WIN" the bid, but when they show up to drive it, "uh-oh, what is that ticking sound?"; "Is that wind noise normal?" "Will the tires will be replaced for that price too?"

Invariably, once the test drive is completed, a new round of haggling, totally unrelated to the original "I'm the highest bidder!" price will kick off. Over as little as a scratched bumper to as much as the car isn't what they expected at all.

Lesson: Smart dealers won't commit to a single, in stone price in any format if the consumer hasn't test drove the car. Smart Dealers hide their trump card. If the shopper has gotten pre-testdrive prices from every store but you, then of all the dealers they have talked to, their perception is that your store is the unkown variable. Play on that and GET THE APPOINTMENT, be it from a web auction, a radio add, phone up, however: get the appt, TEST DRIVE THE CAR, CLOSE THE DEAL.

Good Luck.

[yhurg]

Actually, with this bid system, there is no end time to the auction. The consumer can bid up to 3 times so he can make his first bid and then go to the dealership and test drive the vehicle all he wants before making his second bid. He can talk with a salesman and the two can be cordial knowing that the consumer is bidding on this car on AutomoBids.

For instance, let's say his first bid is $23,000 which meets the floor price of $21,500 (undisclosed to him). He knows when he goes to test drive and meet a salesman that he will not be paying more $23k. While there he sees that the sticker price is $23,500. He can lock in on the $23k price he bid and already save $500.

Now let's say he goes back online and bids $19,500. The system tells him he has not met the floor price so now he has one more bid opportunity knowing that the floor price is between $19,500 and $23,000. So long as his third and final bid exceeds the $21,500 floor price he will have the opportunity to lock in on his final bid price, say he bid $22k. The system charges his card $150 hold which is appplied towards the purchase and the dealer is obligated to sell the car at the locked in price.

The dealer is satisfied because he got his floor price and the consumer is happy because he paid $1500 less than he would have if he didn't have the system.

[friendinthebusiness]

I would happily invest in the system if it generated more traffic to the showroom. Keep in mind cars are not tvs or computers or digital cameras. Online bidding generates alot of floor traffic (ask any dealer who has tried it) but corportate strategist tend to get wrapped up in "new" ways to get a price on a car, as per my prior posts, "price" isn't what sells cars. It is a guide to assure the buyer the vehicle is in thier range, but it is NOT the deciding factor. The test drive is.

If a potential bidder does come to test drive and then leaves without buying the car, I doubt he will go home and bid on it again, especially if there is no end to the time allowed to bid (per your previous post.)

If he wanted it after test driving, the dealer would have sold it to him. Dealers make nothing when a shopper leaves without buying.

Also, I can't remeber one of the thousand+ transactions I have been involved with where I was able to charge a $150 bucks to allow the buyer to make an offer on the car!

If I were shopping, why would I pay to bid on a car? I can just find the car on the web sight, see what the current bid is, drive to the showroom, test drive it, offer $100 more than the current bid (with out having paid $150) and haggle from there. And I would NEVER EVEN MENTION I SAW IT ON AUCTION SIGHT. How will that make the sight money?

The best value for the sight-investor is going to be the links to credit pre-approval sights, fast quote insurance, etc... that the auction sight can gather royalties from.

Web sights are commercials friends, nothing else, hopefully this auction sight will realize that instead of trying to charge folks 150 bucks to shop for a car (when hundreds of other sights charge NOTHING). Didn't we learn that from the first dotcom BUST.

The buyer will still drive the car before buying it. That is when the true negotiations start. But the sight did its JOB. It got the buyer to the dealer's showroom into the hands of a (hopefully) qualified and honest sales rep.

I'm not punching holes to be mean, but to allow the auction sight developers an oppurtinity to recognize the holes and fill them. I base my knowledge not on the 15 or 20 cars I personally have bought and the feelings I had while buying them, but on the 1000+ I have sold while in retail. (My current position with the 3rd largest auction in the country sells 2500+ per week to dealers only, but actually, their behavior often mirrors retail consumers)

I hope the sight does well

Jeff.