2008 round of automotive retail startups

It’s fall 2008 and there’s a new crop of automotive retail startups featuring …gasp… accurate pricing. Truecar, realcartips and pricehub recently launched. truecar shows a great, and good price for each car with easy to understand graphics for most if not all vehicles for sale in the US. Price hub and realcartips rely on consumer input; the data is scant for some models.

Other recent launches have a social slant. Vlane focuses on finding the right vehicle according to your lifestyle needs. It also features consumer ratings and reviews for community input when you are close to making a decision. The founder plans to eventually monetize it by…Pfff… generating leads. Driverside and repairpal are recent launches focusing on the ownership phase. Both are basically a lead source for service. Repair pal links to dealerships, driverside links you to other service providers.



Last year’s round of automotive startups focused on appealing to women. Askpatty founded by women auto executives certifies dealerships as female friendly. cartango lets women anonymously haggle /tango with dealers in a facebook like site dressed up like snow white. Carsdiva offers a ‘safe’ place to learn about cars. And Carfolks is a weird take on ‘hot or not’ and encourages me to not attempt this on my own. I’ll send in a man.




In 2007, Automotive retail accounted for 20% of all retail in the US. There are over 20,000 dealerships. These figures may be smaller in 2008, but the point is it is a huge market. It’s an incredibly crowded space with a few big players and a lot of small players picking up the scraps. Dealerships are generally loyal making it hard to break into that space and next to impossible to change the sales model. That’s why startups monetize by generating leads. The appearance of more service and repair focused startups is a sign of the times. Less people are buying new cars due to job insecurity and high gas costs. Truecar has the potential to disrupt the automotive retail industry. The timing is right for disruption.

These are anxious times for the automotive industry. Over production, high gas prices, poor product mix, the financial crisis and subsequent credit tightening, all add to slumping sales. The OEMs reported as much as 35% sales drops from last year’s figures. The financial crisis has tightened credit to the point where dealerships can’t make payroll and are being forced to declare bankruptcy turning the last year’s consolidation into an industry retraction.

After lagging behind every other industry in its sales processes, this could be the 'straw that breaks the camel’s back'. Consumers are fed up with the antiquated Orwellian sales processes. Saying they’re ready for a change is an understatement. They’re so ready they gloat over dealership’s demise.

Watch to see which dealerships and or OEMs approach startups to help them step into the 21st century. Envision a shopping cart behind truecar.com's accurate pricing with a ‘deliver to your home’ option and a checklist to help you through the final paperwork.

Stripping away the veil of mystery.

Probably the last holdout, automotive retail has managed to keep pricing a mystery. It’s a testament to the strength of NADA and the dealer brotherhood. But there’s this one guy, Scott Painter, who repeatedly disrupts the automotive retail industry.

His latest venture is Truecar.com. It’s his third attempt to break the traditional car buying model and make buying a car online as easy as buying anything else. It’s currently in Beta and open to anyone that requests access.




I found truecar.com from a techcrunch article after searching on ‘honest dealerships’. You can vote on whether you think it will thrive or fail

Pricing sites seem to be the latest rage for automotive sites. Here are a few pricing site from the techcrunch article

Pricehub
realcartips

What do you think would be truly disruptive to the automotive retail industry?

You don’t create a need, you exploit a need

De Beers , the diamond monopoly, latched onto a trend in declining marriages and exploited it in 2003. In 2000, 52% of all households were married down from 72% in 1972. This trend was an ugly reality for a diamond trading company whose product celebrated marriage and commitment. In 2003 they launched the right hand ring campaign. A campaign to capture the disposable income of the single woman as diamonds become as much a way to celebrate independence as the blissful state of a union.

What are the trends to exploit today?

The (automotive retail) Twilight Zone

Learning about the automotive retail industry and talking to dealers was like being in the Twilight Zone. It was like being stuck in a time loop where nothing ever progressed. A perpetual web 0.5. Gads, they aren’t even doing ecommerce. They think negotiation by email and fax is best in class or ‘allowing’ consumers to apply for credit is the same as buying online. Grikee, you can’t even get an accurate price online. How could you possibly trust a business that can’t even give you a price for their product?

This journey started back in December 2007. A friend showed me this incredible car buying prototype he’d created at shopnik.com. In January, my friends at Chrysler invited me to bid on their dealer sites. Fantastic, this could be worth millions. By February, Chrysler closed the bidding to a small group of vendors. I lost the chance to bid. One of my dealership principle friends challenged me to come up with an online revenue plan for him. OK, this could snowball. Start small and build.

Lots of things changed between January and March 2008. Gas prices started to soar and automotive sales to slip. Then Bear Sterns collapsed and was sold for the price of the building and the credit crisis started to roll. Dealerships became more cautious about spending money. By June, I abandoned the idea and decided o move on to something more fun.

The plan was to eventually take dealerships from web 0.5 to web 2.0. The first step was to implement the basics. Web 1.0 ecommerce with web 2.0 sharing and bookmarking. It was pretty basic. The goal was to increase dealer revenue, and reduce costs. The strategy was to make buying a car online as easy as buying any other product. The tactics included matching the site product availability with what was available through the dealer group, cross sell, up sell amongst products with an easy to use gallery that could be filtered and sorted according to a consumers needs. It implemented viral sharing and book marking tactics including a widget.

The ideal dealership was a mega dealer group with global reach. Penske would have been my favorite judging from the Morningstar profile. Autonation too. The implementation was designed to appeal to women because 80% of purchases are influenced by women. Women love to shop online.

Women have proved that highly personalized expensive products sell very well online. People with money tend to be time starved educated and to know what they want. For those reasons a couple of online retail pure-plays are shaking up the fashion and jewelry industries.

Like automotive retail, fashion and jewelry are both very traditional, technophobic industries with tight control on their distribution channels. In both cases, industry insiders and investors did not believe these products could be successfully sold online. The argument was that fashion and jewelry are too personal a product and too expensive. The leading brands believed their brand would be compromised online. The experience, the luxury and exclusivity could not be reproduced online. Two pure-plays proved this wrong and now lead these industries in the move online. In fact the pure-plays are admired and hated / feared.

In 1999, when investors were throwing money at any crazy online idea no matter how weak the business plan, they said ‘Fashion, Online, NO’. One brave entrepreneur, Natalie Massenett , went ahead and founded Net-a-porter anyway. The rest is history, in 2007 net-a-porter’s net revenues exceeded £37M representing nearly 10 years of double digit growth. Sales are global. The success of Net-A-Porter has pressured traditional brands like Gucci, Armani to move online. Read more in the Financial times

Similarly, the jewelry industry has been shaken up by a pure-play called Blue Nile.com. Blue Nile’s 2007 revenues were $319 m. They sell more engagement rings than Tiffanies. Their largest single sale was $1.2m (MILLION) in June of 2007. They have shaken the jewelry industry in the US and are now selling globally. Read more in the economist

What’s with automotive?

Doesn’t the argument against selling cars online sound a lot like the arguments made in 1999 against selling fashion and jewelry online? You have to try the product before buying it. It’s a complicated product. It’s expensive. You can’t return it once you buy it. Yeah, all true. Buying online won’t be for everyone. But consider. Those that have to try it first can test a car anytime at any dealership. This is no different than what people do today before buying at a dealership. You rarely test drive the actual car you buy. This is analogous to the shopping trend toward browsing at the mall and buying online. Yes cars are a complicated product, but with the amount of information online most consumers know more about the product when they walk into a dealership than the sales people. Yes, a car is expensive, so is a diamond and Haute Couture. It’s true, you can’t return the car after you drive it off the lot. Is it any different after you’ve wasted half your day at a dealership trying to buy your $30k - $80k car? No! And why can’t you return a car? There’s no law, it’s a policy. In fact there is a law that you can return a car if it’s faulty. It’s called the ‘lemon law’.

The only thing holding the automotive retail industry back from selling cars online is the power of NADA, and the dealership brotherhood. They tightly control the distribution channel and lock out anyone that tries to change things. You do see cracks in the strangle hold. Smart took preorders for Smart fortwo in 2007 and sold out. They’re sold out through 2009 or 2010. Smart cars that listed at $16,000 resold on ebay and at Barrett Jackson for as much as $31,000. Tesla Motors is allowing preorders of their new electric sports car. For a $5000 down payment you can reserve your $100,000 Tesla. Zap, another electric car manufacturer, has a standard shopping cart. There are a few of renegade dealerships experimenting with selling online. They’re willing to ship anywhere.

While the rest of the world moves on, automotive retail is stuck in an endless time loop. As I stand at a cross road in my career, I choose to continue to learn and grow. I’m going to sell really nice handbags using mass customization business model. It’s a dream.

Go One test drive

Today we test drove a Go One velomobile. You won't find one in a bike shop. For a test drive visit go-one.us site, find an owner nearby. Call and schedule a test drive. The owner we visited, Dave, is a bike enthusiast. In addition to the Go-One, he let us test drive his Rann long wheel base recumbent bike, ,and electric powered upright road bike. He offer to let us try his Fuji carbon fiber racing bike but we didn’t want to impose too much. Dave was very knowledgeable, in his opinion, the Go One is the only well built machine available. The only well engineered machine. Every one of Dave’s bikes was a blast to ride. Each one was a unique experience.

The go-one is for the bike enthusiast. It's expensive, around $10,000 depending on the exchange rate, requires some athleticism and isn't practical for the most US streets.

Getting in and out of the Go-one , or any velomobile, requires coordination and some upper body strength. You have to step over the side and stand on the seat. Using the sides to lift your weight, step into the foot openings and lower yourself into the seat. Take care not to step on the casing, it's thin and may break. To get out requires even more upper body strength to lift yourself up as you step onto the seat, then step over the side as the bike rolls downhill.

Once inside, it's comfortable, there's enough foot room and you can put your feet in the foot holes or on the peddles. For someone with big feet it might be hard to peddle. Certainly hard to step into the flintstone holes. There's good visibility out the front through the casing. You can easily see over the sides. The bike comes with a detachable cover for riding in bad weather or to maximize aerodynamics. With the cover on it's a little claustrophobic. Opening the vent windows helps. The cover would be nice in cold weather but you'd cook in the hot summer months.

It took a little practice to get used to the steering. Upright, the 'tiller' you see works like a boat tiller. The 'tiller' can pulled close and used like a steering wheel. At first I over steered. The steering bar is so small it doesn't take much movement to turn. I also had to stretch to reach the peddles and noticed I'd turn with each stroke. The bike is set for someone 5' 10", I'm 5' 6". I had to stretch. Once I realized what I was doing I relaxed, pushed the bar away a little and I was used to the steering. It almost steers itself. It has a wide turn radius. It felt like the bike would role if you took corners too fast. You can't lean because of the 3 wheels.

We didn’t think we’d be safe on the streets. Dave felt the same way. We’ve found that drivers don’t see cyclists. Even when they do, they’ll sometimes pass within 6 inches of a cyclists. They must not realize how difficult it is to ride in a straight line when you’re terrified of being hit by a car passing you at 45 MPH just six inches away from you. The gutter of most roads is cluttered with debris, over hanging branches and with some of the worst pot holes. You’d constantly be looking over your shoulder to brace for the hit.

While fun, the test drive kind of squashed the idea of building a velomobile for the US market. Unless the US builds bike friendly pathways, the go-one is a great toy for a bike enthusiast.

Bugatti Veyron vs a jet

While I'm on this quest to develop a velomobile for the US market... I'd design the body after the Bugatti Veyron. A Velo Veyron

If I had a million dollars, I'd buy me some toys

Wooow! that looks like fun!


Look at Jeremy Clarkson get in the back seat! LOL