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Online firms win sales on price

In May 2000 Sir Richard Branson claimed that Virgin Cars would sell 24,000 new cars worth £250m in its first 18 months. The time is almost up, but the much-lauded online car retailer has sold only 5,000 cars.

In many eyes, this failure demonstrates the online motor retailing explosion has proved to be a damp squib. Virgin Cars has fallen short of target, but is trading profitably and growing steadily. Similar successes abound. The hysteria of the 'dotcom revolution' has subsided, but online rivals are making steady inroads into traditional motor retailing.

Progress is rapid. One year ago, the Direct Line car sales operation taking 90 days to sell 1,000 cars. Now sales are running at three times the pace, with 1,000 customers per month. In the last month it has had its most successful month ever, selling more than £10m of cars at the rate of one every 45 minutes. The health of the business is evident from plans to recruit more than 100 extra staff.

By 2005 the company expects 15% of car sales will come from the internet. Its optimism is borne out by the Europe's online retail profits report from Forrester Research, which suggests £220m worth of cars will be sold online to UK customers by the end of the year. The consultancy forecasts the online car market will grow by 620% by 2006.

Lower profile online retailers are achieving similar success. Following sales of 7,000 cars last year via, proprietor Simon Empson said: “We are on track to supply in excess of 12,000 new cars in 2001.” The company is now extending its online car buying service to provide access to left-hand drive cars in four EU and five Central European countries. Using subsidiary offices in Holland and Hungary, it has set up a network of logistics firms and customs agents in each country to handle the processes of delivery, taxation and registration.

By the end of 2001 expects to have sold 4,000-5,000 cars, according to head of marketing Andy Nowell. “The key areas of growth for us are private car buyers and cash-for-car employees who are making the conscious decision to come out of company car schemes,” he said. This has been assisted by the recent introduction of PCPs in conjunction with First National Motor Finance and a variety of vehicle disposal options.

“Many car buyers used to use the internet primarily as a research tool,” said Mr Nowell. “Now confidence in the internet as a medium to buy high ticket items continues to grow. More and more people are using sites like ours to complete the entire process.

“In the next few years we will see the emergence of a whole new breed of automotive retailers which will include supermarkets, insurance companies, finance houses and even high street retailers,” Mr Nowell said. As a leading automotive fulfilment and retailing company, is working towards high profile partnerships that will enable these new players to enter the market.

Much of the growth is driven by lower profile companies offering unofficially imported cars at prices that undercut franchised dealers.

London-based Eurocar Consultants expects to increase sales by 40% this year to a total of 800 units. Sales manager Richard Hall said: “Online sales of imported cars will be an area of massive growth as the market polarises more in the next months.”

Trade sales are the area of strongest growth for the company. “We are selling more and more cars to the trade,” said Mr Hall. “The main strengths of alternative sales channels like ourselves is that we can change and mould our sales pitch and prices whenever we see fit. We are not tied to any one source and can cut corners and do many things that main dealers are not yet allowed to do. If a market dries up we simply change source and move on.”

Tony Butterfield, internet strategist from Showroom4cars. com, said the company had sold 800 new cars by the end of August and was on track to reach 1,300 by the end of 2001. This represented an increase of almost 50% over last year. The company says it will have recouped its initial start-up investment by March.

Mr Butterfield said: “Private consumers are showing strong growth, but has also built market share as a source for traditional car supermarket trade supplies. In addition, the brand is developing its B2B fulfilment relationships both within and outside the on-line arena, for example

“A relatively small percentage place their orders directly online. However, the vast majority of our customers continue to use the internet to progress their quotes and track their orders to completion, augmented by a small degree of phone contact. Customers are embracing alternative channels as they become more familiar with the internet as an information and sales resource.

“The pure online brands that have already survived and are set to continue into 2002 are here to stay. Growth will be supplemented by forging brand affinities with car-associated brands. I envisage we will see other bricks and mortar businesses such as finance houses selling direct, as a ruling on Block Exemption comes closer.”

Scores of other companies are capitalising on demand for cheaper imports. Martin Waugh, partner in Inverness-based importer MacGregor and MacAndrew, said: “Online car sales through www.yournewcar4less. com have doubled this year, but the internet should simply be seen as a sales tool. We get 10 leads a day via the internet and 20 by phone – and our conversion rate for phone leads is four times higher.”

Ian Hodgson, owner of Blackburn-based Hodgsons Imports (, is on track to sell 500 cars this year. Half of sales come through which lists pre-ordered stock. “We work in conjunction with established UK importers and have European dealers holding stock now specially for the cancelled orders site,” he said.

“Cars will be bought online in future just the same as ordering your shopping from Tesco.”

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