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At that point, Baird went online and checked out Greenlight.com. Three days later, he picked up his wife's birthday present for $40,200. At $6,000 less than the lowest quote he had received from a dealer, the price left Baird sold on Greenlight. "I negotiate things all the time," he says. "I couldn't do what they did in the time they did." Baird is already planning to buy his next car, a Jaguar, from the company. SMOOTH RIDE. Check out online auto buying's latest business model. This new and improved version of clicks-and-mortar combines the convenience of the Web and the knowhow of traditional dealerships. Unlike older sites such as AutoWeb.com and autobytel.com, which mainly refer customers to local dealers for a set fee, Greenlight tracks down a specific car for a customer, negotiates a price, offers links to national lenders like Chase Manhattan Bank, and then lets the customer either pick up the car at a local dealership or have it delivered. Prices are relatively low because Greenlight charges buyers less than the usual $800 to $900 in sales commission, plus a fee of about $100 that it pays the dealer for delivering the car. Greenlight, in Livermore, Calif., offers consumers a relatively smooth ride largely because it's working with dealers, not competing against them. Asbury Automotive Group, a private national dealership, was an early investor in the company, along with venture-capital firm Kleiner Perkins Caufield & Byers. Of Greenlight's 2,000 dealers in 30 metropolitan areas, 800 own equity in the company, though the company won't disclose the amount. These dealers indirectly share in Greenlight's sales commission, save money on advertising, and get an almost-guaranteed sale with little work on their part. "Greenlight came right out from the starting blocks with their statement they were going to work directly with dealers," says Baba Shetty, a senior analyst at Forrester Research. "THE RIGHT BLEND." The strategy has caught on with big-wheel investors like Kleiner Perkins and online retailer Amazon.com. The venture-capital firm chipped in for a second round of financing that raised $39 million in August. Amazon bought a 5% stake in Greenlight for an undisclosed amount in January, and Greenlight will pay the online retailer $15 million over two years to be Amazon's exclusive new-car partner. The Greenlight link appeared on Amazon's site in late August. "It's the right blend of revolutionizing the front end of the business and leveraging the back-end dealer network," says Jeff Bezos, Amazon's CEO. Greenlight investors hope its strategy will give the company the horsepower to shoot ahead of the competition and grab a share of the rapidly growing online market for new auto sales. Although online sales currently account for only $400 million of the $350 billion new-car market in 2000, Forrester Research expects the figure to climb to $16.6 billion by 2004. "BACK OFF." The pacts with dealers help Greenlight fend off state regulators and carmakers alike. Since most states require dealers to be licensed, online auto sellers have had to either pass sales to local dealerships or buy the dealers themselves. Both options have posed difficulties: carOrder.com, based in Austin, Tex., closed its online retail operations in August after state regulators thwarted its attempts to purchase dealerships. The Big Three auto makers, which maintain close connections with dealers that sell only their cars, are starting to fight back. Ford and GM recently announced they were launching online direct-sales divisions. And they have asked their dealerships not to sell through Los Angeles-based CarsDirect, which started up in May, 1999. (CarsDirect counts only 120 of its 2,500 associate dealers as equity investors.) But that tactic won't work with Greenlight. "The dealer partners will go to the manufacturer and say these guys are on our side, so back off," says Forrester's Shetty. "This is where [Greenlight's] street smarts come in." Founded in August, 1999, by independent investor Todd Collins, Greenlight is a relative latecomer to the field: Its nationwide rollout in April followed CarsDirect's by nearly a year. Hits on Greenlight's Web site number only 153,000 a month, compared with 1.4 million for autobytel and 952,000 for CarsDirect, according to Media Metrix. "POINTS OF PAIN." Collins has lured auto executives to help Greenlight grab a larger piece of the developing market. In April, he hired Joel Manby, former CEO of GM's Saab Cars USA Inc., to head up Greenlight. In August, Mark O'Neil, former head of used-car retailer Carmax Inc., joined as president. Collins is chief strategy officer. These industry pros know what a hassle buying a car can be. So they're trying to drive traffic to their site by promising to ease what Manby calls "the four points of pain" in the shopping process: haggling over price, financing, trading, and accessories. About the only work left for the buyer is choosing a color and deciding between a 6- or 12-CD player. By selling direct, Greenlight is bucking the trend in online car sales. At autobytel in Irvine, Calif., referrals to dealerships still account for 95% of sales, even though the company has offered direct selling since the spring, says CEO Mark Lorimer. That's fine by him, since he believes direct sales are comparatively time-consuming and expensive ways for autobytel to generate revenue, whereas referrals leave the haggling to the dealer and the potential buyer. But Greenlight has a different philosophy. "It took us three hours to sell our first car through Amazon after the tab went up," Manby says. Meanwhile, when buying direct through Greenlight, the customer merely picks up the car at a nearby dealership or a fleet attendant delivers it. An Amazon spokesman says the online retailer is pleased with the amount of car traffic Greenlight has generated to date but would not elaborate. Manby and his colleagues hope the link to 23 million online shoppers will shift Greenlight into high gear in record time. Young is a freelance writer based in Palo Alto, Calif. |
