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JULY 28, 2003
Porsches? Aisle 7 Virgin Cars' department store approach is rattling dealers British Netizens know where to go when they want to buy an automobile: Virgin Cars, a joint venture of billionaire entrepreneur Richard Branson and auto-industry consultant Ian Lancaster. Despite initial resistance from auto makers, who didn't want their products hawked at a discount, Virgin has sold 12,000 cars -- everything from Volkswagens to Porsches -- since the site was launched in 2000. That's just the start of the shakeup CEO Lancaster envisions. In May, Virgin Cars launched the world's first auto department store in Manchester, offering discounts of as much as 30% and a no-haggling guarantee. A BMW 318i, Virgin's hottest seller, goes for $33,760, 12% off list. The 2,800-square-meter emporium houses 25 marques under one roof, making comparison shopping -- normally a tedious process -- a snap. "The car industry was not delivering what consumers wanted," says Lancaster, who founded an auto research outfit called TUP Group in 1990, and built it into a globe-spanning consultancy. Virgin Car's sales staff are trained to be impartial, highlighting strengths and shortcomings based on authoritative consumer reports. Salespeople are rewarded for the quality of their service, not what models they sell. "Here you see the blueprint for the future of vehicle buying," says Branson. With some 700 cars in stock, Manchester is the first of 12 enormous car emporiums Virgin plans to set up in Britain over the next five to seven years. The Manchester store is off to a strong start: Bargain-hunting consumers have snapped up 150 cars in the first six weeks of operation. Virgin Cars' revenues are slated to jump 50%, to $136 million, this year. By 2010, Lancaster aims to be selling between 40,000 to 60,000 autos a year. Whoa. What about all those entrenched traditional dealerships in Europe? They are bracing for a change: The European Union's antitrust commission has scrapped rules that gave the carmakers huge clout in keeping dealers from selling competing brands. Auto makers have a one year transition period to comply, but upstarts such as Virgin Cars are free to play by the new rules. "We'll see a revolution in the distribution market for cars," says Thomas C. Aney, auto analyst at Dresdner, Kleinwort Wasserstein in Frankfurt. One new player that could join Virgin in making a big impact is Germany's Quelle, a catalog retailer with a nationwide chain of shops. In June, $4.7 billion Quelle launched an online shop for new and never-driven cars, including 10 models of Ford, Volkswagen, and Nissan, and the Mercedes Smart, at discounts of up to 22% over list price. Customers can pick up the autos themselves or have them delivered to their front door for an extra $194. As a marketing ploy, Quelle auctioned 50 Smart cars for $2,248, nearly a quarter of the list price. More than 5.5 million people logged on to take part in the bidding. Beats an afternoon of haggling with your local dealer.  By Gail Edmondson in Paris
BW MALL
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