Money Matters, Simplified.
GM and eBay join hands to sell new vehicles online
by Jamie Anderson - August 11, 2009 - comments
Fresh out of bankruptcy, Detroit-based GM has tied up with eBay to sell new vehicles online, in a program that is being pegged as a bigger showroom on the Internet
California, August 11: With an aim to provide a new platform for buyers, General Motor Company LLC will launch a pilot program in collaboration with eBay Inc. (NASDAQ: EBAY), the most-visited U.S. e-commerce Web site.
The venture will allow customers to purchase cars and trucks online through EBay. To begin with, the project has been started by roping in some 225 dealers in California.
"Dealers who are participating see this as a great mechanism to get their products and information out to people where they're doing initial shopping and looking, which is on the Internet," said Dave Barthmuss, western regional spokesman for GM.
The tie up will allow consumers to place online bids for new vehicles on these dealerships. The eBay's normal "Buy It Now" and "Best Offer" formats would be available under the program.
Scheduled to begin on August 11, the program will run through Sept 8. Chevrolet, Buick, GMC and Pontiac brands will be up for grabs at gm.ebay.com during this period.
Substitute to dealer network
As a part of the GM restructuring plan, by the year 2010, the company will scale down its dealer network by as much as 42 percent to 3,600.
The new avenue would not only provide an opportunity to shore up the dwindling sales but also test the waters if the ‘online world’ proves to be a good distribution channel for a product like automobiles.
“Exploring new online distribution alternatives is a good idea as GM downsizes its brick-and-mortar distribution system,” said Laura Martin, a Los Angeles-based analyst at Soleil Securities Group Inc.
GM is already using eBay for its certified pre-owned cars. Moreover, thousands of franchisees and independent dealers use eBay as an additional sales channel. However, the present arrangement with GM is EBay’s first involving new vehicles.
Research suggests program should succeed
The impetus to go ahead with the tie up came from the revelation of a latest report from J.D. Power & Associates. Their study revealed that in 2008, three quarters of the new-vehicle buyers searched the internet during their decision making process of buying cars. In 2007, 70 percent of the consumers had used the internet for such a research.
The year 2008 also saw the largest year-over-year increase in online automotive shopping since 2001, revealed the J.D. Power study.
With increased number of people relying on Internet to take decisions to buy cars, the alliance should succeed.
“There’s clearly an appetite on behalf of consumers to be able to negotiate price and purchase vehicles online,” EBay Motors Vice President Rob Chesney said.