Online car sellers have taken two approaches to selling on the Internet. Some sites let consumers buy a car directly from their computer. Other, "lead generator" sites pass on customer inquiries to dealers and offer Internet training to sales staff.

Now these business models are starting to converge - just one example of how e-commerce and bricks-and-mortar retailing are increasingly melding. Monday, Autobytel.com Inc., one of the biggest of the lead generators, is expected to announce that the company will offer a "click and buy" option so consumers can purchase a car immediately at a fixed price. That's a dramatic shift from Autobytel's old model, which left it up to dealers to respond with an e-mail price quote and then haggle on the showroom floor.

"We've clearly been influenced by what goes on in the market," says Autobytel Chief ExecutiveMark Lorimer.

Autobytel's move is a response to direct-selling rivals such as CarsDirect.com and CarOrder.com, owned by Texas-based Trilogy Inc., and new entrant Greenlight.com, in which Amazon.com Inc. acquired a 5% stake on Friday. Direct sellers have won over a significant number of consumers by offering near-instantaneous price quotes online and allowing consumers the option of bypassing dealer sales personnel.

Direct-sales option
Meanwhile, Microsoft Corp.'s CarPoint will have a direct-sales option available on its site this year, says Lindsay Sparks, chief executive of the unit that got its start as a research tool and referral service. "We've recognized for a long time that direct was a natural evolution," he says. "But we don't believe the current models work, but that a hybrid that includes the dealers is where it's headed."

CarsDirect is teaming up with Cars.com, a lead-generator site owned by Classified Ventures Inc., a business launched by several newspaper companies. Under asix-month deal to test the idea, CarsDirect will offer its direct-sales service to Cars.com visitors who don't want to use a dealer.

CarsDirect, which is a start-up of idealab! and funded in part by Dell Computer Corp. founder Michael Dell's venture-capital operation, is also expected to announce today that it has signed a deal with the Internet portal Earthlink. That deal will have CarsDirect featured as Earthlink's auto-buying site of choice.

All this action is heating up the biggest battle under way on the Web. With US auto sales totaling $350 billion last year, a company that can grab a fraction of that market could be a colossus. For now, the fraction is small. Despite the dot-coms' claim that they would rapidly revolutionize the business of car dealers, only 2.7 per cent of new vehicles were actually sold via the Net in 1999, according to JD Power & Associates.

And all of those sales ultimately went through a traditional dealer no matter how fancy a facade the e-dealers tried to throw up. Even acompany like CarsDirect, which delivers cars to a customer's driveway, buys that car at a dealer.

While online car sales are expected to almost double to 5% of total sales this year, JD Power estimates, there are big hurdles ahead. Lobbying by car dealers has led key states like Texas to tighten franchise laws to further restrict efforts to sell cars without involving traditional dealers. CarsDirect, CarOrder and Autobytel's new direct model aren' allowed to sell cars in Texas.

`A lot of buzz'
"There is a lot of buzz about direct," says Sam Hedgepeth, president and chief operating officer of lead generator Autoweb.com Inc. Autoweb has a direct-sales pilot operating to figure out what approach works. The big question, Hedgepeth says, is "how much do you hide the dealer."

That's a prickly question to answer, especially since lead generators originally based their businesses on dealers' ignorance of the Internet. Early on, many dealers were loath to do any more than take e-mail from consumers andput their salespeople through some Internet-sales training. But some large dealer groups are now fighting back with their own versions of online direct sales.

Greenlight.com, one of the newest auto-buying sites, was created by Asbury Automotive, a big, closely held auto group in Pennsylvania, and Kleiner Perkins Caufield & Byers, the powerful Silicon Valley venture-capital firm.In a test called Project Everest - the name reflects the scale of trying to change a business with 22,000 retail showrooms - Greenlight decided against the referral model in favor of direct sales.

Join the discussion: Industries such as bookselling, music, and financial services have been revved up by the Internet. Will the auto industry be next? How do you see the Net changing the way vehicles are built and sold?Greenlight will get its cars through Asbury's dealers and other dealers with which it's signing exclusive deals. The San Mateo, Calif.-based online car company also expects to get a big jump on the competition from itsassociation with Amazon. Greenlight is paying Amazon $82.5 million over five years to promote it, and Amazon has warrants to increase its stock holding to as much as 30% over five years.

Todd Collins, the company's chief executive, says the owners decided Greenlight had to be different from broker sites, such as CarsDirect. A broker risks losses if it can't find a dealer to sell a car for less than the price at which it sold the vehicle online. Greenlight is nailing down prices first with dealers so "we know whether we're making money or not," Collins says.

Autobytel's new direct-sales plan illustrates both the promise and the complexity of weaving together e-commerce and traditional car dealers. Autobytel won't buy cars from dealers and resell them to consumers.

(The Asian Wall Street Journal)