Tough times for online car sales
By : Magdalena Wierzchowska
Online or on the line: Internet car sales face an uphill struggle.
Buying cars online has yet to prove a successful business around Europe, and Poland's fledgling online car sellers are having to battle for market share with varying degrees of success.
In the European Union (EU), many auto related Web sites have started to specialize in services other than sales, and many analysts are saying that sites in Poland will have to follow suit if they're to survive.
In the EU, so few people are buying cars online that Web sites have shifted to providing general information on cars, rather than trying to sell directly, said Wojciech Drzewiecki, head of Samar, an automotive research company. He added that Poland will have to follow the same route.
To date, 3% of Poland's 800 e-commerce sites sell cars or car parts, according to a report by Internet market research company I-Metria. "However, they primarily sell automotive parts as opposed to cars," said Christopher Modzelewski, president of the company.
The problem with buying cars online is that nobody wants to make a blind purchase, Drzewiecki said. "A car is the second biggest purchase a household can make," he said. "Buyers want to touch it. As a result, auto Web pages will be mainly a source of information."
But some traders disagree and are still bullish about the future of car sales online, although they admit these are still early days. Focusing only on trading over the Internet is not really possible in Poland at the moment, said Daniel Adamiuk, marketing and sales director at Automarket.pl, a portal selling secondhand cars. He said Automarket.pl entered the market because of the huge potential sales in used cars.
Another online car trader, Mojeauto.pl, said it already has excellent results from online sales. PR Manager Dorota Murzynska said that between May of last year and Dec. 31, the company sold more than 400 cars. "It's a grand result," she said. "In our business plan for 2000 we projected we would sell 100."
Mojeauto.pl generates profit by trading directly with the car dealer, while for the purchaser the transaction is free of charge, Murzynska said. The Web page has agreements with 55 dealers around Poland. Although it would be more profitable for the company to deal with auto manufacturers, which would improve the range of cars on offer, the Web site has only one agreement, with Fiat Auto Polska.
But car makers want to keep Internet trading to themselves by setting up sites and selling their own cars directly to customers, Drzewiecki said. Some companies, such as U.S. car giant General Motors, have already started doing this. Last week, it announced that together with its dealers it is setting up an Internet site featuring GM cars as well as other manufacturers' models.
Web sites by car manufacturers generally offer information about what cars are available, where, and at what price, the I-Metria report said. A company such as Trader.pl is only a mediator between two parties that want to sell used cars, it said. Meanwhile, Mojeauto.pl uses its site as a channel to sell products directly from car dealers to customers. The research company also noted that it could take some time for profits to roll in for most companies as only 1% of Poles shop online.
Auto sites said they make money from car dealers' monthly fees, on provisions from single transactions paid by the seller and on banner advertising. Trader.pl also earns money from ads in Autobiznes and Autobit, papers the company publishes. Although advertising is crucial for Internet sites, nobody from the industry would reveal how much revenue they generate from ads.
Analysts said they still couldn't be sure if the falling sales of new cars would kill off or rescue automotive sites. Last year sales in the auto industry fell by more than 25% compared to 1999. But it was a fall that actually helped online companies such as Mojeauto.pl, Murzynska said. "Car dealers began looking for new methods of distribution," she said. Murzynska said the company is not worried about preliminary figures for January, which show a further 30% sales drop compared to last year. "Although the sales of new cars decreased, the sales of secondhand cars increased," Murzynska said. "So the number of cars traded has remained the same."
However, Samar's Drzewiecki predicted that only two to three Polish auto sites would succeed. He said that Samar will be a direct competitor to the existing sites in two or three months' time when it launches its redesigned Web pages containing general vehicle information. The company is already a strong brand as a major source of information on the automotive market in Poland for both producers and the media. Samar also has the advantage that it isn't dependent on profit from the Internet. Drzewiecki said the company makes money by selling information to auto producers. "It may be a powerful weapon against the existing Web pages because they live on the Internet and have to earn money. We draw profit from something else," Drzewiecki said.
