Upstart online car buying service Greenlight.com is betting the road more traveled--the road to Amazon.com--will generate the traffic it needs to thrive in a difficult category. Now Greenlight needs to avoid crashing like some of Amazon's other allies.
Greenlight was hammering out a co-marketing plan with its new partner. The two announced their deal Aug. 23 in which Greenlight will be Amazon's exclusive new car-buying service, for which Greenlight will pay Amazon $15.25 million over two years. That agreement replaces a deal announced in January--before the dot-com stock slide--in which Greenlight would pay Amazon $82.5 million over five years. Amazon has a 5% stake in Greenlight.
'HUGE MARKETING PLOY'
Access to Amazon's 23 million users "is a huge marketing ploy for us," said Joel Manby, president-CEO of Greenlight.
To be sure, alliances with heavily trafficked Amazon are no guarantee of success, as the August bankruptcy of Amazon-backed furniture seller Living.com shows.
Greenlight, which went live in western markets in November, expects to be in all 50 states with some 2,300 member dealers by yearend, up from 27 states with 1,500 dealers now. The expansion comes after competitor carOrder.com pulled the plug on its Web site in mid-August.
Greenlight is readying its first "holistic brand campaign," set to launch this fall, said Lisa Gevelber, brand marketing director. The Web marketer will break a regional newspaper and radio push from Gillespie, Lawrenceville, N.J., which is also creating postcards for direct mail. Greenlight said it dropped a previously planned national TV campaign to save money. The tag is "Car buying in a whole new light." The campaign will feature customer testimonials about the online service.
Mr. Manby differentiates Greenlight because the site helps car buyers solve their "pain points," such as haggling to get the "right price." The online marketer works with high-volume dealers with high customer-satisfaction scores. "Ninety-eight percent of our customers would refer us to friends," Mr. Manby said.
He declined to discuss unit sales volume or ad spending of the private company, which won $39 million in additional financing from investors last month.
Wes Brown, an analyst with market researcher Nextrend, said his concern with Greenlight and other online car-buying services is auto manufacturers and their dealers could put them out of business by improving customer service. But there's little incentive to do that while car sales are still hot.
Ford Motor Co. and General Motors recently announced plans for factory-backed sites for their dealers. While plans are in the early stages, it could threaten independent car sites.
Chris Denove, a director at consultancy J.D. Power & Associates, said Amazon's broad demographics, visitor frequency and their propensity to buy cars online all bode well for Greenlight.
But, he added, "there's still a significant question as to whether Amazon can carry its brand name in low-priced consumer goods into the realm of automobiles, where the online buyer is extremely price-sensitive."
Copyright September 2000, Crain Communications Inc.