'No haggle' has a place

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Mike Jackson has seen the future and it is haggle-free pricing on new cars.

The president-CEO of AutoNation says the Internet has turned the tables on dealers. "Consumers are holding the cards, so the rules of the game have changed." The power switch is the real issue of automotive e-commerce-not actually buying cars online, he contends.

SHOPPING SIMPLIFIED

Visitors to AutoNation.com can pick a vehicle from actual inventory, get a transaction price, pick a dealership from the marketer's more than 400 dealerships and commit online.

AutoNation defines its Internet sales as customers choosing the vehicle online, agreeing to buy it at the set price and coming into one of its dealerships to buy it from an Internet specialist. Among all AutoNation's new car buyers, 55% first do research online. The marketer sold some 60,000 new cars and trucks last year that way, or 10% of all the vehicles it sold. Those sales translated to roughly $1.5 billion of AutoNation's $20.6 billion in annual revenues in 2000.

Mr. Jackson predicts sales this year will rise to roughly 75,000 units totaling $1.7 billion in revenues.

Zimmerman & Partners, Fort Lauderdale, Fla., handles the no-haggle advertising for Auto-Nation's Tampa Bay and Denver dealerships. AutoNation showrooms use the name of the prominent regional dealer under the corporate umbrella. In Denver for example, the stores are branded under John Elway, the former Broncos quarterback who sold his stores to AutoNation.

SEEKING A NATIONAL BRAND

While the dealerships use regional names, Mr. Jackson wants to build AutoNation into a national online brand.

General Motors Corp.'s Oldsmobile division tried one-price selling in 1993. About a third of the dealers signed up for it, a third were on the fence and the rest refused to go along with it, a spokesman says. Oldsmobile then had more than 2,800 dealers, who were "very traditional in the way they dealt with customers," he says. Despite sending all the dealers to training about one-price selling, "It didn't work" and was dropped in 1996, he added.

GM's Saturn Corp., which started selling cars in 1990, continues to use no-haggle pricing.

According to an annual Consumer Reports survey in January with 1,001 new vehicle buyers and leasers, 30% did not negotiate the price and 36.5% visited only one dealer before making their final selection. The magazine found the three key factors in choosing a vehicle are: reliability (52%), appearance/styling (44%) and best-possible price (40%).

Pricing didn't show up in the top two reasons consumers cited for picking a certain dealership: convenient location (52%) and treatment by staff (50%).

There is some resistance to the one-price selling even within AutoNation's network and some consumers who still like to negotiate, but Mr. Jackson says "everyone is going to have to adapt."

OVERHAULING COMPANY

Mr. Jackson has shaken up the company since his arrival in fall 1999 from DaimlerChrysler's Mercedes-Benz USA. He closed or converted AutoNation's 37 unprofitable used-car superstores into new-car stores by early 2000. Last June, he spun off the car-rental operations of the Alamo and National brands to form the separate ANC Rental Corp.

In the past 12 months, the marketer has beefed up its online presence. In February, it inked a three-year deal with Microsoft Corp.'s MSN Carpoint.com, becoming the primary distributor of the online car-selling site's leads.

Last May, AutoNation signed a multiyear alliance with AOL Time Warner's America Online to be the exclusive retailer of new and used vehicles to AOL members who buy through AOL AutosDirect. Also in 2000, AutoNation acquired AutoVantage.com from Cendant Corp., but agreed to use that operation's logo and name for three years.

Mr. Jackson says carmakers and large e-dealers like AutoNation will replace online, third-party vehicle brokers and referral services. He believes their business models aren't sustainable because they're middlemen coming between the consumer and dealer and adding cost to the system.

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