GM Ramps Up To Sell Vehicles Online
For perspective car buyers who think it’s a hassle to shop for a new car, General Motors Company (NYSE: GM) wants to make the experience as pain free as possible. The company plans to put into place a new tool that will allow consumers to bypass showrooms altogether. Called Shop-Click-Drive, the app will let car buyers get a quote of the trade-in value of their old car, lock in the price of a new car, and apply for financing. The purchaser can even arrange for a test drive and delivery of their new vehicle.
GM may just have something here. Although online sales are still an undersized portion of the overall retail economy, there is ample room for continued growth in the venue. It’s not conventional for consumers to purchase high-priced goods such as automobiles online, but the move to e-commerce is growing daily for luxury items.
The idea is hardly new. There are online car dealerships that specialize in selling cars via the Internet. In most cases they do have a physical showroom, but some are strictly virtual. The virtual entities provide all facets of the transaction online, with no face-to-face contact at all. The vehicle is shipped to the buyer. Think eBay Inc. (NASDAQ: EBAY), Auto Finder, and CarsDirect. The low overhead associated with these businesses translates into a better deal for consumers. But bear in mind that for the most part, the cars are used. One limitation to purchasing online is that you do not have the opportunity to test drive a car in person and examine an individual vehicle prior to buying it. Even with a reputable company, problems can arise. Caveat emptor.
As for GM, the company could face some headwinds in its attempt to set up online sales of its vehicles. Most states have franchise laws which give dealers sole rights to sell new cars. The laws protect car dealerships, meaning that their role in new auto sales will remain essentially unchanged. Besides, dealers favor doing business face-to-face. It allows them to do some serious selling of add-ons such as service work, finance, insurance products, as well as warranties and various upgrades on the vehicle.
The bottom line is that GM cannot force their dealerships to jump in on online retailing of their cars, but by the end of the year the company hopes to extend its app to hundreds of its brick and mortar dealers across the country. It will certainly appeal to plenty of potential car buyers, if for nothing more than the convenience it provides. There are really people who hate schlepping from place to place in order to buy a new vehicle and GM is sympathetic to them; not to mention it wants to sell its cars.
Disclosure: The author has no position in the stocks mentioned in this article, and does not intend to initiate any position in the next 48 hours.
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