Found, Fixed and Delivered, It’s Yours
Dan Rucks decided that he had to have a third-generation Mazda RX-7 before it dawned on him that finding a decent one was going to be a chore.
Mazda began selling the last version of its rotary-engine sport cars in 1993 but quit importing them in 1995. In all, dealers in the U.S. sold only 13,897 of the sleek two-seaters--whose design, penned at Mazda’s North American studio in Irvine, was so advanced it earned a permanent display at the Petersen Automotive Museum in Los Angeles. Not many of them show up in the used-car classifieds.
Rucks, a West Hollywood music video editor, spent almost a month chasing RX-7s on the Internet before stumbling across a new electronic-commerce company, IMotors.com, that promised not only to find him the car of his dreams but also to buy it, refurbish it inside and out and deliver it to him with a 30-day warranty for a price that was about $3,000 below the $25,300 retail value suggested in the oft-cited Kelly Blue Book.
The clincher came when an IMotors sales representative explained that Rucks would have to put down only a $250 deposit, could back out of the deal at any time with a full refund and could even cancel the sale and get his money back up to seven days, or 700 miles, after taking delivery of the car.
“I’m a busy guy, and I don’t have a lot of time to look for cars,” Rucks says. “It took them 36 days to find one, but the waiting was the only hard part. And now I’m getting exactly the car and the color I wanted.”
San Francisco-based IMotors, which went online in Northern California in September and launched in the Los Angeles area last month, is the latest wrinkle in the fast-growing and ever-evolving world of automotive e-commerce.
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New-car selling on the Internet has received most of the attention, but Americans regularly buy more than twice as many used cars and trucks as new ones each year--an estimated 40 million of them this year.
Until now, though, used-car sellers have not mined the Internet to the degree their new-car counterparts have.
“The used-car market is huge, but there are a lot of pitfalls in selling online,” says James Preissler, an industry analyst at PaineWebber. “The big question is the level of faith the consumer can have in the purchase.”
After all, a new car is a commodity: A 2000 Ford Focus is the same whether at a dealership in San Francisco or one in Orange County.
But every used car is unique, its condition dependent on how well its owners have treated it.
“There’s a much greater need for used-car buyers to see, touch and drive the vehicle before committing to buy it,” says Chris Denove, who follows automotive e-commerce trends for J.D. Power & Associates, the Agoura Hills-based marketing consultants.
In an effort to take some of the gamble out of used-car buying, many manufacturers now inspect and “certify” the quality of used cars that come back to them from lease and rental fleet returns. But those certified used cars are only available through the manufacturers’ franchised dealerships.
IMotors’ claim to a unique position in the independent used-car retailing market is that it certifies and guarantees all the cars it sells--no matter the brand.
Still, Denove says he has “serious concerns whether [IMotors] can be a long-term moneymaking venture” for its backers because of the potential for losses as the company spends its own money refurbishing cars that customers can easily return.
At the same time, he acknowledges, IMotors and any Internet used-car sellers that decide to copy it could represent a great deal for consumers who know what they want and are willing to forego getting the absolute lowest price in return for guarantees of quality and refundability.
Denove recalls the adage that any deal that seems too good to be true probably is.
“But there is such a fight for market share in Internet commerce that companies now sometimes offer deals that seem too good but really are true.”
Beth VanStorey, IMotors’ president, says the company can make the promises it does because its overhead is so low and because it is selling to a fairly committed buyer. So far, she says, the return rate is below 1%.
The 37-year-old e-commerce specialist--VanStorey headed Office Depot’s Internet shopping subsidiary before joining IMotors in June--says the company is aimed at “the person who already knows what they want and is seeking a pleasant buying experience, a high-value used vehicle and the comfort of a risk-free purchase.”
There are, quite literally, hundreds of places an Internet-savvy shopper can click to when searching for the perfect used car or truck.
Many newspapers put their classified ads online, and there are an abundance of specialty sites, often operated by car clubs, for lovers of just about every make and model ever produced. Less common are major regional or national sites, although as the e-commerce industry perfects new-car shopping models, companies such as Autobytel.com, Microsoft Carpoint.com, EBay Inc. and AutoTrader.com are expanding into used-car sales to try to broaden their appeal.
Most provide the shopper a description of the vehicles for sale, give prices and perhaps display photographs. Some send the buyer’s request to a participating auto dealer and let the dealer respond to complete the sale. Others provide the seller’s phone number or address--postal or e-mail--and leave the rest to negotiations between the seller and the potential buyer.
One exception has been AutoNationUSA.com, which lets the shopper search the inventories of the giant auto retailer’s chain of more than 400 dealerships and sells direct, providing a nonnegotiable price, a money-back guarantee and even a limited warranty.
Illustrating the precarious nature of the used-car business, AutoNation on Monday abruptly closed 23 of its used-car superstores, including all five Southern California locations, and said it would integrate its six remaining used-only lots with new-car franchises because it wasn’t making any money with its policy of selling top-quality used cars at expensive fixed locations.
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Adam Simms, IMotors’ founder, decided that the way to succeed in the increasingly crowded field was to take even more of the risk out of the proposition by going electronic.
IMotors sells only 1- to 5-year-old cars with relatively low mileage--its pricing assumes an average of 15,000 miles a year, and the company won’t sell a car with more than 85,000 miles on the odometer, says Mitchell Kudler, service director at the company’s refurbishing facility.
The electronic site wasn’t born in a burst of inspired thinking. On the contrary, it evolved from Simms’ efforts three years ago to launch a traditional bricks-and-mortar used-car store that would outperform operations such as CarMax and AutoNation--which have found it tough to turn a profit while spending huge sums on their refurbishing operations and high-profile sales facilities.
“I figured that if I could do all the best sales and management practices of a company like Saturn without the high overhead, I could do better than anyone else ever had,” says Simms, 38, whose career at that point spanned 16 years in new-car retailing and wholesaling, including four years as head of operations for a 28-franchise chain in Virginia.
He headed for California in 1996 and decided to set up a late-model used-car store to maintain greater operating freedom than he would have as a franchised new-car dealer.
He opened his store, Auto Choice, in Fresno--where the market was sizable but competition was limited--and set up a used-car refurbishing facility in the town of Elk Grove, just south of Sacramento, to take advantage of relatively cheap land and labor costs. He bought--and still buys--his stock at wholesale used-car auctions around the country.
Simms says Auto Choice has been profitable from the start but that he discovered within a few months that, as with other used-car superstores, he could not carry enough inventory to meet every customer’s needs.
“The job became one of listening to customers tell us what they wanted,” he says, “then persuading them to switch to what we had.”
Simms began developing IMotors.com after he and his salespeople started using a computer to search wholesale auctions for vehicles that customers wanted but weren’t on his lot.
“That became a third of our volume overnight,” he says.
Now, the Fresno store is used to train IMotors personnel, test the market appeal of lesser-known brands--used Hyundais, for example--and to liquidate cars that IMotors takes as trade-ins on its computer deals.
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The Internet company is selling an average of 125 cars a month and has heralded its launch in Southern California with an extensive print and radio ad campaign.
IMotors also budgeted $10 million for an all-media advertising campaign for California next year and has retained the San Francisco office of Saatchi & Saatchi to produce it as well as campaigns that will keep step with the company’s expansion plans throughout the year.
Flush with a new influx of almost $58 million in venture capital--from some of the same investors who have backed companies such as Office Depot, IVillage.com and GoTo.com--IMotors plans to begin expanding beyond its two California markets, moving next month into Oregon and Washington and into selected East Coast markets in the second half of the year.
IMotors is also enlarging its refurbishing plant, adding 60,000 square feet to the 30,000-square-foot garage and body shop it now operates. Service director Kudler says he expects to have about 500 employees preparing cars by this time next year.
Preissler, the PaineWebber analyst, remains skeptical of any used-car seller’s abilities to deliver on promises such as IMotors’ while growing as the company says it will.
“There’s a question of scale,” he says. “You have to keep hiring mechanics and computer systems people and building more” refurbishing facilities in order to grow, and it is difficult to maintain earnings that match the growth rate.
In the meantime, Preissler agrees with J.D. Power analyst Denove that the company’s promises make it a worthwhile site for a used-car shopper to look into.
“People go to the Internet for convenience, not to haggle over prices,” Preissler says, “and in that, there certainly is a potential benefit.”
Rucks certainly thinks so. A few days after picking up his 1995 RX-7 at IMotors’ Torrance delivery facility, he was still buzzing.
“It’s perfect,” he said of the car. “Everybody looks at it, it’s fast and I’m just having a good time with it. And being able to have someone else go out and find one equipped just the way I wanted, check it out, guarantee it and deliver it with no time or effort on my part was just great.”
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Good as New? Used Cars on the Net
Upstart IMotors.com joins established e-commerce business in the growing used-cars business on the web. Here’s a look at the features offered by eight sites.
Autobytel.com: Money-back guarantee*; Offers auction/bid system; Classified listings
AutoMallUSA.com: Money-back guarantee; Site is seller (not referral svc.); Classified listings
AutoNationUSA.com: Money-back guarantee; Site is seller (not referral svc.); Classified listings; Provides fixed price
Autoweb.com: Offers auction/bid system; Classified listings
AutoTrader.com Money-back guarantee**; Classified listings
Cars.com: Classified listings
EBay.com: Offers auction/bid system
iMotors.com: Money-back guarantee; Site is seller (not referral svc.); Provides fixed price
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* On certified used vehicles
** If warranty purchased
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Source: J.D. Power & Associates.
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Times staff writer John O’Dell can be reached at john.odell@latimes.com.
