Used Cars, New Models

Back when Dennis Berry, 56, was publisher of the "Atlanta Journal-Constitution," he spent a lot of time thinking about where to find them, how to get accurate information about them, how to persuade them to advertise in his newspaper. Yet he was a bit nervous five years ago, when he moved from selling ad space to dealers to working with them directly -- as president and CEO of Manheim Auctions Inc., a used-car auctioning service and a sister company to the "AJC." The job seemed like a radical departure, and he wondered how long it would take to learn his new business. But when he attended his first auction -- and he saw 1,500-plus dealers who turned up every week to buy cars -- Berry had a flash of insight that came directly from his newspaper background. "Someone," he said to himself, "could sell a lot of classified advertising here."

That "someone" turned out to be Manheim. Berry's observation led his company, the world's largest used-car auctioning service, to become the leading wholesale seller of used cars on the Net. In 1996, Manheim's effort to connect its customer base of about 80,000 dealers and manufacturers to each other resulted in only 62 cars sold. In 1999, the company's wholesale Web site moved more than $615 million worth of cars -- and predictions for 2000 are north of $1.5 billion.

Part of the success of Manheim's Web initiatives can be credited to easy-to-use technology and good educational programs, which Manheim built for used-car dealers. But two key ingredients behind its online success were imported directly from its position in the physical marketplace. One was its enduring relationships with dealers: Roughly 90% of all used-car dealers attend Manheim auctions. The other was its vast physical resources -- specifically, Manheim's 65 auction locations across North America.

Sure, doing business on the Web can mean a sharp break from the past, in terms of strategy or style. Often it requires an assault on existing channels of distribution. But sometimes it pays to be a 55-year-old company with a proud business tradition. And it's almost always better to work with folks who are already selling your products -- even if you have to teach them how to change -- than it is to provoke a backlash from them.

"Anyone can build a Web site to sell cars," says Rob Leathern, an analyst with Jupiter Communications Inc. in New York. "But the notion of a zero-gravity player in this market -- a pure dotcom with no physical infrastructure or preexisting relationships -- is naïve. Manheim already owns the sweet spot. It's got loyal customers as well as the infrastructure that's needed to store, ship, repair, and recondition used cars. That will be a difficult edge for others to replicate."

Berry puts it another way: "Our mission has always been to help used-car dealers succeed. Everything we do is focused on helping them win," he says. "A lot of dotcoms say, 'We're going to bypass dealers. Consumers don't like doing business with dealers.' We knew that wouldn't happen -- because used cars are sold one car at a time, and every used car is unique. We felt confident that if we built our online business on helping dealers succeed, we would win."

Have You Hugged a Car Dealer Today?

It's just after 10 on a warm spring morning, and the pace at the Atlanta Auto Auction is already frenetic. More than 4,500 cars will be sold today, and the last of the same-day entries are being washed and then checked in by lane supervisors using shortwave radios to relay the information. A digital camera is used to photograph every car, in case dealers want to resell a newly purchased car on Manheim's consumer Web site, AutoTrader.com. Hundreds of car dealers mill around 13 auction lanes, a series of long, connected garages with entryways at both ends.

Once the auction starts, pandemonium ensues. Cars are driven down the lanes, rolling along as dealers open car doors, sniff interiors, slam trunks, and inspect paint. Red, green, or yellow lights behind the auctioneers indicate whether a car is being sold "as is," whether it has a quality guarantee, or whether it comes with specific damages or features that will be announced. Auctioneers, who sit on a platform next to a car's owner, chant in a rapid-fire tempo over the noise of idling engines. Meanwhile, a "ring man" on the floor among the dealers scans the crowd for the winks, waves, nods, and shrugs that signal a bid. It takes about 30 seconds or so to auction off each car, and Manheim receives transaction fees from both the buyers and the sellers.

A used-car auction is more than a marketplace -- it's a cultural ritual that has remained virtually unchanged for decades. Car dealers come here to buy and sell, but they also come here to meet and socialize. More importantly, they come here because Manheim has built services around its auctions that make it easier for dealers to do business. Do the five cars that you're selling need engine repairs or body work? Manheim will do it. Want to store 1,000 cars for the next auction? Manheim will hold them. That approach has done more than offer convenience -- it has built relationships with thousands of dealers that trust the company to stand behind the cars.

"There aren't many businesses out there that are in love with auto dealers the way that Manheim is," Berry says. "We sometimes describe our company as 'Mother Manheim.' And Mother Manheim loves car dealers. You know that your mother takes care of you, that your mother looks out for you, and that your mother won't lie to you. That's how we think about ourselves and about dealers."