Used Cars, New Models

A New Deal for Dealers

Even Berry notes the irony in Manheim's relationship with used-car dealers, which is based on trust. Dealers might sound like customers that only a mother could love, yet they make up a major chunk of the $375 billion used-car industry. As a result, for Manheim to take that industry online successfully, the move had to be based on a relationship with dealers.

On its dealers-only Web site, Manheim Interactive's customers can purchase cars at a flat rate from the site's "CyberLot" section; search Manheim's nationwide auction inventory for specific makes and models; find a going wholesale rate for a specific car model based on actual sales; and register for an auction, which includes being able to pick specific lane positions. While all of those features make it easier to sell cars, none of them take dealers (or auctions-as-service-providers) out of the picture.

"It's all about making life easier for dealers," says Hal Logan, 49, president and CEO of Manheim Interactive Inc., one of two Internet spinoffs from Manheim Auctions. "If you know that the people who come to your store are looking for late-model Camrys or Acuras, what happens if it's Thursday and you're sold out? The last thing that you want to do is face a weekend in which you've got no inventory. It's one thing to hop on a plane, fly across the country to an auction, stand in a lane, buy cars, and ship them back to your store. It's another thing to sit in your office, look at a larger number of cars than you would have an opportunity to see by visiting any single brick-and-mortar auction, order the cars that fit your needs, and have them shipped to your store in time for the weekend."

Manheim Interactive has signed up more than 13,000 dealers for Manheim Online, its Web site, which charges a subscription rate of $50 per month. Posting a listing on Manheim Online is free, and all of the listings come through the auctions, whether the cars are lease returns from Ford or fleet returns from Avis. Manheim Interactive also is testing real-time online auctions for limited audiences and plans to link its site to all of its brick-and-mortar auctions. Those changes would allow dealers to bid by computer from anywhere.

Dealers who want to sell to consumers can post listings for free on Auto-Trader.com -- Manheim's joint venture with ADP, Kleiner Perkins, and Trader Publishing Co., among others -- which announced its initial public offering in April. One page of the auction-purchase invoice is a form that requires only a price before it can be entered onto the AutoTrader.com site. Within 24 hours, that car is listed for sale.

Mike Motter, used-car manager for Lehman Motors, in Mechanicsburg, Pennsylvania, buys about 80% of his used-car inventory from Manheim Online through its "CyberLots" section. He also uses the site to track down specific requests by customers. "If I have a customer who asks me whether I have a red 1999 Toyota Camry, I can find that car online and pull it up on my computer screen for them without showing them the price," Motter says. "Manheim's service allows me to offer cars to customers without having to keep those cars in stock."

The road to getting 13,000 dealers online was long and bumpy. When Manheim launched its Web site in 1996, few dealers were on the Internet; many didn't even own computers. The first part of helping dealers succeed was educating them. So, at all of its locations, Manheim Auctions set up kiosks and hired technology managers. Their mission? Teach dealers how to use the Web and show them how it could make their lives easier. Brian Stanley, 26, a technology manager, notes that dealers were not initially technophiles. "When I first started this job, I would instruct a dealer to point and click somewhere on the screen and he'd do this," Stanley says, picking up a mouse off the desk and clicking it at the monitor as if it were a TV remote control. "We had a long way to go."

Once dealers were more familiar with the Net and realized how it could streamline their interaction with Manheim, interest boomed. Between 1997 and 1998, Manheim's Web sales jumped from $58 million worth of cars to $216 million. Last year, Manheim topped $650 million; this year, it may top $1.5 billion.

Click-and-Mortar: Let's Get Physical

At Manheim's Atlanta Auto Auction, bulldozers are scraping away red Georgia clay to clear space for more parking lot. The site already includes 160 acres of asphalt and holds more than 15,000 cars. That asphalt is what divides Manheim from the rest of the dotcom players in the used-car industry.

"Our physical infrastructure is integral to the process of buying and selling used cars," Berry says. "You can't just pluck those sales from the Internet without having the capacity to back them up. You want to sell the 10,000 cars that I, as a manufacturer, have coming off lease agreements? Great. Do you have a place where I can store those cars? If I'm a small dealer and you sell my car, can you get it off my property right away? Used cars depreciate every day, and you have to be able to move them quickly. Dotcoms can't do that."