GM warns dealers about working with pure-play online auto sellers

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GENERAL MOTORS FIRED another salvo across the bow of direct-sales car-buying Web sites on Friday by sending a letter to its 7,700 member North American dealer network cautioning dealers against allying themselves with a direct Internet-sales channel.

The letter reminded GM dealers of its franchise agreement that specifically states that vehicles are not to be sold to third-party intermediaries such as so-called Internet brokers. The agreement does not exclude the dealers from working with referral or lead generating sites such as autobytel.

GM warned dealers that a replacement model will not be given to them for inventory if they sell autos in this manner and that dealers will not be the recipient of any GM-sponsored sales incentives to dealers.

A similar move was made by Ford Motor a number of months ago.

At stake in the battle between the automakers' dealer network and sites such as Carsdirect.com, which purchases autos from dealers and then resells them to consumers, is ownership of the customer.

Unit sales of GM cars are not threatened by consumers using a different channel. However, there are branding issues, upselling the customer with additional products and services as well as issues surrounding data collection and data mining for future marketing efforts when it comes time to re-buy, according to Adam J. Weiner, senior auto consultant at Gomez Advisors in Lincoln, Mass.

"Saturn for example, invests money in creating a way of doing things. Carsdirect can treat people well but it is not the Saturn way," Weiner said.

In addition, the online sites that go beyond customer referrals to dealers are more concerned with selling a consumer a vehicle and less concerned with model or manufacturer.

As services become an increasingly larger part of the revenue stream for dealers and automakers owning the customer relationship is critical to upselling the auto buyer, according to analysts.

"It's more likely a GM dealer will push OnStar than a third party because the online site doesn't get any additional revenue from the sale," Weiner noted.

Finally, future sales of cars can hinge on who owns the data. For example, if a dealer sells a Corvette to a newly married couple, a few years down the line the dealer, using GMs data-mining capabilities, might push out to them a sale on mini-vans.

"The direct sales sites are undermining what dealers are spending on training, and developing marketing models," Weiner said.

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