Referral Service and Broker Models ‘Not Sustainable’

Speaking before the Automotive Press Association here today, AutoNation’s Chief Executive Officer, Michael J. Jackson, said that automotive manufacturers and large “e-dealers” are replacing online referral and broker services as the dominant players in online automotive retailing.

Mr. Jackson said, “It’s clear that the online automotive lead provider and broker models are not sustainable. The question is not if there will be a consolidation among these players, but when that will happen. National e- dealers who fulfill customer orders from their own inventory, and manufacturers whose web sites feature direct access to their best dealers and special factory incentives, will be the dominant online automotive players.”

Mr. Jackson said that while referral and broker services were generally earlier to the Internet than dealers and manufacturers, these services have failed to offer a seamless buying experience. “No matter how you cut it, the referral and broker services are middlemen. They come between the customer and the dealer, and that’s not efficient. These services also disappear after the sale, leaving the customer without a service relationship with a local dealer.”

The AutoNation CEO said “e-dealers” have several important advantages when compared to referral and broker services. “Large e-dealers, like AutoNation, offer Internet shoppers access to real vehicles at real prices because we own the inventory at dealer cost. We can conduct the entire transaction online, without a middleman, and we have the bricks-and mortar facilities necessary to provide long-term service.”

In related remarks, Mr. Jackson tackled a number of misconceptions related to shopping for vehicles online.

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“The first misconception is that the referral and broker sites give consumers access to hidden cost savings that they wouldn’t get if they went directly to the dealer. The truth is, these services have to buy the vehicle from a dealer,” Mr. Jackson said.

The second misconception that the AutoNation CEO addressed was that of “direct” versus “indirect” retailing. “Perhaps the greatest myth is that the referral and broker services offer consumers direct access to vehicle inventory. Nothing could be more misleading. It might be more appropriate to call these services ‘indirect.’ And now, with some manufacturers warning their dealers not to sell to Internet brokers, even the word ‘indirect’ might be a stretch,” Mr. Jackson said.

Mr. Jackson also said, “Research shows that customers spend an average of 19 days researching and buying a new automobile. On the other hand, they own the vehicle for an average of 39 months. Good e-dealers, like AutoNation, are positioned to meet the needs of customers during the entire ownership experience. The referral and broker services seldom see beyond those first 19 days.”

About AutoNation, Inc.

AutoNation, Inc. (NYSE: AN) is America’s largest automotive retailer, on and off the web, operating more than 400 new vehicle franchises in 19 states and more than 200 web sites. The Company’s revenue in 1999 totaled more than $20 billion, making it a Fortune 100 company. AutoNation also owns the sales referral business of, an automotive retail web site that serves more than 1,200 dealerships in the U.S. This summer, AutoNation is launching a new co-branded web site with America Online, Inc. (NYSE: AOL). Called AOL AutosDirect, powered by, the site will be the “world’s largest virtual auto dealership.”