Introduction
Autobytel was the first company to leverage the internet in the car-buying market. Their revolutionary product matched consumers with car dealers and offered consumer resources for buying, selling and owning a car. With no cost of goods sold, no procurement, no carrying or shipping costs and no inventory risks, this business model allowed Autobytel to capture 100% gross margin. The company's first mover advantage allowed them to set the bar for online car sales. Although Autobytel performed fairly well in the online car sales market, capturing 25% of all online car sales in 1999, the company suffered from high operating expenses (i.e. $3.7 million on internet marketing and advertising in Q2 of 1999) which exceeded their revenue. Looking towards future growth, Autobytel management wanted to expand their online service for car sales to all car-related services ? essentially owning the customer experience for cars.
Company
Autobytel's first mover position in the online car sales market had become the market standard in 1999. Since most state laws required consumers to purchase a new car through an authorize dealer, Autobytel established a way to match the consumers needs and reservation prices to high quality dealers who could deliver on those specifications. Their original product strategy emphasized price, convenience and no-haggle car purchases ? all efforts focused on the end customer of the car purchase. Their innovative product reduced the number of sales contacts and hours associated with a car purchase, resulting in bottom line pricing for the customer and a guaranteed sale for the dealer with lower associated operating costs (i.e. payroll and marketing). The company maintained a fairly unique dealership strategy compared to its comp ...