John Honiotes, ABT's director of new business, says that the ranks of salespeople will shrink and shift because only the computer literate and softer selling will be needed. "It's a classic case of survival of the fittest," he says. "Many will embrace the new technology. Others won't and will have to find something else to do."
Technology, Ellis understands, has changed the balance of power in a car purchase. For 50 years the true cost of a car was information closely held between the manufacturer and the dealer, putting the buyer at their mercy. Now, through the Internet, buyers have access to that information--24 hours a day. They have the edge. Dealers who can't deliver a low, haggle-free price and superior service will be history. "Car dealers don't like being told how to run their business, but in a couple of years a lot of these guys aren't even going to be in business," says Ellis. "The biggest thing they've got to figure out is how to drop their costs. I see the Internet as destroying the old structure."
What drives Pete Ellis is a rich stew of car dealer's self-loathing, Chapter 7induced pain, and a raw competitive drive to simply be proved right. He readily admits, "I hated my dealerships. I hated the way there would be 20 salesmen waiting to jump on the next customer who walked in the door." Selling cars has always been a commission-based business that explicitly encourages the salesperson to mug the customer's wallet. Sell the car for the highest price possible--and somehow gull the customers into thinking they're getting a great deal.
Manufacturers encouraged such behavior by granting too many franchises, leading to oversaturated markets. Ellis, who had a Ford store in San Diego, could count 15 other Ford dealers within a 30-mile radius. That forced dealers, trapped like rats in a cage, to gnaw one another to death. Bait-and-switch advertising became the norm. Lure the buyers in by advertising an impossibly low price on a car that you don't even have in inventory--then sell them something more expensive. "The competition among dealers creates price advertising, and that creates unsavory sales practices," says Ellis. He sees it as his mission to change all that--for good. And he'll try almost anything to do it. A year ago Ellis called up his media-buying service. "Give me a quote on the Super Bowl," he said. The price for a 30-second ad was $1.2 million, ridiculously extravagant for a company with 1996 sales of just $5 million and no operating profit.
In a subsequent ABT board meeting, Ellis suddenly interjected, "I just bought some time on the Super Bowl." The idea was so ludicrous that nobody even responded. Ellis, as usual, was playing the merry prankster. The more serious business at hand continued. Five minutes passed. "Really," he said. "I'm not kidding. I just bought the Super Bowl." Sure, Pete. Another five minutes passed, at which point Michael Fuchs, an ABT board member and the former president of HBO, suddenly said, "You know, Pete, I think you should buy the Super Bowl." Board members, assuming that Fuchs, a media insider, knew what he was talking about, then began solemnly nodding their heads in agreement.
Ellis, ever the marketing tactician, argues that his decision to buy the ad was a no-brainer. "The Super Bowl is not where it's happening," he explains. "It's not that 30-second spot. It's the publicity surrounding the event. People forget that the Super Bowl is a promotion over three months. It's a 90-day campaign, and in that campaign we got all sorts of publicity. We also became known as 'The First Internet-Based Company to Advertise on the Super Bowl.' "
Ellis, the perpetual salesman, says things in a way that people tend to remember. Speaking to dealers at the NADA convention last February, he offered a word to the fence-sitters in the face of onrushing industry consolidation. "If you're not coming with us, then I suggest you call 1-800-WAYNE."
Wayne, of course, is Wayne Huizenga, another latter-day binger in the car trade. Huizenga built Waste Management and then Blockbuster Entertainment, but now he is doing something even more ambitious: trying to vertically integrate the car industry by selling, renting, leasing, and servicing cars at every level imaginable. No car story these days would be complete without the reporter's making the obligatory pilgrimage to Republic Industries, in Fort Lauderdale. The actual distance between Huizenga's Republic headquarters and ABT's may be 3,000 miles, but the cultural distance is a million.
Republic's AutoNation USA megastore in the nearby suburb of Coconut Creek encompasses around 1,000 vehicles sitting on more than 20 acres of concrete freshly laid through thickets of palmetto and saw grass. On a tour of the site, store manager Jeff Dyke explained that the location had gone "from dirt to fully operational in three months. It's the McDonald's concept." In fact, he added, "we'll open one of these superstores every two weeks for the next three to four months." Dyke himself seemed to be part of this fast-moving game plan. The manager of the Houston store, he'd come to work one Monday and been told to start work in Fort Lauderdale on Wednesday. That meant leaving behind a wife and infant daughter to follow him later.
To date, AutoNation has 15 used-car superstores in four states. It's an operation that relies on laser beams, bar codes, and computers to track every car that leaves every lot on every test-drive, to ensure it is being marketed efficiently. Every two days, the entire inventory is washed. It is tirelessly shifted around the lot, fitted with eye-catching accessories, and otherwise promoted to speed the sale.
A visit with the (nearly) top brass preceded the car-lot show-and-tell. While Huizenga, Ozlike, remained at some remove up in his penthouse office on the 14th floor, down on the 13th, three trusted lieutenants--company president and co-CEO Steve Berrard, AutoNation president Larry Rich, and the president of Republic's new-car division, Mike Maroone--gathered around a conference table.
