Free Encyclopedia of Ecommerce » Free Encyclopedia of Ecommerce » Carsdirect.Com - Successful Test Led To National May 1999 Launch, Aimed To Be A Brand Leader, Survived Dot.com Shakeout Of 2000

Carsdirect.Com - Successful Test Led To National May 1999 Launch

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CarsDirect.com was created at the Internet incubator Idealab, which also developed such Internet companies as eToys.com and GoTo.com. Co-founders were Bill Gross, founder of Idealab, and Scott Painter, who became CarsDirect.com's CEO. At the time CarsDirect.com was founded in Culver City, California, in late 1998, it was a bold step to try and sell autos and trucks directly to consumers through a Web site. Existing auto buying services, such as Autoweb.com and Autobytel.com, did not sell cars themselves. Rather, they referred prospective buyers to brick-and-mortar dealers, who paid them for the referrals.

CarsDirect.com began selling vehicles over the Internet through a test program launched in December 1998. Loan and lease financing for customers was provided by Bank One Corp., which partnered with CarsDirect.com to form CD1 Financial.com, an Internet auto lending and leasing company. The outlook for online car-buying services was favorable, according to Forrester Research, whose report noted that 2 million people researched their new car purchases online in 1998. Forrester projected that 17,000 people would buy their cars online in 1999, a figure that was projected to increase to 470,000 households by 2003, representing $12 billion in online sales.

CarsDirect.com's test proved successful. It sold 277 cars in April 1999, and in May the company launched its national Web site. It had received about $30 million in financing from several sources, including Idealab, which held a 40 percent stake in the company, and Michael Dell's venture capital firm MSD Capital LP. In the two months following its official launch, CarsDirect.com sold more than $1.5 million worth of vehicles a day, making it the fastest growing company developed by Idealab. It obtained vehicles from a network of 1,200 dealers.

To purchase a vehicle, prospective customers would use a series of pull-down menus at the company's Web site to select their cars and choose their options. In the final step, customers chose a method of financing their purchase. As the Los Angeles Business Journal noted, "CarsDirect is the only company through which a customer can make a complete purchase on the Web" of an automobile or truck. Later in the year, Gomez Advisors Inc., which ranked Web retailers, named CarsDirect.com the best overall automotive resource for online customers among the more than 100 automotive Web sites that offered some type of shopping help.

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