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Life is tough for General Motors. Once the world's largest and most powerful automaker, the Great Recession put the final nail in the coffin of a company that had grown too large and too lackadaisical to survive.

But thanks to Chapter 11 bankruptcy and the support of the United States government, GM is trying to reinvent itself. It's spending lots of money trying to convince consumers to give its cars a second look and it's looking for new solutions to old problems.

One possible solution to its sales problem: the internet. Shortly after it emerged from bankruptcy, GM turned to eBay. The idea: use the popular auction site to sell GM automobiles. The setup: list GM cars for sale with a "buy it now" price equal to the supplier price -- but let consumers make lower offers. The execution: launch as a pilot program with dealers in California. The goal: expand the program nationally before the end of the year.

At the time it launched, it was clear that GM had high hopes for the eBay partnership. GM's vice president for US sales, Mark LaNeve, told The New York Times:

It’s very attractive to a core group of customers who don’t really care for the negotiating experience at a dealership but do want to negotiate Now they can do that anonymously online. So we think it’s going to give us some opportunities we didn’t have before.

GM's CEO was even more enthusiastic: he went so far as to claim the program could "revolutionize" the way cars are sold online.

Unfortunately for GM, the result was not the one desired. Although GM calls the program a "success" and revealed that 1.5m visitors generated 15,000 leads for dealers, GM's program with eBay is being shut down at the end of the month.

According to a number of dealers, the program was generally ineffective and led to few sales. A major problem: consumers would make low-ball offers. One dealer, Richard Slade, told The Wall Street Journal that one person offered $2,500 for a $40,000 car. In Slade's opinion, "We don't need to have fire sales. We need to promote the quality of the product".

Here's the problem: at its heart, GM's effort with eBay was designed to generate leads. But generating quality leads on the internet is not what GM is good at. Case in point: one dealer The Wall Street Journal spoke to said that he generally generates 1,000 leads per month on his own and that the eBay pilot boosted that number by around 20%. But only one of the eBay leads led to a sale. In other words, GM's eBay effort appears to have generated weak leads and in some cases hurt dealers by exposing them to prospects who weren't serious about buying.

Obviously, GM had the best of intentions. But the reality is that GM probably tried to go too fast in trying to use the internet to generate leads. After all, the internet is great but generating leads online is not necessarily any easier than generating them offline. Right now, GM has two jobs: build and market a great product. But that's bit tricky given that many consumers are skeptical about the company. Even so, that's not stopping GM from trying to do the impossible: convince consumers that it has a great product when it really hasn't changed the product. Sort of like Yahoo.

If and when GM builds a product that everyone can agree is better, it won't need to "revolutionize" online auto sales. And it will be able to let local dealers do what they do best. Until that time, it's my opinion that pretty much anything GM does will likely turn to rust.

Photo credit: ryan14072 via Flickr.

Patricio Robles

Published 1 October, 2009 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2391 more posts from this author

Comments (3)

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J S

GM went about this wrong.  Whoever was in charge of the ebay marketing program needed to learn for themselves how things are bought and sold with their own listings. 

There is a real science to selling on ebay that is different than the regular markets.

They would have had more success setting a low price with a BIN flat rate.

Or had a starting price they could live with if sold at, but open for bidding, like starting with $15,000.

Higher priced items will usually only have a few bidders - so offering a vehicle at $2 might only bid up to $10.  Same car posted at $15,000 might bid up to $15,200.

almost 7 years ago

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Matthew Treagus, Managing Director at rtobjects

I've no doubt consumers want to buy new and used cars directly off the page with a bit of telephone support. Their increasing sophistication, the inherent convenience and the peer-review tools will enable this.

The challenge is always going to be setting the price. We love-to-hate them but estate agents and car dealers role as an intermediary is not redundant yet. An auction model of some form will prevail (as per previous comment).

Buying, actually transacting, a car online (and probably having to dispose of their old one separately) is big step for the consumer and a new way of thinking. Any manufacturer or reseller seeking to move any meaningful volumes of cars would do well not to introduce too many new ideas at once.

Embedding online sales as part of business-as-usual is the ‘revolution’ here – rather than trying to re-educate the consumer on the back of volatile market conditions.

almost 7 years ago

Mike Berry

Mike Berry, Head of Marketing at Pure Collection

I'm not sure it is fair to put such a negative slant on this story.

Reinventing the way that GM makes cars will take time - it takes years to get a car into production. This move shows that GM are serious about change, and that they are prepared to try things that are a little different.

OK so this particular scheme didnt work, but the company is clearly looking for ways to embrace online, and I am sure in the background frantically working on renewing their product range for the market today (or the market in the near future).

J S makes a key point - GM need to learn. The best way to learn is to test, and that is exactly what they have done here.

almost 7 years ago

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