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Some of this century's greatest fortunes have been attained in the auto industry. Unfortunately, the auto industry is much like it was in the days when Henry Ford started to mass-produce his Model Ts. But, in the past few years, a start-up has revolutionized the industry: Autobytel.com. The company's founder, Pete Ellis (who at one point owned 16 dealerships), has grown his company to 175 employees and $16.5 million in sales for the first three quarters of this year.

The site works in a simple fashion: A consumer visits, does research, and describes the car of his or her preference. This information is sent to a local car dealer, who has signed up with Autobytel.com. The dealer is then required to respond with a no-haggle price. The service has been a tremendous success. Since the company's inception, it has received more than 2 million purchase requests. The Autobytel.com story provides great lessons on how to create a solid e-commerce business.

Management Culture

Having a command-and-control management culture may be successful in a brick-and-mortar business. However, it fails miserably for Net companies. "To play at the edge of technology, culture is the most important thing," said Mark Lorimer, the CEO of Autobytel.com, This means hiring the best. "I like the fact that every day all my employees get calls from headhunters," Lorimer added. "This means we have an incredible team."

As much as possible, Lorimer tries to maintain a flat organization structure and encourage independent decision-making. What's more, argument is encouraged. "We want dissent, not conformity," said Lorimer.

Consumer Need

Lorimer believes the biggest gains in e-commerce are in those industries with "information discrepancies." For example, until Autobytel.com arrived on the scene, consumers were at a great disadvantage when buying a car. There existed a tight information loop between car manufacturers and dealers. Consumers weren't aware of dealer invoices, manufacturer rebates, and other critical information. But on the Net, the consumer has the knowledge to get a fair deal. For example, on the Autobytel.com site, you have access to Edmund's Buyer's Guides, Kelly Blue Book, Weekly AutoMarket Report, as well as other resources. Empowered with this information, a consumer can either make a purchase request or go directly to a dealer, greatly reducing the stress of buying a car.

Effective Business Model

Ultimately, a business must make profits, but many Net companies probably never will. As for Autobytel.com, its business model is perfect for the Web. Here's why: From the consumers' standpoint, the car-buying process is very stressful and complicated. As explained above, the Autobytel.com website takes care of this for free. Dealers want to sell more cars, but marketing costs are high, averaging about $335 per car. By becoming a member of Autobytel.com, a dealer's marketing costs average $86 per car (according to JD Power & Associates). These savings are partially passed on to the consumer and the dealer, making both sides happier. As a result, more than 2,600 dealers have joined the Autobytel.com network. Where does Autobytel.com make its money? It charges annual fees (ranging from $2,500 to $4,500), as well as monthly fees (ranging from $500 to $3,000) to the dealers.

One-Stop Shop

"When people think about cars we want them to think about Autobytel.com," said Lorimer. "That is, we are striving to be the portal for cars."

There is a long cycle of car ownership: buy, use, repair, and sell. Autobytel.com wants to offer compelling services for every part of this cycle. The site already offers many after-market services like insurance.

Guerrilla Marketing

For a successful Net company, marketing is critical. In an emerging market, it takes a huge branding effort to grow a customer base. Autobytel.com has been a pioneer of online advertising. In fact, it practically invented the notion of exclusive deals with portals, such as Excite, Infoseek, and Netscape. "We also provide the buying component for other car sites," said Lorimer. For example, the Autobytel.com engine is used at Edmunds.com, AT&T WorldNet, CarPrice.com, and IntelliChoice.com.

Autobytel.com believes strongly in traditional advertising. For example, it was the first Net company to advertise during the Superbowl, in both 1997 and 1998. Within minutes of the ads' airing, purchase requests skyrocketed.

Customer Feedback

Autobytel.com upgrades its site every three months. "We look at customer feedback intensely and also do usability studies," Lorimer said. "We strive to constantly improve the site. We want to make sure that is not only easy to use, but quick."

Trust

Quality is taken very seriously at Autobytel.com. To join the Autobytel.com network, a dealer must meet rigorous standards and also undergo training. To make sure the dealers are getting customer information, Autobytel.com has built a sophisticated extranet called the Dealer Real Time (DRT) system, with extensive contact management capabilities to keep track of customer interactions. There are detailed reports that even compare performance against other dealerships. The DRT technology also tracks customer satisfaction.

High standards are also part of Autobytel.com's Used Car CyberStore. To be in the database, a car must undergo a 135-point Dealer Certification Program, so as to protect consumers. The Used Car CyberStore offers a 72-hour, 100 percent money-back return policy, as well as a three-month, 3,000-mile warranty. As Lorimer likes to say, "I don't want to hear that our customer got a bad car."

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