GM boosts Net plans with e-commerce alliance
The giant automaker purchases a 10 percent equity stake in Internet consulting firm Reynolds & Reynolds in an effort help simplify its unwieldy e-commerce strategy.
GM's goal is to create a "seamless" experience across numerous brands, thousands of dealerships and hundreds of Web sites. Regardless of whether prospective customers visit physical or a virtual showrooms, the automaker said it hopes to tie them into a central database and uniform sales process that links to all GM dealers, suppliers and assembly lines.
The company currently uses a hodgepodge of databases and networks to keep track of the 5.7 million vehicles it sells each year--at great expense for the automaker and its 8,000 North American dealers, which must input orders numerous times depending on whether the customer wants to buy online or in person. No automaker in North America allows people to order customized vehicles online and track them from the factory to the dealership.
Bill Lovejoy, GM's vice president for North America vehicle sales, said creating a unified system would save the North American automobile industry, which records sales of $1.7 trillion annually, at least $40 billion in the first year and $10 billion on a yearly basis.
"We felt there was enough cost in the system that in doing this project...we would be able to eventually take cost out for the dealers or make it revenue neutral," Lovejoy said of the stake in Reynolds & Reynolds, which is valued at about $200 million. "We like to say there's a little bit of spaghetti in the system in that the dealer has multiple PCs and multiple connections to GM."
GM and rival Ford Motor have taken great pains to enter the e-commerce arena since the beginning of the year. GM has leased office space in a trendy San Francisco neighborhood to get its fledgling e-GM unit closer to Silicon Valley employees and ideas, and the automakers have jointly set up a vast online marketplace to reduce waste in their supply chains.
The newest deal means that Reynolds & Reynolds will be GM's preferred provider for dealer management systems and its exclusive provider for dealer e-business technology. But it does not necessarily prohibit the consulting firm, which wants to establish an industry standard for back-office e-commerce functions, from selling its model to other automakers.
"We've looked carefully at the opportunities here," said David Holmes, chief executive of Reynolds & Reynolds. "There are elements of this approach...that make sense for the whole of the marketplace and for individual manufacturers."
E-commerce experts praised GM for its efforts, even if the entire system will take two or three years to be completed.
"It's an excellent move," said Adam Kapel, principal of the e-commerce strategies and solutions group at Emerald Solutions of Portland, Ore. "It's important that organizations like GM think about unifying across brands and customer touch points. GM is a very, very large organization, and this will be a massive undertaking."