Austin, Texas-based CarOrder is the latest vehicle sales site to fall on hard times. In December, Amazon.com-backed Greenlight.com laid off about 25 percent of its staff to slash costs. Competitors Autoweb.com and Autobytel.com have also stumbled in recent months as executives defected and stock prices tanked.
In addition to typical business-to-consumer challenges, including customer service hassles and high turnover among staffers, vehicle sales sites face additional roadblocks: Strict franchise laws in most states forbid the sale of new vehicles to consumers from any outlet except an authorized dealer. That reduces online car-buying sites to middlemen, where profits are slim, or leaves them scrambling for new business models as funding dries up.
Privately owned Trilogy, which specializes in configuration software, had invested roughly $70 million in CarOrder since 1998. The division employs 26 people, and many will assume new positions at Austin, Texas-based Trilogy. Those who do not get new jobs at Trilogy will receive severance packages with health benefits, spokesman Reed Byrum said.
Like many e-commerce companies, CarOrder had a brief but complicated lifespan.
The company was founded in 1998--a time when any company with a ".com" at the end of its name was fashionable, and business-to-consumer e-commerce was the rage. The operation sold cars to consumers at a no-haggle price, then located specified vehicles at dealerships nationwide, pocketing the scant difference between the customer price and the dealer invoice.
But by the summer of 2000, investors had soured to e-commerce companies. In August, CarOrder shuttered its e-tail operations and began a plan to remodel itself as a company specializing in car dealership operations. As part of the reorganization, CarOrder laid off 100 of its 150 workers.
The remodeled operation dropped the ".com" from its name and acquired two California dealerships in the fall and winter of 2000. Employees concentrated on learning how to wire the brick-and-mortar world of showrooms to compete in the business-to-business segment, while also selling cars in stock directly to consumers.
The company planned to buy more dealerships and assume the back office e-tail concerns of other traditional dealerships, bypassing its role as middleman. CarOrder unveiled a new site Jan. 30.
But CarOrder could not raise enough funds from outside investors to buy more dealerships. The recently purchased dealerships will be sold, Byrum said.
Trilogy refused to invest more in CarOrder because it would not likely be profitable in the next several years, Byrum said.
"Our consumers enjoyed CarOrder," Byrum said, "but we also realized, based on consumer reaction, it was going to take a long time to achieve the goals of profitability that Trilogy required for continued investment."
A CarOrder representative said the company will honor all orders that were placed through the site in the past month.
"Our dealerships will hopefully be able to fulfill all orders and customers will be taken care of," CarOrder's Beth Viner said.