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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

B2B: Getting It Wholesale
New Zealand used-car dealers are buying Japanese autos on the Internet. Is this the future of global trading?

By ANDREA HAMILTON

Steve Beston sells used cars. The job does not require a lot of technological know-how. Until recently, the only microprocessors on the lot of his New Zealand dealership were inside the Toyotas and Nissans. Beston's offices harbored no computers. "I don't trust them," he says.


Munshi Ahmed for Asiaweek

An unlikely candidate for an electronic-commerce test drive? Don't bet on it. Earlier this year, Beston bought a PC for his business after he was offered an irresistible deal: the ability to bid on used cars located in Japan through an Internet auction service. Now he acquires part of his inventory online without kicking a tire. "I'm the last person you'd expect to find among the first ones doing this," says Beston, surprised to find himself on the cutting edge of business-to-business e-commerce.

Bringing self-described Luddites like Beston into the Internet era is the job of Fujimoto Misao, managing director of Asia Business Venture Holdings (ABVH). The Singapore-based company is trying to streamline age-old international trading practices by adapting them to the Net, and among its first efforts is New Zealand's - and the region's - first wholesale auto auction website. "This is conventional commerce, just replaced by electronic means," explains Fujimoto. "We operate between the buyer and seller, as an exchange for commodities. In this case, the commodity happens to be used cars."

ABVH - owned in part by Japanese trading giant Sumitomo Corp., SembCorp Industries and three Japanese banks - is edging into a big market. With no domestic auto industry, New Zealand imports all of its new cars and most used vehicles. Its largest trading partner is Japan, which supplies more than 100,000 new and used cars and trucks annually.

For small used-car dealerships, the geographic distance from their primary source of supply presents hassles. Typically, buyers must spend a week in Japan every month or two, paying visits to traditional auction houses, inspecting vehicles and bidding on them in person or through an agent.

Japan's larger houses have offered online auctions for several years, but not on the Net; buyers must be in Japan to access the private networks. That's where ABVHcomes in. Through its New Zealand affiliate Auto Auction Network (Aucsat), the Singapore company allows dealers to log on from home territory and join the live bidding. The Aucsat web pages display photos and specifications of vehicles, their lot numbers, and inspection grades and conditions (information is posted 24 hours in advance so dealers can peruse the lot). Once the opening gavel drops, bidders must point-and-click with all the haste required for a real-world auction - cars typically are sold online in less than 20 seconds. The winning bid includes commissions, customs fees and door-to-door delivery, which is handled by ABVH. Between four and six weeks later, the vehicle shows up at the dealer's driveway.

Auction participants say buying online currently offers no significant cost benefits save travel cost savings. To address concerns of those who might be leery about bidding on vehicles they haven't eyeballed, ABVH inspects each car and guarantees its condition.

The convenience factor, however, is strong motivation. Several dealers who say they now buy about one out of 10 cars through ABVH plan to increase that proportion. The system certainly seems to have appeal: a wholesaler interviewed by Asiaweek declined to be named because he didn't want his customers finding out he was using the service - and that they could too, cutting him out of the loop. "I've bought some vehicles through Aucsat that I can't buy at auction in Japan - I've just never seen them," says Mike Vinsen, a used-car dealer who has been importing from Japan for 12 years. "In a perfect world, I'd buy all my cars this way."

ABVH has yet to make the auction site an end-to-end e-commerce operation. The system was originally designed so that payments would be automatically debited from dealer accounts - a feature that car lot owners have firmly resisted, prefering to pay by check and maintain control over their cash flow. Paul Chia, ABVH's general manager, says he is confident that some form of electronic payment will ultimately be acceptable to users.

After a year of operation, ABVH has signed up about 40 dealers, as much as the system can handle. Technically, it's still a pilot project. Chia says it has taken six months to get the bugs out of the software, and they are continually tweaking the technology. Full commercial service is slated for later this year, after the capacity of the computer system is boosted to accommodate a growing waiting list.

Aucsat sold 300 cars between January and April at an average price of $6,400. ABVH, which makes a commission on every sale, has yet to turn a profit. But roughly 30,000 vehicles pass through Japanese auctions every week, of which ABVH buyers have access to 4,000. As ABVH expands, it can boost the volume of cars available to dealers, and sales along with it. Chia says the company should be in the black sometime in 2000.

To be sure, buying cars online has been growing in popularity among consumers in the U.S. and Japan, where millions of people use the Internet. Two of the U.S.'s leading auto websites, Autobytel.com and Autoweb.com, say they each generate about $25 million in auto sales every day.

ABVH officials see no reason why that kind of success can't be achieved in the wholesale used-car market. But they do not intend to stop there. The company is the brainchild of Ito Seiji, a Tokyo-based executive of Sumitomo Corp. Ito thinks the future of Japan's giant trading houses is in e-commerce services linking buyers and sellers and providing logistics and payment systems. ABVH intends to apply what it learns in the Internet car business to other commodities.

Last month, the company set up a joint venture with closely held New England Circuit Sales in Boston to expand their trade in electronic components to Asia and Europe via the Internet. Still under development: Web-based services for trading steel, wood pulp and chemicals. "The basic model and infrastructure is in place," says Fujimoto. "Step by step, we will change a traditional business over to electronic business." Why not? He has already converted used-car salesmen. Is there a tougher crowd?


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