@LARGE
Internet-driven

By Scott Kirsner, Globe Staff, 9/4/2000

In jazz, there's a concept called trading fours. Two musicians in a band might do it. The first musician plays a short, four-bar improvised solo, and then the second responds. One player will sometimes build on a melody that the other started, or counter it.

Something similar is happening in the Internet economy right now. We've heard the pure-play Net start-ups, run by world-conquering MBAs and fueled by plentiful money, do their four bars. Now, attention is shifting to the other side of the stage: established businesses have a chance to answer.

In their four bars, old economy companies have a chance to build on the mistaken assumptions and strategic flubs of the start-ups. They've got other advantages: an intuitive understanding of their markets, strong relationships with customers, trusted brands, and, hopefully, a stable team that's signed on for the long haul. I expect we'll see established businesses do some impressive things with their four bars, not just when it comes to streamlining the delivery of existing products and services, but in using the Net to reach new customers with new offerings.

Barry Lundgren, the second-generation owner of Lundgren Honda in Auburn, is ready for his solo. Already, Lundgren has figured out how to use the Net to sell 50 new and used cars a month, which represents about 25 percent of his total sales volume. More than half of those cars are sold to people who wouldn't have ordinarily walked into Lundgren's showroom. That's impressive, even when compared to some Boston-area dealers who have been pioneers in Internet sales, such as Boch Automotive, which does about 10 percent of its volume online.

Lundgren also has plans to launch at least four auto- oriented Web sites this fall. The first to debut is TheCarSection.com, which is designed to offer car dealers an alternative to big newspaper ads. Lundgren also has plans for a Web site that would sell Honda parts to individuals who want to do their own repairs; a site called PrivateWheels.com that would facilitate consumer-to-consumer car sales and sell related services, including pre-purchase inspections, insurance, and warranties; and a site called NewAutoFinance.com.

''I'm extremely optimistic about the Internet,'' says Lundgren, who took over the dealership from his father in 1987, ''especially as it pertains to this business, which is so antiquated.''

At Lundgren Honda, they've already figured out Internet challenge number one: how to use the Net as another channel for serving customers. Want to buy a new or used Honda online - without a single visit to the Lundgren dealership in Auburn? You can do that. Schedule a service appointment? Absolutely.

Most dealers have not gotten that far. ''This is not a real forward-looking industry when it comes to technology,'' says Mark Bonfigli, the founder of EarthCars.com, a development firm in Burlington, Vt., that builds sites for car dealers - including Lundgren. ''[Barry] is definitely out there ahead of the pack.''

But apparently Barry Lundgren, beneath a laconic exterior, is an extremely impatient guy. The favored car in his personal fleet is a red Ferrari 355. It's not an investment. He drives it. A lot.

So Internet challenge number two is to develop a way that Worcester-area car dealers can work together to cut their marketing costs. Launched last Friday in partnership with Bancroft Nissan of Worcester, TheCarSection.com hopes to duplicate - and improve on - the big ads that car dealers place in local newspapers.

''Newspapers won't be thrilled to hear about it, because dealers spend 20 to 30 thousand dollars a month on those ads,'' says Lundgren. ''But you can't track the response to those ads - how many people do they bring into the dealership? TheCarSection will cost dealers $1,500 or $2,000 a month, and dealers will be able to track how many e-mails they get directly from those ads online. Plus, the Internet is there 24 hours a day. Dealers usually only advertise in the paper on Saturday, Sunday, and Monday.'' The site looks much like the new car ads you'd see in the paper - except the image quality is better.

Achieving success with TheCarSection won't be easy. For one, while Lundgren and the other dealers who participate may be slashing their newspaper budgets, they'll still have to spend money to attract serious buyers to the site. Lungren says he'll shell out as much as $20,000 a month promoting the site's launch and will devote half the revenues to advertising thereafter, but even in a regional setting that kind of money can disappear before it turns a Web site into a must-visit destination.

Then there's the issue of getting car dealers to come together for a joint venture. ''If you put a group of dealers in a room, they can't agree if it's day or night,'' says Ernie Boch Jr., a third-generation car salesman in his family. ''They're self-made entrepreneurs. The reason they're in business for themselves is because they want to do things their way.''

But Lundgren is committed to getting his colleagues to try Net ads instead of print ads, and he's not just talking the talk. Last March, he says, ''our dealership didn't spend a cent on advertising, and we sold 216 cars - our best month ever.''

Internet challenge number three is creating new offerings for new customers. One of Lundgren's projects in this category, the yet-to-launch PrivateWheels.com, is particularly promising - and an interesting model for other businesses. The dealership already knows how to make money by selling insurance, car loans, and warranties to customers who buy new and used cars on the lot. PrivateWheels.com will offer those services - plus $99 pre-purchase inspections - to individuals who buy and sell cars from other individuals. ''We wanted to figure out how to get at the billions of dollars in consumer-to-consumer car transactions,'' Lundgren says.

Yes, there's competition in this space - notably from AutoTrader.com - but Lundgren is keeping his investment manageable. The business will be handled by people already employed at Lundgren Honda. Site development has been outsourced to EarthCars.com. After covering the minimal costs of creating the site, the revenue that PrivateWheels generates will be the best kind of income: found money.

''I don't want to say that I'm bored, but I've done everything I could do with this car dealership,'' Lundgren says. ''So I'm looking at other opportunities within the car business. A lot of other dealers seem to hope the Internet will go away. That's fine with me. That's to our advantage.''

Established businesses of any size that exhibit that kind of ardent appetite for Internet opportunities are going to be the ones to watch over the next six months. To return to the world of jazz: If the pure-play start-ups of the late '90s were like Charlie Parker, burning brightly before burning out, old economy firms that get the Net are going to be like the Count Basie Orchestra, which since 1935 has chugged along like a big, unstoppable steamroller.

Agree? Disagree? Drop me an e-mail.

Scott Kirsner is a contributing editor at Wired and Fast Company magazines.