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23rd in a series of occasional articles about venture businesses

Staff writer

The concept of Internet marketing is nothing new to Kiyotaka Fujisaki, president of Aucnet Inc., who started selling cars on a computer network long before the Net became a popular sales vehicle.

Fujisaki invented a computer auction system for used cars that combines a computer, communications satellite and telephone lines, enabling car dealers to join an auction from their office.

“I kept wondering if there was any way that automobile dealers could join an auction while sitting in an office. It takes time and effort to run around auction sites all day long. … If I could create such a system, I knew that there would be strong demand for it,” said Fujisaki, 46.

Subscribers to the auction system need to buy a special computer system with a tuner to receive data such as photo images and voice transmissions sent from a host computer at Aucnet’s headquarters in Tokyo via satellite.

While viewing information on their computer screen, dealers make bids from their terminals, which are linked to the host computer by telephone lines. Such auctions are held five days a week.

The company currently has about 6,100 corporate subscribers, including about 500 dealers of used motorbikes. Fujisaki hopes to raise total membership to 8,000 by 2000.

When Fujisaki launched an early version of the auction system in 1984, sales of automobiles were conducted face-to-face and the idea of selling cars by telephone was totally new. “It was a challenge. At that time, even the word multimedia did not exist. It was the time when people had just started talking about telecommunications. Boldly, we started the new system by hooking up more than 1,000 computer terminals,” Fujisaki said.

The satellite-based auction system, which can handle a sale in 0.2 seconds, met the demand of used car dealers who want to sell their stock as soon as possible.

Before the company launched any sort of sales effort for the new auction system, Fujisaki had received more than 1,000 applications from car dealers who wanted to subscribe. “A new car becomes a used car immediately after it is sold. If dealers keep a car for one year, the car gets one year older and its price automatically drops. Dealers try to minimize the time they hold their stock,” Fujisaki said.

Along with the auction system, Fujisaki established an inspection system for used cars to increase the credibility of the product information that is sent over the system. The firm currently hires 114 inspectors who check every vehicle before it is put on auction. “It is difficult for even professional auto dealers to identify cars that have been in accidents or submerged under water. (With the inspection system) we make our information credible,” Fujisaki said.

The company, founded in 1984, logged 9 billion yen in sales in 1997.

Fujisaki believes the expertise gained through the auction system for used cars can be applied to other products. He started a satellite-based auction system for fresh flowers in January 1997.

Fujisaki also plans to expand the auction business to overseas markets, including the United States and New Zealand, although he already experienced a failure in the U.S. market.

The firm entered the U.S. market in 1994, but Fujisaki had to close the U.S. operation earlier this year due to different business practices there.

In the U.S., automakers have stronger ties with used car dealers, and the auction system did not function as well as it does in the Japanese market, Fujisaki said. “We were a little early going into the U.S. market. The distribution system in the U.S. is a little behind that of Japan or other countries. But I’m sure that our system will be accepted in the future,” Fujisaki said.

In cooperation with Sumitomo Corp., Aucnet plans to start the auction system in New Zealand, where the import of used cars from Japan has been on the rise and roughly 90 percent of used cars in distribution are Japanese products.

Fujisaki stressed that Aucnet’s satellite-based auction system is different from the concept of selling cars over the Internet, though the two systems may look similar.

In contrast to the Internet, which targets consumers, Aucnet’s system targets professional car dealers. Fujisaki said consumers still need to consult car dealers about such matters as insurance and legal procedures when they buy cars.

“The Internet provides information to sell goods (to consumers). For some products, consumers can place an order by tapping computer keyboards and get delivery the next day. But cars are not that kind of product,” he said.

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