Branson's brand was a virgin in the car market

Currently under new management, Virgin Cars is now starting to cut it in online car sales. James Ruppert explains how the company has done it

Once upon a time, buying a new car was a simple process. You went to a dealer, chose the car, paid what they asked and waited patiently for delivery. However, in the last few years UK consumers emboldened by the "Rip-Off Britain" campaign discovered that they paid more for their vehicles than anywhere else in Europe. The strong pound also made the price differentials more obvious and alarming.

Entrepreneurs realised there was money to be made by getting disgruntled UK consumers behind the wheels of cheaper new cars with the least amount of hassle. So, not surprisingly, the most ubiquitous brand name of them all, Virgin, wanted to flog you a car. But after four years Sir Richard Branson is handing control of the Virgin Cars business to Derek Cook, the car dealer whose DC Cook firm went bust three years ago.

So why the handover? Virgin Cars was set up to import cars from the Continent, taking advantage of lower prices, and then sell them over the internet. It moved into phone sales before entering the highly competitive area of car supermarkets.

Now Branson is negotiating to merge the business, which reported losses of more than £13m in 2001, with Motor Solutions, a motor retailer set up by the Cook family. Virgin will have a 25 per cent stake in the business, which will trade under the Virgin Cars brand. Branson will keep the option of taking his stake to 50 per cent, depending on how well the company trades in the future.

As Virgin reorganises itself the rest of the motor trade can now afford to feel a little smug, especially when Branson said modestly at the launch of this venture: "It is our intention to become the biggest car dealer in Britain." Yet the serial entrepreneur and jumper wearer's record on diversification was not particularly encouraging. At the time, the Our Price record chain was debt-ridden, the Victory clothing business closed due to lack of interest and few of us could stomach Virgin Cola.

Darren Duesbury, the managing director at Showroom4cars.com which successfully operates a car supermarket and an online new car sales operation, gave his opinion as to why the UK's biggest brand didn't succeed: "Virgin definitely thought they could break new ground by applying new ways of working to the motor trade. But, as well as focusing on customer service, it's also essential to concentrate on sourcing your stock, and this is something that they failed to address.

"In the motor trade, customer choice is very important, and you need to have a wide range of vehicles readily available. The fact that manufacturers were generally unwilling to support Virgin, while block exemption remains an issue, doesn't help the supply situation either."

Duesbury is referring to Virgin staking their claim to some potentially lucrative territory. In 2002 the EEC Block Exemption rules, which had allowed the cosy and exclusive relationship between manufacturer and dealer to prosper, was opened up to competition. Potentially that meant anyone could sell a range of new cars without being an accredited dealer. That does not seem to have happened and it is the UK brokers who have been operating for some time who look set to prosper.

Drivethedeal.com have been sourcing cars from within the UK new car dealer network for more than eight years with a great deal of success and know what they are doing. "You have to offer a good deal or customers won't buy the car," says managing director Richard Saunders.

"The car supermarkets which supply pre-registered imports are offering the worst of all worlds that can cause buyers problems when they come to resell. We have long-established relationships with dealers and if there is a problem, the car buyers have instant support. Also the way we operate we are never at the mercy of fluctuating exchange rates."

As his company can offer the latest Volkswagen Golf diesel with a substantial 15.5 per cent saving and the equally fresh Jaguar X-Type estate at 9 per cent off, here is proof that you can buy cheaply and safely. This is very relevant because in the last year buyers have lost deposits as importers have gone into receivership.

You need to know your way around the car trade to survive and that may explain why in the first weekend that Motor Solutions ran the Virgin supermarket site they sold a record 33 cars in 48 hours. The Virgin name is not disappearing and Derek Cook has ambitious plans, aiming to open more sites to create a nationwide chain of 12 over the next five years and ramp up sales to 24,000 a year through the call centre operation alone.

It supplies discounted new and nearly-new cars to third-party resellers, including the British arm of the Dutch-owned cash-and-carry chain Makro. They also claim to be in talks with a major UK food supermarket fuelling rumours that one of the biggest brand names in the UK is about to enter the market.

So far, while providing car loans and insurance, both Sainsbury's and Tesco have resisted the temptation to sell cars outright. Marks & Spencer always played down their involvement with the One Swoop online car retailer. Maybe they realise that flogging cars direct to the public isn't that easy. That has not put off Lloyds TSB which is setting up a chain of car supermarkets under the Black Horse Car Sales brand.

Buying a car should be a simple process and not a brand beauty contest. Buying from the company you trust is only part of the equation, the bottom line is just as crucial as getting the service you demand and deserve. So until Virgin and all the other car supermarket wannabes get their act together, you still have to shop around to get the best deal.