Quote:
Originally Posted by Tacoma
I agree car dealers would still be needed to service delivery and other costs like inventory holding, etc. Service centers is funded out of costs to cover services not MSRP sales.
But a material part of MSRP currently covers sales costs that include sales commissions, sales managers, sales and after-sales support (like financing), very expensive real estate for showrooms, fixed asset costs for sales department, etc. that would no longer be needed (done online), and thus MSRP can drop and still maintain same margin. All of these costs would be centralized by the manufacturer but would still be much less than sales costs of maintaining hundreds/thousands of decentralized sales departments across the globe via dealerships.
Therefore, from a cost-based pricing perspective, MSRP price should materially decrease since the Dealership Sales department can be largely eliminated if sales can be done via manufacturer's website. Of course that's only the cost-based pricing perspective as you can still price over cost-based MSRP based on market factors like supply and demand.
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I highly doubt manufacturers will simply pass on savings from removing sales staff to the consumer. Manufacturers, whether it be automakers or any other industry, are looking to cut costs not so that they can reward the customers, but so that they can increase their own margins or hedge against rising costs associated with materials, logistics, geopolitical issues, or whatever else is going on in the world (or to just line their pockets).
As for removing dealerships entirely as many suggest, we don't have enough information to say that savings from elimination of dealer showrooms and sales related costs would be greater than the increase in logistics/production costs. I've done hundreds of network studies related to physical asset rationalization to know that it's not as simple as people make it out to be. Often times conventional thinking might suggest that it's obvious if you remove costs associated with labor and physical facilities you'd save money - failing to realize that you're sub-optimizing distribution/logistics and manufacturing which results in an insane amount of added cost. And like I mentioned before, in times when demand is irregular, that issue is further exacerbated by the inability to have a dealer network to absorb inventory and be able to streamline production planning.
Dealers aren't here to service customers. Dealers exist to service manufacturers. And while many customers feel like they're getting screwed by a dealer and hate the haggling process, any savvy shopper can easily leverage the dealer network to their advantage.
When I was car shopping, I didn't step foot inside a single dealership until it was time to collect my car. The only other time I'd even consider going to a dealer would be if I wanted to test drive, and even then anytime a sales person wanted to talk numbers I made it clear I was only checking out the car and wanted to think about my decision on my own time. I didn't do any "negotiation" in the form of haggling. I drafted a simple email detailing exactly what I wanted and what sort of pricing I was expecting, and blasted that email to 20 different dealers in the Midwest. It was a simple yes/no question if they accepted. If any dealer asked me to come in to talk, I declined and stated if they wanted my business, they'd address my question in the email. Ultimately 4 of the 20 dealers were willing to play ball, and I simply went with the dealer which offered the best combination of pricing and service. It was such a pain free process, and I'd take that 10 times out of 10 over paying a non-negotiable, static price where the manufacturer can arbitrarily raise prices at their will.
I'm all for a hybrid model... maintain a dealer network for those who are savvy shoppers and have knowledge to be able to leverage the dealer network... and for those who don't want to talk to a person and are ok paying MSRP, knock yourselves out and order a car as if you're ordering a pair of slippers on Amazon.