Should dealerships become obsolete?

mwking

Original poster
Member
Dec 7, 2011
9
Ok, this is something I have been thinking about lately and it should be interesting to see what people on the board think about it. Considering that most people seem to come here for info to their own vehicles and avoid the dealer unless they have no choice I can figure we are biased against them to start. While there are some good dealers, we hear a lot of horror stories of dealers and their staff that just seem to be out to get as much money out of the customers pocket as possible and just move on to the next. A good dealer can be a great asset to the manufacturer, but a poor one really hurts their reputation. The manufacturers aren't blameless in this either, sometimes they take the easy way out rather than deal with the customers concerns with a dealer.

So if you were a car company today and you were starting fresh would you go out and start up a franchised dealer network to sell your product to the public and service them? It may have been the way to go 100 years ago, but is it today? If you were a car company from China or India and you wanted to start selling a small inexpensive car in North America how would you market it? Multi million dollar dealerships have to be paid for, what if there isn't enough margin in the car to justify that much investment? Would you as a car buyer be willing to purchase a vehicle directly from a manufacturer or from another authorized retailer who carries the product?

With all of the options to research vehicles online, do you really need a sales person to sell you the car, or do you just need somewhere to go to test drive one and look at it in person to make up your mind? If the car company had it's own stores in larger centers would you go there to see and buy the product or to a retailer who carrys the product? Would you want the option of ordering the vehicle exactly as you want online from the manufacturer and having it delivered to a retailer near you?

For service, would you rather have the manufacturer set up authorized service centers for warranty service? Would you be willing to take your vehicle to a major retailer's auto center for warranty work? As far as regular service is concerned would you rather just find your own service facility or do it yourself and keep your own records and receipts of the work done for warranty purposes?

Another way of looking at this is to look at the real estate market. It used to be that just about everyone that bought or sold a house used a real estate agent. Now that there are many more options for researching and listing homes online, not everyone sees the need to go that way and pay thousands in commission for someone to act as your agent. If you can buy or sell your house on your own, why not your car? Is the dealership model outdated and ineffecient in todays marketplace?
 

Me007gold

Member
Nov 20, 2011
1,106
mwking said:
Ok, this is something I have been thinking about lately and it should be interesting to see what people on the board think about it. Considering that most people seem to come here for info to their own vehicles and avoid the dealer unless they have no choice I can figure we are biased against them to start. While there are some good dealers, we hear a lot of horror stories of dealers and their staff that just seem to be out to get as much money out of the customers pocket as possible and just move on to the next. A good dealer can be a great asset to the manufacturer, but a poor one really hurts their reputation. The manufacturers aren't blameless in this either, sometimes they take the easy way out rather than deal with the customers concerns with a dealer.

So if you were a car company today and you were starting fresh would you go out and start up a franchised dealer network to sell your product to the public and service them? It may have been the way to go 100 years ago, but is it today? If you were a car company from China or India and you wanted to start selling a small inexpensive car in North America how would you market it? Multi million dollar dealerships have to be paid for, what if there isn't enough margin in the car to justify that much investment? Would you as a car buyer be willing to purchase a vehicle directly from a manufacturer or from another authorized retailer who carries the product?

With all of the options to research vehicles online, do you really need a sales person to sell you the car, or do you just need somewhere to go to test drive one and look at it in person to make up your mind? If the car company had it's own stores in larger centers would you go there to see and buy the product or to a retailer who carrys the product? Would you want the option of ordering the vehicle exactly as you want online from the manufacturer and having it delivered to a retailer near you?

For service, would you rather have the manufacturer set up authorized service centers for warranty service? Would you be willing to take your vehicle to a major retailer's auto center for warranty work? As far as regular service is concerned would you rather just find your own service facility or do it yourself and keep your own records and receipts of the work done for warranty purposes?

Another way of looking at this is to look at the real estate market. It used to be that just about everyone that bought or sold a house used a real estate agent. Now that there are many more options for researching and listing homes online, not everyone sees the need to go that way and pay thousands in commission for someone to act as your agent. If you can buy or sell your house on your own, why not your car? Is the dealership model outdated and ineffecient in todays marketplace?

Most people are stupid and need the dealer to hold their hand through the entire process, while its a nice idea it will never happen. Most of the general public need the dealer and their severice center. Enthusiasts like us are the exception. Most the general public has no desire to work on their own vehicles. They just want to drop it off and have the problem fixed.
 

jrSS

Member
Dec 4, 2011
3,950
I would agree on the easy things to work on. Some people aren't too mechanically inclined to do some of the big jobs, or are overwhelmed. I think its stupid as hell to take it in for fluid changes and things of that nature. (Unless u bought lifetime oil changes) but still i'd rather do the fluid changes cuz I know it'll be done to my expectations.
 

Lima Tango

Member
Dec 4, 2011
242
Think about all the ways people have to avoid dealerships - internet buying, services like USAA or CostCo, etc. A. Lot of people still want to use traditional dealerships. You can be sure they do cost/benefit analysis' to justify the investment in the dealerships. If enough people still use them to offset the cost, they will still have dealerships. Plus even if you don't practice predatory sales practices, they still can upsell to a higher profit edition or trim package much easier if the customer is entranced by the shiny car right in front of them rather than just reading about the technical data of each model.

At the end of the day, we are a capitalist society, and customers vote with their dollars. If the customers dollars stop coming in through dealerships, they will disappear.
 

mwking

Original poster
Member
Dec 7, 2011
9
Ok, the thread title was designed to get your attention, I don't really think that all dealerships are going to closeup overnight or anything. They do have their place for a lot of customers who need and are willing to pay for their services. But what if you are a new automaker to North America and you want to sell here but you need a different cheaper way to market your product. Maybe your marketing a low priced car that a traditional dealer dosen't want because they can't make enough on it, you might only have a couple of models. Do you think the market is ready for cars to be sold differently, and if it started to happen do you think that it would shake up the existing car sales structure? In some ways the existing system seems to me like an old general store back 100 years ago. You go in and a clerk waits on you, you just stand there and list off all the things you want today and they find it and wrap it all up for you. That level of service comes at a cost and today's shoppers, while they might like it, don't want to pay for it.

It's all pretty hypothetical at this point, but change is afterall the only constant.
 

Badbart

Member
Nov 20, 2011
633
Good subject. I don't think you will see any dealers going away forever though. Just tougher competition. I've been in and out of the auto service business since 1975. The labor rate was $12.00 an hour with the experienced techs getting 50% ($6.00) and the new guys getting 40% ($4.80). The labor rates have gone up through the years but the techs pay is usually no more than $25.00 per hour for the highest paid. That leaves the dealer getting roughly $75.00 per hour/per tech, $85.00 per hour if the tech only makes $15.00 per hour(based on $100.00 per hour). Definately not the 50/50 deal from days gone by. On top of that many dealers use a "labor grid" that makes it hard to pin down the true labor rate. The dealer will say their labor rate is $93.00 per hour (for the first hour)but when they use the grid it's usually over $100.00 per hour. These prices reflect my area, many other areas are much higher. And then there is the "shop supplies"! 5% of the first $500.00 in repairs. So that's $25.00 per car. So a busy shop with 100 cars a day (not uncommon) equals $2500.00 per day, or $12,500.00 per 5 day week! Now you can buy alot of shop rags, grease, and penetrating oil with that, huh? And the worst part is that the customers aren't complaining so much about the cost, but the shoddy service. Not getting the car fixed right the first time. It's so hard to find competent help these days. And then there's the parts department. I priced a job that included a part that was quoted at $156.00. I then was told by the customer that he had an extended warranty. I presented the warranty company the estimate. They have software that verifies the part numbers and gives them dealer MSRP prices. As it turns out the part was only listed at $49.00, so they were ripping the customer at 3 times list price. This is a common practice. Basically, the dealer is making a 50% profit from the service department/parts department these days. On a week that I, as a service advisor, wrote $30,000.00 worth of service sales, the dealer made a $15,000.00 profit. My dealership had 5 service advisors. Do the math.

And then there's the new car and used car departments....:lipsrsealed:
 

Wooluf1952

Member
Nov 20, 2011
2,663
Milwaukee, Wisconsin
mwking said:
Another way of looking at this is to look at the real estate market. It used to be that just about everyone that bought or sold a house used a real estate agent. Now that there are many more options for researching and listing homes online, not everyone sees the need to go that way and pay thousands in commission for someone to act as your agent. If you can buy or sell your house on your own, why not your car? Is the dealership model outdated and ineffecient in todays marketplace?

This relates more to used vehicles.

If there were no dealers, who would do the inevitable warranty work?

I think the manufacturers need to take more responsibility for the greed and dishonesty of some dealers.
 

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