Ever wake up one morning and think, "I'm going to go car shopping, oh what fun!"? Me either. I'd be willing to bet some amount of something that not too many people do. No one I know thinks car shopping is fun. I concede that automobiles are expensive and no one likes the idea of shopping for a money sink that's inevitably going to cost them a lot of it. Maintenance, fuel, and repairs oh my! However, I don't think that cost is the only reason, or even the primary reason, that car shopping isn't fun. Case in point, I know many people who enjoy home shopping, clothes shopping, computer shopping, and tool shopping (<-- I love tool shopping). Going to open houses, showings, and driving around looking at homes in different neighborhoods can be fun and even exciting despite the fact that the average home costs 5-10 times more than an automobile.
So, what makes car shopping so dreadful? Is it the lack of options? Doubtful - there are more car manufacturers today with more models and more options to choose from than ever before. So, what then? What about the sales person? Car dealers have developed quite a reputation for themselves over the years. Perhaps it's the high-pressure sales and the perception that dealers are difficult to work with. What about the perception that car sales people lie? Not all of them of course, but there's no denying the "used car salesman" metaphor. Now we're getting somewhere.
Car dealers are notoriously difficult to work with, more so than other retail enterprises and industries. But, why? Why must it be so difficult to purchase an automobile? Is it really that difficult or is it just a bad perception? Better yet, why is it so difficult to buy an automobile in 2006, the age of the Internet, enlightenment, and online groceries? I'm glad you asked. I intend to explore this theme through the rest of this essay using highly scientific made-up statistics, personal observations, allegory, and other literary techniques to prove my, as yet unstated, syllogism. We'll get to this in a bit. So, we've established (it's my essay, I say so) that automobile dealerships, and particularly sales people, are difficult and frustrating to work with. Let's see if we can figure out some reasons why.
First, automobile sales people generally work on commission. Commission sales people are typically difficult to work with for the obvious reasons, regardless of the industry. Have you ever tried to buy consumer electronics or an appliance at a retailer with commissioned sales people? They invariably attempt to steer you into the most expensive models with the nifty whiz-bank features guaranteed to add enjoyment to your washing experience and treat your clothes with the utmost care while agitating them in toxic chemicals. Then, after fighting the good fight to get into the relevant price range, here come the accessories you didn't even know you needed and the extended warranties. Let's be clear the more you spend, the more he makes. Simple incentives have worked since the days of the Neanderthal. Car dealers == Neanderthal. No, quit jumping to conclusions. Car dealers == commissioned. Commissioned == greedy? Maybe greedy is too harsh a word, but it's close. Commissioned == incentivized. Therefore, commissioned sales people have a vested interest in themselves and seeing you spend lots and lots of your money on the product they're peddling to earn money for their hobbies.
Now, it's time for my allegory. John and Jane have a car that's getting on in miles and years, and they think that perhaps it's time to trade it in for a new one. John and Jane have a slight difference of opinion on whether they should finally buy a minivan or another SUV. John's not quite ready to be a soccer dad just yet, so he's holding out. I digress. So, John jumps on the “the internets” to go to “the google” and research new cars. He spends hours and hours driving Jane crazy with deal after deal and every permutation of options that Jane doesn't even care about in the first place. After several days and dozens of cars later John and Jane go to the local dealership armed with a Kelly Blue Book® printout of the value of their current car, three printouts of the cars they're interested in (picked right from the dealer's online inventory system) including the estimated payment amounts, and the payoff amount for their current car.
They arrive at the dealership after rehearsing their speech about trading “old faithful” in for one of the three printouts. They park “old faithful”, get out, let the kids out, and begin looking. Like chum in the water, here come the sharks. A fine upstanding young man comes to assist. "Hi, I'm Sharky. Can I help you find a car?” Jane panics. She turns to run. She grabs the kids and heads for not-the-car-they-want to put some distance between them and Sharky. Dad can handle this. John explains everything exactly as rehearsed - he nails his lines! Then Sharky begins the pitch. Something's wrong. John's sure he explained the bit about wanting this *particular* SUV, not the brand new one. Perhaps Sharky is just showing John a new one for comparison to last year's model. That's it. John explained what he wants very clearly so that must be the reason they're heading across the lot to the new SUV's.
Fast forward. John finally convinces Sharky of the SUV that they want. Now, about that trade-in. Of course, the Kelly Blue Book® is only used by car dealers under the following circumstances: You haven't looked it up. If you've looked up the value of your car already, then the dealers are forced to use other tactics. Ultimately what this means is that, although John knows “old faithful” is worth $5000, Sharky has no choice but to offer $3800 based on the super-secret, highly classified formula known only to the dealerships which I am about to divulge right here. I can get in a lot of trouble for exposing this knowledge but I feel it's my duty. Here it is: Sharky pulls a number directly from his sphincter, which is much lower, but not too much lower than the Blue Book® price that John is holding. Let the fun begin! John's pulse begins to climb, his ears begin to get warm, and he feels the skin on his scalp tighten. It's the fight-or-flight instinct. Adrenaline rushes. Fortunately, like any well-rehearsed military battle plan John expected this! He prepared for all contingencies, even this. Tragically, John has purchased enough automobiles to know that this is normal and the only option is fight. Flight will land him in the same predicament at another dealership, only he'll have to start all over from scratch. At least this way he's made it to this point and the worst is over. Or is it?
Fast forward. John spent the previous 35 minutes arguing, yes arguing, with both the sales person and the sales manager about the merits of the Blue Book®, the value of “old faithful”, why he's frustrated, and why he won't accept anything less than $5000. Jane and the kids have long since walked across the street to Burger Mountain with the Play World. Since no one can seem to come to an agreement on the value of “old faithful”, they agree to move on to discuss the purchase of the new vehicle and return later.
The SUV that John decided on has a window tag with the value $18,998. John made the mistake of assuming that that number was the price of the vehicle. Unfortunately though, automobiles are not be priced that way, because Sharky immediately asks John what monthly payment amount would be suitable to him. Another flanking move by the shark. Once again, John came prepared. He figured the estimated payment amounts and wrote the entire equation on the aforementioned printout of the SUV. That John, he's a clever one. Sharky then asks him what is credit score is. John knows his credit score is 728 but doesn't want to discuss the specifics with Sharky so he tells him it's “great”. Sharky picks up the phone and calls the finance person to ask for a quote. He writes down 3 numbers 48, 60, and 66 months of payments. Now, John and Sharky are sitting opposite each other and the numbers that he's writing down are upside down, but John can definitely tell that they're no where *near* what he figured out at home. When Sharky gets off the phone, he shows John the three numbers and asks him which one sounds best. Here comes that warm ear, raised pulse feeling again. Those aren't right, that's not what John figured out. He's no mathematician but he can figure out interest and sales tax. What's wrong here? John asks to borrow a calculator. Mmm, hmm. The finance manager quoted John 16% interest. 16 percent?! Why?! Sharky begins to bob and weave. “That's about the going rate,” he explains. Going rate? Never mind that the going rate is about half that.
So, John can finally take no more. His blood pressure is raised, his ears are burning, the wife and kids have disappeared, and he's just been insulted too much for one day. John thanks Sharky for his time and gets up to leave. Wait! Not so fast, prey. Sharky makes one last ditch effort to get John to commit by asking for... earnest money! Dum dun duuuuuuhhhhh. “How about I put the SUV in sold status for you while you go talk it over with Julie?” “It's Jane.” “Right.” John leaves, never to return.
The end.
Why did this happen? Better yet, why does it always happen?
Now it's time for my personal observations. I've personally experienced, and I know a number of people who have also experienced, the story of John and Jane. It's way too common and all too tragic. Essentially, the only conclusion that one can draw is that automobile dealerships all practice the same sales tactics unilaterally. I've been to Chrysler, Ford, GM, Honda, Toyota, and non-franchise dealerships, and I have yet to experience anything other than the insulting, frustrating, low-ball-the-trade-in, overprice-the-new-one, jack around the credit score, talk payments-not-price tactics. They're demoralizing, frustrating, demeaning, insulting, and off-putting. Unfortunately, this is the only way to buy cars.
Are you listening car manufacturers? This is the outlet for your product. This is what you depend on to move your wares and ultimately what determines your profitability, or lack thereof. Something is seriously wrong with this methodology.
I read headline after headline about automobile manufacturers such as Ford and GM whose sales are declining and who are suffering major losses. Price cuts, buyer incentives, rebates, cash-incentives are used to combat the falling sales. Yet, the commission, non-fixed price, haggle-style retail model lives on. Dealers who think of their customers as prey and sales people who care about one thing, their commission. Has anyone ever looked at the turnover at car dealerships? It's enormous. There aren't likely any hidden reasons behind that. It's a cut-throat business model and it's almost assuredly contributing to the decline of automobile sales (aside from the fact that most automobiles are over-priced). All of the economic analysis, JIT inventory algorithms, ERP scheduling, union contract negotiations, plant consolidation, and off-shoring you do doesn't change the fact that the consumer outlet for your product is stifling your sales. After all, everything that goes into an automobile, all of the marketing, manufacturing, and planning, all boils down to a simple transaction at a dealership between a sales person and a customer.
Tragic? You bet. Do I feel sorry for you? No.
It's 2006. The interweb thingamajig has been around for over a decade now. Why do you suppose automobile manufacturers haven't jumped on board yet? I can buy groceries, consumer electronics, legal services, clothes, mortgages, auto loans, and.. .yes even cars (eBay) on the World Wide Web. So, why can't I browse to www.ford.com, build [my] vehicle and click check out? The only option available to me is find a dealer.
I don't want to find a dealer. Do you hear me? I don't like them anymore than they like me. I don't like being insulted, demeaned, or frustrated. I don't like wasting 4 to 6 hours at the dealership because I have to practically scream at them to get the trade-in value my car is worth. I don't like to stand outside in the rain. I do like to shop online and buy things in my slippers. I do like to click and look at wonderful pictures of your cars on your website. So, why can't I buy direct? Why aren't there regional warehouses where I can have my vehicle shipped after I configure it and buy it now? Why can't I have it delivered right to my home for an extra, nominal fee? Enterprise does it with rental cars, why can't [insert manufacturer here] do it with sales cars? It just doesn't make sense. Of course, I'm not an economist. On the other hand, I am a consumer. Funny thing is, I know a whole bunch of other consumers too. Yes, pretty much everyone I know is a consumer. Well, we don't like your dealers. We'd rather just have 1-click cars. Can't you work something out with Amazon to license that patent? Ok, fine don't license the patent. What about one-stop shopping. Apply for credit, buy a car! How simple. How wonderful! No dealers? Sounds fantastic!
Seriously, why can't I purchase a car direct from the manufacturer? You're making them anyway. Can't you just put my name on it and let me enter my credit information? Perhaps a 15% deposit with no refund as incentive not to back out, with payment in-full due on pick-up (or delivery). Have you ever even considered trying to leverage the Internet? Your dealerships (and bang-for-the-buck) are killing you. Slowly, they're helping to drive you out of business. It's time to make some changes, and I'm not talking about off-shoring. Your real problems are right here, on-shore, in every neighborhood.
Good luck.
Oh. The syllogism. Right. Drum roll, please. I will heretofore attempt the world's first syllogism as a haiku. Let this essay serve as prior art should a patent case ever arise. As promised, here goes:
Car sales slide downhill
Dealerships drive away sales
Auto makers lose
Alright. Not quite a syllogism but it's darn close.