Tuesday, 30 August 2016

Car dealerships in the age of online shopping.

Where have all the car dealerships gone? 

I've been trying to go car shopping this week and have discovered that the process has changed completely since ten years ago when I last needed to buy a car.

Last time I went on the tour of car dealerships, there were loads of them around out town. Vauxhall are very successful here and there were many small Vauxhall dealers about the place. It seemed as though we could go on a daytrip in almost any direction here and it would be easy to drop into a Vauxhall dealer while we were there. One of these dealers had an expert engineering section and a snazzy little sports car on show in their showroom, just because they had so much money that they could.

However, now things have changed. There is only one Vauxhall dealer within reasonable travelling distance of my house and all the others have gone. The BMW dealer has left our town and moved to a much more rural location, which would take up a whole day to visit.

The people who used to sell new Ford cars here, gave up some years ago, and now sell used cars.

In summary, ten years ago there were lots of car dealers here and now there are fewer.

What happens when you enter a dealership now?

It turns out that when we go in and try to buy a car now, the process has changed a lot. 

We used to go in, look at cars, have a few test drives, read the brochures, and flounder helplessly while the salespeople charged us an inflated mystery sum for a car. 

These days, I look at reviews of cars on Whatcar. I read about the specs of cars on the manufacturers' website. I do a bit of comparison shopping online, using a combination of Google and Carwow. By the end of a couple of days I can go to a car showroom knowing exactly which car I want to buy, in which spec, and already knowing the best price available. All that's needed is a test drive to be sure that the car is suitable.

The other day though, I went into a garage and tried to act on my research. I ask for a test drive and also asked if the dealership would be able to match the best price online. To my surprise I was told that they couldn't match the price because they were a small company. The best prices were only offered by large dealers with bigger buying power. Furthermore, they said that they didn't want to offer me a test drive if I was going to then buy a car online elsewhere.

This left me in a big quandary, because I needed a test drive, but I didn't want to be unfair to the dealer. I also didn't want to just give up haggling, because I had been offered a £3000 reduction in price by a larger dealer online. £3000 is a large sum of money and has to be taken seriously. But I couldn't buy a car without a test drive.

So how can small local dealers stay viable these days?

This really strikes me as an important issue, both for dealers and the buying public. In the first place, dealers need to make a profit. Not all dealers can be large businesses with big buying power. 

You could say that this is sad, and that it's their loss. However, in this instance I would argue that it's also our loss. We do need local dealers to let us test drive cars, and to help with technical questions about our increasingly complex cars (Self-driving car anyone? Hybrid? Electric?). We need them to do warranty work. And ideally we want them to be close to home. A lot of people buy cars when their old cars have failed, and that is not a good time to make several long journeys to visit distant car dealers. 

It seems to me that the business model of car dealership needs to change and I'd like to hear ideas from people about how the model should change. 

Some ideas

Here are some thoughts I've had:

  • In our town there are Zipcars. These are cars that are parked in various fixed locations round the city that we can rent for an hour or a day or whatever, and all we have to do is log into the internet to book the car, pay a small sum and then collect the car. It seems to me that Zipcar is a fantastic way to allow people to test drive cars that they may want to buy. 

  • Similarly we could just go to a car rental business and ask to test drive their cars. This would work okay, but leaves the car dealers high and dry. 

  • By extension, I do wonder whether car dealerships would be fantastic locations in which to cite Zipcars. The dealers already have lots of cars sitting around doing nothing. If some of these cars were listed with Zipcar then the dealers would get lots more passing trade, and it would be all from people who don't yet own a car at all, which is an ideal population for them to have as visitors. 

  • Alternatively the dealership could just charge a flat fee for test drives. They could make that fee high enough to pay for their costs so that they would not have to resent buyers who came to them for a test drive and then bought elsewhere. Most of these buyers would be coming back for technical support, warranty work, services and MOTs. As long as the dealers charged a high enough fee for these other pieces of work, then perhaps it wouldn't matter if people bought cars more cheaply elsewhere. All of these other jobs need to be done be people who are close to where car owners live, so it makes sense to focus on this kind of work. 

  • By extension of this model, the dealers could offer inclusive deals on cars. Their price could include local tech support, service and MOT for three years. This is something that the online dealer cannot match. 

  • Now that cars are more technical, it really does help to have very well informed sales people. I have read online that some car salespeople are now paid a large stable salary and then also a small bonus for being really well informed and helpful to the customer. This is a big change from the days when they had a small salary and a big bonus based entirely on sales. I do wonder whether some change like this would be a good idea. It would encourage customers to keep returning. If the structure allowed customers to pay appropriately for the expertise on offer, then this could work well. 

  • What do you think? 

I'd love to hear a discussion of this in the media before all our car dealerships go the way of the small independent bookshop that was a staple in my childhood. If you have any ideas, then please do write them in the comment box. 

Thanks for thinking about it. :-)