What do you thing about this idea to sell new cars?
#1
What do you thing about this idea to sell new cars?
The idea here is to offer a wide assortment of automobiles of all brands under one roof. The up side is that competition between various brands on each class of vehicle will be fierce, driving prices lower & perhaps forcing each automaker to have a vehicle in each class (imagine having a Mustang on sale at Ford, but the Chevy section having nothing to compare to it.).
Most of the dealer money would be made on parts and services (and possibly add ons). Gotta admit, it's pretty intriguing.
Most of the dealer money would be made on parts and services (and possibly add ons). Gotta admit, it's pretty intriguing.
Car buyers to win from new sales rules, eventually
Reuters / September 29, 2003
FRANKFURT (Reuters) -- The vision is a car buyer's paradise: cheap autos from Cadiz to Copenhagen, supermarkets selling Ferraris alongside Fords and bargain repair shops close to home.
New rules to boost competition in the European Union's car sales network by loosening manufacturers' grip on dealers take effect on October 1, and consumers can already see some changes.
In France, Michel Leclerc, the brother of the man behind Leclerc hypermarkets, has set up Automobil-Eclerc, a network that sells 200 different models from different brands at a 12 to 30 percent discount to old-style dealership prices.
"It's a supermarket in the sense that you can walk in, look at 200 or so cars, choose one at a discounted price and drive off in it," says Michel Leclerc.
The new EU rules allow Leclerc to buy the cars more cheaply via brokers in Belgium so he can cut prices at home.
And he is not alone in embracing the fresh possibilities. New outlets and car supermarkets are springing up across Europe.
German retailer KarstadtQuelle's mail-order division is offering a 10 percent discount on Internet orders for Volkswagen's new Golf.
In Belgium, shoppers at discount supermarket chain Colruyt can pick up promotions with discounts of up to 5,000 euros ($5,703), and vouchers for no VAT on cars bought at Antwerp-based discount car retailer Cardoen.
It sounds too good to be true.
PIPE DREAM
In fact, it probably is -- at least in the short term. The reality could lead to the emergence of a small number of mega dealers who control pricing as much as the manufacturers do now.
Supermarkets, still allowed only to resell cars, may back off when they realize how little they are earning as it is after-sales service that accounts for most of a dealer's profit.
And drivers, many of whom consider buying a car an emotional experience, will often want to drive the automobile and talk to an experienced salesman before splashing out.
But most of all, prices will not fall across all of Europe.
"The impact on the consumer will not be visible in the short term and expectations of falling prices is a fantasy," said Wolfgang Brueckner, a director at Urban Science consultancy.
Before the new rules were announced last year, pre-tax prices for the same models varied up to 50 percent between countries within the so-called single market, and national tax levels remain a major obstacle to standard prices.
A Reuters survey proves the point. Peugeot's popular small 206 has a list price of 9,290 euros in Greece but 18,842 euros in Denmark. Ford's larger Mondeo goes for 36,349 euros in Denmark but costs just 19,150 euros in France.
Several factors, including the euro, which has improved transparency, will gradually lead to price convergence, but the trend may not be down. Most experts expect the highest prices to slip slightly but in many countries they will go up.
Morgan Stanley says UK prices have fallen 15 percent in the last three years but German prices remain stubbornly high, about five percent above the continental European average.
CARMAKERS FRET
Despite such buoyant prices, Europe's "national champion" car makers in particular fear ceding more ground to Asian rivals as they lose their grip on their home markets' distribution networks.
Few European carmakers will see profit growth this year as they battle falling demand, overcapacity and fierce competition.
Manufacturers may also be worried about brand erosion as some dealers may sell several marques under one roof. Companies invest heavily in developing and guarding car brands as they are the most powerful pricing levers they have.
"There is a danger that cars will be sold through channels the manufacturers don't want and they could lose control of the customer," said Brueckner, who thinks the danger is greatest for Ford, Opel and VW, whose models are less distinctive than those of their rivals.
Another worry for automakers is the loss of earnings from spare parts which can account for 20 to 30 percent of profits. On top of that, spending on distribution, which can comprise 30 percent of a maker's total costs, may rise with greater marketing and logistics requirements, experts say.
But the impact on dealers may not be all positive either.
While the new rules offer an opportunity to expand, some larger players, including Inchcape and Reg Vardy, could grow aggressively, and experts envisage a small number of powerful dealers devouring small family-owned firms.
In a taste of things to come, Inchcape, which sells nearly a fifth of the world's Maserati and Ferrari sports cars, has signalled its intentions by buying six BMW dealerships.
Reuters / September 29, 2003
FRANKFURT (Reuters) -- The vision is a car buyer's paradise: cheap autos from Cadiz to Copenhagen, supermarkets selling Ferraris alongside Fords and bargain repair shops close to home.
New rules to boost competition in the European Union's car sales network by loosening manufacturers' grip on dealers take effect on October 1, and consumers can already see some changes.
In France, Michel Leclerc, the brother of the man behind Leclerc hypermarkets, has set up Automobil-Eclerc, a network that sells 200 different models from different brands at a 12 to 30 percent discount to old-style dealership prices.
"It's a supermarket in the sense that you can walk in, look at 200 or so cars, choose one at a discounted price and drive off in it," says Michel Leclerc.
The new EU rules allow Leclerc to buy the cars more cheaply via brokers in Belgium so he can cut prices at home.
And he is not alone in embracing the fresh possibilities. New outlets and car supermarkets are springing up across Europe.
German retailer KarstadtQuelle's mail-order division is offering a 10 percent discount on Internet orders for Volkswagen's new Golf.
In Belgium, shoppers at discount supermarket chain Colruyt can pick up promotions with discounts of up to 5,000 euros ($5,703), and vouchers for no VAT on cars bought at Antwerp-based discount car retailer Cardoen.
It sounds too good to be true.
PIPE DREAM
In fact, it probably is -- at least in the short term. The reality could lead to the emergence of a small number of mega dealers who control pricing as much as the manufacturers do now.
Supermarkets, still allowed only to resell cars, may back off when they realize how little they are earning as it is after-sales service that accounts for most of a dealer's profit.
And drivers, many of whom consider buying a car an emotional experience, will often want to drive the automobile and talk to an experienced salesman before splashing out.
But most of all, prices will not fall across all of Europe.
"The impact on the consumer will not be visible in the short term and expectations of falling prices is a fantasy," said Wolfgang Brueckner, a director at Urban Science consultancy.
Before the new rules were announced last year, pre-tax prices for the same models varied up to 50 percent between countries within the so-called single market, and national tax levels remain a major obstacle to standard prices.
A Reuters survey proves the point. Peugeot's popular small 206 has a list price of 9,290 euros in Greece but 18,842 euros in Denmark. Ford's larger Mondeo goes for 36,349 euros in Denmark but costs just 19,150 euros in France.
Several factors, including the euro, which has improved transparency, will gradually lead to price convergence, but the trend may not be down. Most experts expect the highest prices to slip slightly but in many countries they will go up.
Morgan Stanley says UK prices have fallen 15 percent in the last three years but German prices remain stubbornly high, about five percent above the continental European average.
CARMAKERS FRET
Despite such buoyant prices, Europe's "national champion" car makers in particular fear ceding more ground to Asian rivals as they lose their grip on their home markets' distribution networks.
Few European carmakers will see profit growth this year as they battle falling demand, overcapacity and fierce competition.
Manufacturers may also be worried about brand erosion as some dealers may sell several marques under one roof. Companies invest heavily in developing and guarding car brands as they are the most powerful pricing levers they have.
"There is a danger that cars will be sold through channels the manufacturers don't want and they could lose control of the customer," said Brueckner, who thinks the danger is greatest for Ford, Opel and VW, whose models are less distinctive than those of their rivals.
Another worry for automakers is the loss of earnings from spare parts which can account for 20 to 30 percent of profits. On top of that, spending on distribution, which can comprise 30 percent of a maker's total costs, may rise with greater marketing and logistics requirements, experts say.
But the impact on dealers may not be all positive either.
While the new rules offer an opportunity to expand, some larger players, including Inchcape and Reg Vardy, could grow aggressively, and experts envisage a small number of powerful dealers devouring small family-owned firms.
In a taste of things to come, Inchcape, which sells nearly a fifth of the world's Maserati and Ferrari sports cars, has signalled its intentions by buying six BMW dealerships.
#2
Mmm... so how the hell would they manage service, let alone knowledgeable sales staff???
In their crazy world, a dealer would have to Dodge, Ford, Chevy, Ferrari, Porsche, Audi mechanics... etc etc ---> I don't see how dealerships could afford to do that and provide quality service (well, ok, not any worse than most typical dealer service is already).
In their crazy world, a dealer would have to Dodge, Ford, Chevy, Ferrari, Porsche, Audi mechanics... etc etc ---> I don't see how dealerships could afford to do that and provide quality service (well, ok, not any worse than most typical dealer service is already).
Last edited by Z28Marcus; 09-29-2003 at 05:46 PM.
#3
It seems to me that in a "car supermarket" situation, the real winners would be the manufacturers who could afford very attractive sales commissions and "spiffs" for the salespeople. It would be no different than Circuit City, etc, where Sony and Nokia are sold frequently not because they are better, but because they have the best incentives to the salespeople.
The playing field would not be any more level--the consumer would simply be steered by the salesperson towards the cars that make THEM the most money.
This might not be bad for GM given their current rebateitis, but if Toyota got aggressive on incentivizing salespeople, it could be a massacre.
The playing field would not be any more level--the consumer would simply be steered by the salesperson towards the cars that make THEM the most money.
This might not be bad for GM given their current rebateitis, but if Toyota got aggressive on incentivizing salespeople, it could be a massacre.
#4
Actually CC is hourly. And at one time it was spiff based but most electronic stores got away from that. CC did even before it went hourly. While the idea sounds cool in the short run it wouldn't work very well after a while. BTW CC owned a car sales company called CarMax that they spit off. I wished CC still had it maybe I could get a discount on a new car.
#5
Europe is always behind the times...
It's about time european car dealerships "got with the program." The average dealer has almost no inventory, cramped facilities and outdated trade practices. Perhaps this will spell an end to zero consumer choice and gross inefficiency. The average European car-buyer is forced to order his/her vehicle, and pay a huge mark-up to boot... Just the same way alot of Americans did it from 1946 until the mid-1970s.
Is it just me, or is Europe behind the curve in just about everything?
Is it just me, or is Europe behind the curve in just about everything?
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