Car Dealerships Are Dying

August 25, 2015 in Daily Bulletin

The Economist took a look at the business of car dealerships:

  • In the past buyers would go to dealers to figure out what car they want to buy. Nowadays customers research on the internet and come to the dealership with a model and price in mind.
  • Some dealers are trying to increase convenience by bringing cars to potential buyers’ houses for test drives.
  • But customers have realized that test drives are largely pointless, since there’s usually little that can be learnt from a quick spin, and taking one may create an irrational emotional attachment that a dealer can exploit.
  • What budding car owners do want however is someone who can talk them through the various features – without trying to sell them so they can make an informed decision.
  • They also would prefer not to haggle.
  • This is all to the carmakers advantage. Having a showroom that focuses on features could create brand loyalty through an Apple store like experience.
  • Having customers believe that prices can’t be bargained with could also help carmakers raise prices.
  • And since cars are increasingly connected to the internet and communicate data back to the carmaker, auto manufacturers are beginning to build a relationship with customers anyway.

Read more about the business, its history, the legal protections that it has, and how Tesla is trying to upend everything over here.

Source: The Economist