[Hypothetical/utopia sceneario] - No more "dealers" [Archive]

malecoke

Feb 12th, 2009, 08:05 PM

Brandon

Feb 12th, 2009, 08:07 PM

http://www.autoblog.com/2009/02/09/report-chinese-expect-to-build-cars-in-mexico-in-2010-may-sell/

Perhaps the most interesting part of this scenario would be the distribution chain. Instead of using franchised dealerships, Mexican-built Chinese cars could be sold at large retail chains like CostCo and Walmart. GS Motors, the Mexican distributor for China's FAW brand, is already trialing this strategy in Mexico and would likely do the same in the States, assuming the program proves successful in smaller markets.

Not exactly the same, but similar.

stuntman

Feb 12th, 2009, 08:13 PM

mazdubb

Feb 12th, 2009, 08:14 PM

I wonder if Wal-Mart would give you store credit if you break your Chinese built car.

spf1971

Feb 12th, 2009, 08:17 PM

malecoke

Feb 12th, 2009, 08:18 PM

Without salesmen who is going to sell the product? No one.

Sure, sales will still continue, but, nowhere near as good as they would with salesmen.

The biggest reason salesmen exist is move product.

If you want communism go to Cuba.

Stop discuss.

Stuntman

I see this as a win-win proposal
Salesmen now dont have to work 12 hours days and possibly up to 50hours a week. No pressure from the manager to meet quotas, nor do they need to pressue the buyers anymore.

Buyers don't have to see this as a "war" with stealerships to battle prices, thinking what the salesmen jsut told u 20mins was a lie....I dont see why not.

As for stop discussing, keep dreaming. This is a forum - it meant to be a place for discusssion. YOU dont like it, YOU can stop discussing and leave.

Vladimir

Feb 12th, 2009, 08:29 PM

who exactly pays the "Product Advisor" what determines raises?
I think it should be exactly how it is now, except that you have the option to pick up the car at the manufacturer to avoid freight.

stuntman

Feb 12th, 2009, 08:30 PM

I see this as a win-win proposal
As for stop discussing, keep dreaming. This is a forum - it meant to be a place for discusssion. YOU dont like it, YOU can stop discussing and leave.

dont get your underwear in a bunch. I was being sarcastic on the OPs line "Discuss". It sounded very silly.

sm

rupert

Feb 12th, 2009, 08:42 PM

This will work because everybody has a manufacturing plant near them. hehe, well freight will cost you ~1k across the country, what money will you save then? What about imports from overseas?

Just off the top of my head, what if somebody sets up a group buy? Will they negotiate better prices then? If these groups get big enough, do we have the whole dealership thing going on again??

Manufacturers will start to compete with each other, will they hire salesmen?

I don't think this will work.

flexwong

Feb 12th, 2009, 08:51 PM

you've also just wiped out the jobs of all the salesmen in the country. that is unacceptable.

z24driver1986

Feb 12th, 2009, 10:00 PM

sounds different but it could work... its almost like buying from a catalog or something. The people at the dealer are only there to help you, no commission.

Funny you say pick it up from the factory.... Here in Oshawa I could technically pick up the car myself from the factory, but they don't allow it you have to pay 1200$ for someone to drive it over to the dealer regardless if its in Oshawa or Vancouver.

iam_immigrant

Feb 12th, 2009, 10:10 PM

you've also just wiped out the jobs of all the salesmen in the country. that is unacceptable.

It'll be like shopping at BB or FS except for cars so there will be salesmen. They're there to help with product specs and that's it.

Billa-786

Feb 12th, 2009, 10:17 PM

stuntman

Feb 12th, 2009, 10:17 PM

It'll be like shopping at BB or FS except for cars so there will be salesmen. They're there to help with product specs and that's it.

You are stating that here are no salesmen at Future Shop or Best Buy.

Well I would agree that most are not good salesmen, but, they are salesmen. Some of them are good salesmen.

Futureshop is commissioned and Best Buy is not. And if you are thinking that non-commissioned salesmen will work for a big ticket marketing driven item like a car you would find a course in marketing or a real commissioned sales job an eye opener.

I may never figure out why I contribute to "hypothetical" threads of make believe.

stuntman

stuntman

Feb 12th, 2009, 10:20 PM

Isn't there something similar in the U.S. ???

A while back I was reading a lengthy journal on edmunds.com and the salesman mentioned how people would come in for test drives and what not...and then order their cars through cars.com given the low price and hassle free buying.

Your right. APA.ca is sort of like that and there are others....there are consumers that like that. They are on the fringe though, they may increase their market share a bit but a take over of it? Nah.

stuntman

dealmeone

Feb 12th, 2009, 10:44 PM

In many cases, the sales are made by car magazines, automotive shows like MotorWeek, etc., and by advertising, not to mention races (win on Sunday, sell on Monday). People have far more access to automotive specs, facts and comparisons than ever before. People will decide on a car because it was 1/10th of a second faster in a magazine comparo or got 1 mpg better in a test.

It would be nice to not have to go through the whole car buying process, but then how would the dealers add on all of the useless crap like extended warranties, undercoating, paint protection, fabric protection, and insurance against being hit by a satelite that fell from the sky???

I for one would miss being pressured and lied to by the "business manager".

malecoke

Feb 12th, 2009, 11:23 PM

It would be nice to not have to go through the whole car buying process, but then how would the dealers add on all of the useless crap like extended warranties, undercoating, paint protection, fabric protection, and insurance against being hit by a satelite that fell from the sky???

And we should give a siht about how extended warranties/undercaoting/fabric protection are gonna take a hit because ??

You have pinpointed the exact purpose of this thread - to avoid all those money scamming items...who cares if they take a hit ? They shouldn't exsist in the first place, and here we are almost BEGGING them to make the go away, or to give us a "discount" cux they add it on.
The only fact that we shuld care is our earned income shall not be spent into those useless crap.

stuntman

Feb 12th, 2009, 11:50 PM

And we should give a siht about how extended warranties/undercaoting/fabric protection are gonna take a hit because ??

You have pinpointed the exact purpose of this thread - to avoid all those money scamming items...who cares if they take a hit ? They shouldn't exsist in the first place, and here we are almost BEGGING them to make the go away, or to give us a "discount" cux they add it on.
The only fact that we shuld care is our earned income shall not be spent into those useless crap.

Not all the stuff you mentioned is garbage...I want some of that stuff.
Are you saying salesmen have a magical power over you that does not allow you to say "no"? Just say "no".

Become a better consumer and negotiator, spread the word get a law passed to ban items for environmental issues. Start a car buying service. Problem solved (except for that freight issue: your dreaming).

Your frustration is pinpointed at automobile sales but it can also be applied to a lot of our capatalistic way of life, maybe even the products your company sells or supports.

stuntman

tonyhon

Feb 13th, 2009, 12:27 AM

I like the idea of a set price, just like going to Futureshop to buy anything, no negotiation.

I don't like to negotiate, but I also feel bad if I didn't, because I will feel I paid more than other people.

I like to do the "Built and Price" on web site, and I would expect the same price on the web when I go to the dealer, but usually different.

malecoke

Feb 13th, 2009, 12:38 AM

rupert

Feb 13th, 2009, 10:50 AM

I like the idea of a set price, just like going to Futureshop to buy anything, no negotiation.

I don't like to negotiate, but I also feel bad if I didn't, because I will feel I paid more than other people.

I negotiate at futureshop everytime I buy an item worth over 500 dollars. I negotiate everytime I spend a significant amount of money anywhere I shop.

Since you don't like to negotiate and don't negotiate at futureshop, what is stopping you from going to a dealership pay the msrp?

tonyhon

Feb 13th, 2009, 12:35 PM

I negotiate at futureshop everytime I buy an item worth over 500 dollars. I negotiate everytime I spend a significant amount of money anywhere I shop.

Since you don't like to negotiate and don't negotiate at futureshop, what is stopping you from going to a dealership pay the msrp?

Different between that for me is, I never heard people could negotiate from FS except demos (now I do heard from you), but for cars I do hear about it all the time, specially posts here. Under msrp, get addons throw in, get oil changes for free, etc. Yes I don't like to negotiate, but I also don't like other people getting more deals than me, so even I don't like it, I still do.

spf1971

Feb 13th, 2009, 12:49 PM

Wasn't it Saturn that had the "no haggle/hassle sales"? The price you see is the price you pay. Does anyone believe that it tomorrow the car manufacturers said "The list price is THE price" people would stop trying to get a deal? Nothing would change, it would simply shift from local dealers to centralized dealers.

akira1971

Feb 13th, 2009, 12:49 PM

Different between that for me is, I never heard people could negotiate from FS except demos (now I do heard from you), but for cars I do hear about it all the time, specially posts here. Under msrp, get addons throw in, get oil changes for free, etc. Yes I don't like to negotiate, but I also don't like other people getting more deals than me, so even I don't like it, I still do.

Well, I've Price Matched many, many times at FS/BB. As I'm not paying sticker price like the average customer, I've actually negotiated a lower price.

stuntman

Feb 13th, 2009, 01:03 PM

non-commissioned car salesmen as the standard hahahahahahhahahahahaha

Those car guys are laughing their butts off right now or simple shaking their heads.

Really, do people think that non-commissioned salesmen has not been tried? I guess if you have been living in a closet or are young that is an excuse.
If the car business was more profitable that way then we would have a glut of non-commissioned salesmen.

Why would a good salesmen settle for a lower income than they are worth? (bonuses are comm)
What incentive would there be to sell? They would walk (blow the sale) customers left right and center.
Often, some of a salesmans income is at a fixed price.....that income is about all the stress relief they get.

SM

pitz

Feb 13th, 2009, 01:06 PM

In order to prevent any scams/rip offs/bs "admin charges"/so called "PDI"/d-bag salesmen....heres what I suggest.

Dealers - Instead of a place of doing sales, its now a place where people can testdrives and get info from "Procduct advisors". These people are not responsible for pushing sales or quotas. They get paid by the hour (or salaries), and they are only there to answer any questions, escort testdrives etc.

I agree, the car industry desperately needs to get rid of its bloated inventories and 'dealers'. If someone wants to test drive a car, they can rent one from their favourite car rental outfit for $30-$50/day. A manufacturer, to promote a specific brand of slow-selling car, could send out coupons for a free days rental. And let's face it, a car is a $20-$50k purchase, and costs $4000-$5000/year to run (if not more) -- having customers shell out $50 to rent instead of free test drives is a trivial cost in the whole scheme of things.

The idea of cars sitting on car lots, millions of dollars worth, idle, is an idea whose time should come to an end. That idea worked when financing was cheap, but now that financing is enormously expensive throughout the entire auto sector, bloated inventories must be slashed.

Of course, once a person has driven a few rental cars, and has decided on one they like -- they can simply go to the car manufacturer's website, and have one built for delivery.

"Dealers" can continue in their current role of providing warranty services for the manufacturers, and, of course, preventative maintenance, off-warranty repairs, and customization/retrofitting. The 'dealers' themselves could also be in the business of renting cars too, which would facilitate one-stop shopping.

spf1971

Feb 13th, 2009, 01:40 PM

Of course, once a person has driven a few rental cars, and has decided on one they like -- they can simply go to the car manufacturer's website, and have one built for delivery.

"Dealers" can continue in their current role of providing warranty services for the manufacturers, and, of course, preventative maintenance, off-warranty repairs, and customization/retrofitting. The 'dealers' themselves could also be in the business of renting cars too, which would facilitate one-stop shopping.

How long would it take from ordering online to when you actually receive your car?

Right now there is an incentive for dealers to keep you happy. If you're happy, you'll come back to them the next time you need a car. Once that incentive is gone, there is no extra reason for a dealership to extend itself for you. Warranty work generally doesn't make the dealership much money. The labour rate and time paid under warranty is less than the normal amount charged.

" If you're not happy with your car, take it up with the manufacturer."

pitz

Feb 13th, 2009, 02:01 PM

How long would it take from ordering online to when you actually receive your car?

A 2-3 weeks I would anticipate. 1-2 weeks to build the car, and a week for shipping. A bit slower than buying, for instance, a Dell computer, but not a huge impediment.

After all, all of the instant gratification 'buy now, pay later' customers are essentially out of the market because of the collapse of consumer credit. The days of cars being impulse purchases, IMHO, have come to an end, simply because of complete and utter exhaustion of credit.

Right now there is an incentive for dealers to keep you happy. If you're happy, you'll come back to them the next time you need a car. Once that incentive is gone, there is no extra reason

But this has to be counterbalanced against financing charges. Interest rates have easily tripled in the past year for dealers. A dealer that carries 100 cars in inventory now has financing charges of (at $25k/unit) of $375,000 instead of $125,000.

The difference, $250,000, pretty much equals or exceeds the payroll of sales staff in a typical 100-car dealer.

High financing costs, which are associated with capital rationing, will kill the traditional auto dealer model of keeping large inventories. And good riddance. And the industry can't just raise the price of cars to account for the higher financing charges, because there's a glut of cars and car manufacturing. They need to trim the fat from their own businesses, and triming bloated inventories is the only way to recovery.

for a dealership to extend itself for you. Warranty work generally doesn't make the dealership much money. The labour rate and time paid under warranty is less than the normal amount charged.

With fewer dealers, the remaining dealers will have more pricing power to do warranty claims. And while warranty work doesn't necessarily enrich a dealer heavily, most warranty work tends to be highly repetitive in nature, and little 'learning' is required. For instance, GM intake gaskets, the 'book' time is 8 hours on them, but a dealer tech once commented to me that they've become 'so experienced' at them that they only take 4 hours because they have all of the processes committed to memory, and the proper jigs, tooling, and shop supplies available.

new_vr

Feb 13th, 2009, 02:13 PM

The idea of cars sitting on car lots, millions of dollars worth, idle, is an idea whose time should come to an end. That idea worked when financing was cheap, but now that financing is enormously expensive throughout the entire auto sector, bloated inventories must be slashed.

When I bought my Golf at Collingwood VW, they had around 4 cars on the lot. I actually had to test a jetta, because I wanted a tdi, and it made more sense to test a tdi jetta then a VW golf. I had to wait around a week to get my car.
After I bought my car, the dealership was sold to another dealer, who added a nicer showroom, and more cars in the inventory. They promptly went out of business, since they didn't have enough customers to support this.

pitz

Feb 13th, 2009, 02:31 PM

When I bought my Golf at Collingwood VW, they had around 4 cars on the lot. I actually had to test a jetta, because I wanted a tdi, and it made more sense to test a tdi jetta then a VW golf. I had to wait around a week to get my car.

Exactly, and since the TDI has such a great reputation (at least for fuel efficiency and performance), I bet you would've waited a month if that's what it took to have one shipped from Stuttgart (or wherever they're made, Mexico, Brazil probably) if need be.

Cars are expensive items, and they don't need to be delivered overnight, if, indeed, the product is quality.

After I bought my car, the dealership was sold to another dealer, who added a nicer showroom, and more cars in the inventory. They promptly went out of business, since they didn't have enough customers to support this.

Yeah seriously, who on earth is so impatient that they can't wait a few days/weeks for the opportunity to plunk down a year or two's worth of salary for a car?

Of course, with leases and vendor financing, people don't have to put anything down (and could often refinance underwater previous car debts), but that garbage is dissappearing too.

Stock R

Feb 13th, 2009, 03:08 PM

I personally wouldn't mind if car sales were moved away from dealerships, commissioned sales people and purchased direct from the factory instead.

I have never found sales staff to be of any particular help. If anything I've found online and printed sources to provide the most help in learning and choosing a vehicle. I am only interested in going to the dealer to go for a test drive to see how the actual vehicle compares.

All the stuff about dealer invoice price, "let me go talk with my manager", extended warranties, rust proofing, admin fees, etc. really just sour up the whole car buying experience.

I make most of my purchases (aside from groceries and general items) online now and have found the experience to be so much nicer. I wouldn't mind building my next car online and clicking the purchase button instead.

stuntman

Feb 13th, 2009, 03:53 PM

High financing costs, which are associated with capital rationing, will kill the traditional auto dealer model of keeping large inventories. And good riddance. And the industry can't just raise the price of cars to account for the higher financing charges, because there's a glut of cars and car manufacturing. They need to trim the fat from their own businesses, and triming bloated inventories is the only way to recovery.

What Does Capital Rationing Mean?
The act of placing restrictions on the amount of new investments or projects undertaken by a company. This is accomplished by imposing a higher cost of capital for investment consideration or by setting a ceiling on the specific sections of the budget.

What the heck are you talking about? What does capitol rationing have to do with this anything you stated?

High costs of financing? I guess you don't remember pre 1990 when they had "traditional dealerships" and high interest rates. Seemed to work OK then.

pitz

Feb 13th, 2009, 03:58 PM

What the heck are you talking about? What does capitol rationing have to do with this anything you stated?

Capital rationing = high interest rates for industries that do not make productive use of capital.

Having cars sitting on dealer lots not generating income is not a productive use for scarce capital.

Firms that make in-demand products are having no problem obtaining financing. But industries for which there is an absolute and utter glut of capacity and inventory can only receive financing at the highest possible rates of interest.

High costs of financing? I guess you don't remember pre 1990 when they had "traditional dealerships" and high interest rates. Seemed to work OK then.

What are GM, Ford, etc. bonds trading at right now? Go look it up. Interest rates are well into the double-digits, and far higher than pre-1990 levels now for those participants in the auto sector.

I personally wouldn't mind if car sales were moved away from dealerships, commissioned sales people and purchased direct from the factory instead.

Yup, computers used to be sold that way too, dealerships, commissioned salespeople, dealers trying to push lots of extra add-ons, pricing that wasn't very transparent. In the 80s.

Then the market exploded, and all the fat was trimmed from the entire supply chain. Yes, the bloated 'dealerships' went out of business, but consumers and the industry benefitted enormously.

AGR-1

Feb 13th, 2009, 04:46 PM

The majority of people do their research and comparisons "online", they can even configure a car "online" to get the price, a lease or finance quote.

The highest turnover of personnel in a dealership is the sales staff in the showroom, these folks are barely paid enough to earn a living, cannot make any decisions by themselves, are more like clerks to serve customers, than real sales people to actually sell.

The customer spends time with an individual that cannot make a selling decision, while the customer is supposed to make a purchase decision.

Pricing of vehicles is based on "dynamic pricing" and varies from month to month depending on a myriad of variables.

Interest rates have never been lower than they are now, inventory for dealers should be less money and not more money, with the exception of the D3 manufacturers where their captive finance companies are challenged to raise money since the entire company is on the brink of disaster.

If 50% of Canadian lease vehicles, what are they negotiating? The lease rate of point 9 something, NO - the residual, NO -the price/capital cost of the vehicle, YES (keeping in mind that the spread between MSRP and dealer invoice is between 8 to 10%) no secret there.

Could it be that most Canadians would love to pay more per month, and have everything included in their lease, with the exception of insurance, plates, gas. No one is very interested to visit service departments and pay invoices for maintenance.

Imagine an "automotive retail centre" where a prospect/customer can go to view several makes from several manufacturers under one roof, the possibility to road test the vehicle. The price, payments, the customer has done all of it online. The price is fixed, there is no F&I, the is no Frt PDI, Admin, its all included in the price. The customer has the choice of taking delivery from inventory or ordering a vehicle.

Trade-ins if 50% are leased there are not many trades, and many lease returns.

If more customers would send e-mails to manufacturers, instead of ranting, manufacturers would change their selling processes very quickly.

The customer is empowered or should be empowered all the information is there online provided by manufacturers on their websites. Imagine that manufacturers provide all the information, and most customers do not use it, its all there and they don't use it.

A customer does not need to visit a dealer to get a price, to get a lease quote, to get a finance quote, to configure a car....its all online, and in many instances even the inventory is online, the manufacturers tell you where the vehicle is located.

Customers have a choice to walk into a dealer empowered and ready to do business, or walk into a dealer not having done their due diligence, and....

The sales person that will get $125 for selling a vehicle, how much desire do they have to spend time with a customer. The F&I manager has a strong desire to spend time, and sell a myriad of protection packages that are extremely lucrative.

"Lets give up another 200 on the price. and we'll get him in the box for 500".

The Canadian customer/consumer should be empowered when it comes to buying vehicles it all there, sadly many don't use all the information that is disseminated.

A survey on Gen Y and the automotive industry....Click (http://www.deloitte.com/dtt/cda/doc/content/us_auto_gen_y_survey_findins.pdf)

A survey of Canadian dealers...Click (http://www.pwc.com/extweb/ncpressrelease.nsf/docid/CA4C86DC2D80B5C38525754500621382)

stuntman

Feb 13th, 2009, 05:06 PM

Capital rationing = high interest rates for industries that do not make productive use of capital.

Having cars sitting on dealer lots not generating income is not a productive use for scarce capital.

Firms that make in-demand products are having no problem obtaining financing. But industries for which there is an absolute and utter glut of capacity and inventory can only receive financing at the highest possible rates of interest.

What are GM, Ford, etc. bonds trading at right now? Go look it up. Interest rates are well into the double-digits, and far higher than pre-1990 levels now for those participants in the auto sector.

Your definition of capital rationing is misplaced and its application convoluded. Capitol rationing is not a term used on the upper scale you are talking about. It is like capitol rationing but the mechanisms are different.

Your idea of GM and Ford being perceived as poor investments is true but you are trying to show them as representing the whole car industry. You conveniently excluded Asian car companies. They are perceived to have a good future (their current bonds took a small hit). You are using recent news events and limited scope to prove a falacy. GM, Ford and Chrysler are not the end all and be all of car manufacturers.

Interested rates were in the double digits way back then. I remember a good rate for a mortgage being 17%! Were car maker bonds at 4%? Certainly not. What was the cost of money for the makers? I don't know, (relatively high?) its your argument that the interest rates were low; don't ask me to look them up you go look them up.

Yup, computers used to be sold that way too, dealerships, commissioned salespeople, dealers trying to push lots of extra add-ons, pricing that wasn't very transparent. In the 80s.

Then the market exploded, and all the fat was trimmed from the entire supply chain. Yes, the bloated 'dealerships' went out of business, but consumers and the industry benefitted enormously.

Your example of the Comptuer industry is a fabrication of how the consumer market worked:

I bought a computer from Radio Shack around 1980. Then I bought one at Canadian Tire.
Those are not dealerships and they sold a huge share of computers: VIC20s, commodore 64s and Tandys.

My third computer was about 1984 and I bought it at a clone maker / computer shop. Ever since the courts said clones were OK IBM/intel computers have always been sold pretty well the same the way they are now.

On top of all that low ticket computers are not high ticket cars.
sm

PS car companies are not stupid....if they thought it was a better model they would use it.

Firms that make in-demand products are having no problem obtaining financing. But industries for which there is an absolute and utter glut of capacity and inventory can only receive financing at the highest possible rates of interest.

Your talking as if this inventory thing has been going on for years and the car companies cannot adjust to make the right amount of cars that will sell. The inventory hiccup is just that.....

pitz

Feb 13th, 2009, 05:42 PM

Your definition of capital rationing is misplaced and its application convoluded. Capitol rationing is not a term used on the upper scale you are talking about. It is like capitol rationing but the mechanisms are different.

Capital rationing and capital budgeting is when capital, in an economy, only gets allocated to the most worthy projects, with the highest ROI. And only very high ROI parts of the economy, right now, are able to receive funding. That's rationing.

Your idea of GM and Ford being perceived as poor investments is true but you are trying to show them as representing the whole car industry. You conveniently excluded Asian car companies. They are perceived as good investments. You are using recent news events and limited scope to prove a falacy. GM, Ford and Chrysler are not the end all and be all of car manufacturers.

Go look up what Toyota bonds, Hyundai, etc., bonds are trading for in the marketplace. Not as severely down as the North Americans, but those manufacturers and dealers are facing extremely high funding costs. In a high interest rate environment (which we are clearly in), why on earth would manufacturers tie up billions of dollars in inventory? Makes no sense. That's why big car lots with hundreds of cars sitting idle are soon to be a thing of the past. That's why dealers are going bankrupt like crazy. That's why build-to-order is such an attractive idea for manufacturers, and offers numerous advantages for both manufacturer and consumers alike, the least of which, is a better match between manufacturing output, and consumption.

Interested rates were in the double digits way back then. I remember a good rate for a mortgage being 17%! Were car maker bonds at 4%? Certainly not. What was the cost of money for the makers? I don't know, (relatively high?) its your argument that the interest rates were low; don't ask me to look them up you go look them up.

Interest rates are high right now, and going even higher by the day. Go over to the personal finance thread and see the posts of everyone getting their mortgages and LOC's jacked up. Funding in the bond markets for auto leases has pretty much dissappeared. Nobody wants to finance a bunch of idle inventory on dealer's lots. Even dealers themselves aren't accepting inventory (banks won't advance credit against inventory for which there is no demand) and cars are piling up at places like the Port of Oakland like crazy.

Your example of the Comptuer industry is a fabrication of how the consumer market worked:

Hardly. Your own comments prove it.

I bought a computer from Radio Shack around 1980. Then I bought one at Canadian Tire.
Those are not dealerships and they sold a huge share of computers: VIC20s, commodore 64s and Tandys.

Ummm, Radio Shack was, if i recall, a Tandy computer dealership.

My third computer was about 1984 and I bought it at a clone maker / computer shop. Ever since the courts said clones were OK IBM/intel computers have always been sold pretty well the same the way they are now.

Ostensibly with much larger mark-ups than you have today. The profit margins on that stuff used to be incredible, money was everywhere. I put myself through university selling home-built computers and even a monkey can do that. A thousand bucks easily, for each unit, clear. Now even buying wholesale, you'd be hard pressed to beat the delivered price of a Dell or similar.

PS car companies are not stupid....if they thought it was a better model they would use it.

They're, for the most parrt, are all stupid, and that's why they're all in the process of going bankrupt. Bankruptcy would have happened sooner if it wasn't for finance activities propping them up (ie: GMAC at GM, with residential mortgages) for a few years.

Your talking as if this inventory thing has been going on for years and the car companies cannot adjust to make the right amount of cars that will sell. The inventory hiccup is just that.....

You call this a 'hiccup'? Lol. Its a secular trend of over-accumulation of inventory, both by manufacturers, and by consumers (do families really need more than 1 or 2 vehicles?), as well as a secular trend of reduced consumption due to greater operational performance (ie: cars are lasting longer than ever due to better engineering).

stuntman

Feb 13th, 2009, 06:37 PM

"Your example of the Comptuer industry is a fabrication of how the consumer market worked":.Hardly. Your own comments prove it."

Ummm, Radio Shack was, if i recall, a Tandy computer dealership.

Ostensibly with much larger mark-ups than you have today. The profit margins on that stuff used to be incredible, money was everywhere. I put myself through university selling home-built computers and even a monkey can do that. A thousand bucks easily, for each unit, clear. Now even buying wholesale, you'd be hard pressed to beat the delivered price of a Dell or similar.

I missed (and everyone else did) that part where my own words proved your point that computer sales correlate to auto sales.
Computers have nothing to do with cars. Zilch. I bought a computer from RadioShack...wow that proves your point (not). Tandy computer sucked (compared to competition) that is why they did not do well, not because of their distribution model.
The distribution model for computers has little no/little similarity to the car distribution model. Next thing you will be using the distribution of books by Amazon and saying "we can do that with books, why not do it with cars and get the same success?"

But I guess since you knew how to put parts in a computer that makes you an economics expert too.
BTW: I never buy from Dell unless it is for my parents. There is more bang for buck building one out of parts.

They're, for the most parrt, are all stupid, and that's why they're all in the process of going bankrupt. Bankruptcy would have happened sooner if it wasn't for finance activities propping them up (ie: GMAC at GM, with residential mortgages) for a few years.

Really? Toyota, Honda, Hyundai are all in the process of going bankrupt? If they file you can gloat. Until then you are still talking out of your butt. You are using hand picked examples to prove a false premise.

You call this a 'hiccup'? Lol. Its a secular trend of over-accumulation of inventory, both by manufacturers, and by consumers (do families really need more than 1 or 2 vehicles?), as well as a secular trend of reduced consumption due to greater operational performance (ie: cars are lasting longer than ever due to better engineering).

OK...more of a vomit :P The problem has a lot to do with the the economy as a whole NOT the manufacturers. Responsible manufacturers got caught too. Houses and car sales are key economic indicators so they get the attention and usually get hit first (and hardest).

I usually find that people who try to explain small things in long winded, grand fashion with lots of fancy words are really just salesmen selling BS. Dude, your not that good.

sm
Are you gonna post a 15 point quote response this time?
are we way off topic yet?
And can you post a source for your explanation of capital rationing? It does not match the definitions/references I have or posted. I think there is a different term for what you are trying to express.

rupert

Feb 13th, 2009, 06:54 PM

Is it just me or does no one else feel their car salesmen do a great job?

The sales guy I buy my cars from does a great job everytime, I have never been dissapointed. This guy goes above and beyond. He would arrange for pickup/drop off at your office/home for service, testdrives etc. Matter of fact, I am waiting for him right now at my office to give me some autoshow tickets for this wkend.

In all seriousness, if he told me he is going to sell me a car at cost tomorrow, I am willing to pay his commission. If he is gone, I will have no one to deal with :(

pitz

Feb 13th, 2009, 08:16 PM

IAnd can you post a source for your explanation of capital rationing?

I don't know what point you're trying to make, but this (http://www.techcrunch.com/2008/10/10/sequoia-capitals-56-slide-powerpoint-presentation-of-doom/) slideshow (slide 18) shows that high-yield spreads and investment grade spreads are at recent highs and rising. Markets naturally, by definition, ration scarce resources (in this case, savings) to the highest marginal bidders.

This process is known as capital rationing. The word 'rationing', connotates that there is a shortage. Which is why real interest rates are sky-high.

It does not match the definitions/references I have or posted. I think there is a different term for what you are trying to express.

No, that's the right term. For instance this page (http://www.wisegeek.com/what-is-capital-rationing.htm) states that, "capital rationing is all about the acquisition of new investments based on such factors such as the recent performance of other capital investments, the amount of disposible rersources that are free to acquire a new asset, an the anticipated performance of the asset.".

Markets naturally ration capital, directing it towards projects that are deemed by market participants to be the most worthy. Since auto and home loans are going bad left and right, little new investment is being made in them by market participants, and existing consumer loan investment is being allowed to run into liquidation.

And computer sales correlate to auto sales, I argued no such thing. I simply argued that the prohibitive cost of financing large inventories will force auto makers into re-tooling their practices such that build-to-order, and Lean manufacturing techniques will increasingly come to dominate the entire auto production chain.

http://en.wikipedia.org/wiki/Lean_manufacturing

In the context of Lean manufacturing, carrying inventories at dealers is completely wasteful, unless it can be shown that those inventories add value that exceeds the cost of carrying that inventory.

konfusion666

Feb 13th, 2009, 08:41 PM

Without salesmen who is going to sell the product? No one.

Sure, sales will still continue, but, nowhere near as good as they would with salesmen.

The biggest reason salesmen exist is move product.

If you want communism go to Cuba.

Stop discuss.

Stuntman

Good grief, this is such a ******** post on so many levels.

First, the guy accuses someone who's merely discussing a *NEW* model of selling cars of being a communist.

Next, he tries to to block all further discourse on the subject - something that communists, not capitalists, have been known to do throughout history!

Does RFD give out Darwin awards? ;)

stuntman

Feb 13th, 2009, 08:54 PM

Thanks for posting the "capital rationing" references:

"High financing costs, which are associated with capital rationing, will kill the traditional auto dealer model of keeping large inventories"

It sounds like capitol financing results in higher interest rates because that is the only way "which are associated with capital rationing" would be relevant in the sentence.

Next time forget the fancy talk:
"higher financing rates will cause manufacturers to keep lower inventories." is relevant.
"Capitol Rationing, due to higher finance costs, will kill traditional auto dealer model of keeping large inventories" is relevant but with fancy talk.

Don't worry: my wife has an english degree and is an editor. I had to check with her.:cheesygri I am probably guilty of the same thing once an a while.

The issue you are describing is normal part of every healthy business too.....get rid of dead wood might be another term. In lean times there are always victims and usually what does not kill you makes you stronger.
I don't think things are bad enough to kill off the required amount of dealers...you do. Correct?

sm

stuntman

Feb 13th, 2009, 09:02 PM

Good grief, this is such a ******** post on so many levels.

First, the guy accuses someone who's merely discussing a *NEW* model of selling cars of being a communist.

Next, he tries to to block all further discourse on the subject - something that communists, not capitalists, have been known to do throughout history!

Does RFD give out Darwin awards? ;)

I did not accuse the guy of being a communist (like being a communist is being a bad thing?). But I do think if he is looking for universal model like that Cuba is a good place to look because the idea sounds like communism.

To be clear and repetitive for the slow//confused (or overly aggressive) person throwing the Darwin insult:

The idea not the person sounds communist.

SM

pitz

Feb 13th, 2009, 09:10 PM

It sounds like capitol financing results in higher interest rates because that is the only way "which are associated with capital rationing" would be relevant in the sentence.

Well which comes first, the chicken or the egg? Are interest rates high because capital is scarce, or is capital scarce because interest rates are high?

Or is it all caused by a lack of savings?

A play on words, but savings will always attempt to seek the highest risk-adjusted return on investment in a normal, undistorted economy. The auto bailouts are a travesty that will damage a future economic recovery as they distort this process and rob valuable investment from sectors that are not in economic surplus.

The issue you are describing is normal part of every healthy business too.....get rid of dead wood might be another term. In lean times there are always victims and usually what does not kill you makes you stronger.

Yup. And if dealers do not add value for consumers or the economy, then they will eventually dissappear. Just like those Tandy computer salesmen at Radio Shack (and Tandy computers in general) :).

I don't think things are bad enough to kill off the required amount of dealers...you do. Correct?

I think the industry is at the cusp of a transformation that has almost never been seen before in American business, and I think the industry in a decade will bear no resemblance to the one that exists today.

And I'll leave it at that, cuz this thread is pretty much useless now... But car manufacturers have an awesome direct-to-consumer channel available through the Internet, and its a crying shame that they don't leverage it more effectively to reduce selling costs and to increase customer satisfaction.

stuntman

Feb 13th, 2009, 09:23 PM

Well which comes first, the chicken or the egg? Are interest rates high because capital is scarce, or is capital scarce because interest rates are high?

Or is it all caused by a lack of savings?

A play on words, but savings will always attempt to seek the highest risk-adjusted return on investment in a normal, undistorted economy. The auto bailouts are a travesty that will damage a future economic recovery as they distort this process and rob valuable investment from sectors that are not in economic surplus.

When it comes to "capital rationing" the high finance rates come first and can result in rationing that occurs within a company. The company does not have an affect on the finance rates. We need a different term....I don't know what that is.

Tandy failed, Hayes modems failed, commodore failed. All were dominant companies from the same era. All failed for major reasons that are irrelevant to this discussion:

The computer analogy is now as relevant as a dinosaur reference.

Don't worry about the thread.....do "hypothetical" threads often lead to much?
SM

I learned a new business term today "capital rationing" :cheesygri

tyfriend

Feb 13th, 2009, 09:32 PM

stuntman

Feb 13th, 2009, 09:55 PM

Salesmen don't dictate sales, customers do.

A lot of the time it takes 2 to make a deal. Total customer laydowns (is that a familiar term?) were rare.

Some customers wander around from dealer to dealer looking for a good deal and salesmen after salesmen walk the customers out the door. Good salesmen close deals.

Some salesmen create sales:

I sold a lot of TVs to guys who's wives were next door looking at linens.....they wander into the electronics store wondering what is new in TVs and pricing and BAM! 15 minutes later I end up closing them on a deal they did not know existed. They are also VERY happy with the purchase. If they did not run into a good salesmen then they would have walked...no sale today and no sale ever for my store.

We loved that linen store :cheesygri

lousy salesmen = lousy sales
SM

crono06

Feb 13th, 2009, 11:12 PM

tyfriend

Feb 13th, 2009, 11:55 PM

A lot of the time it takes 2 to make a deal. Total customer laydowns (is that a familiar term?) were rare.

Some customers wander around from dealer to dealer looking for a good deal and salesmen after salesmen walk the customers out the door. Good salesmen close deals.

Some salesmen create sales:

I sold a lot of TVs to guys who's wives were next door looking at linens.....they wander into the electronics store wondering what is new in TVs and pricing and BAM! 15 minutes later I end up closing them on a deal they did not know existed. They are also VERY happy with the purchase. If they did not run into a good salesmen then they would have walked...no sale today and no sale ever for my store.

We loved that linen store :cheesygri

lousy salesmen = lousy sales
SM

The TVs most likely have a return policy if they are not happy with the purchase, so they don't feel too disappointed if they don't like it. Car purchases do not and if the poor sap bought a rotten car, Tough luck. It is a win-win scenario for the dealership regardless.

I value a good product over a good sales pitch any day. Car salesmen are a dime a dozen. Some if not many have no real knowledge of the car itself. Like you said, they are there to "close the deal" and most if not all salesmen don't have the authority to sign off on the deals themselves. So why are they so important to the car industry?

stuntman

Feb 14th, 2009, 12:37 AM

The TVs most likely have a return policy if they are not happy with the purchase, so they don't feel too disappointed if they don't like it. Car purchases do not and if the poor sap bought a rotten car, Tough luck. It is a win-win scenario for the dealership regardless. I value a good product over a good sales pitch any day.

Your guessing, fishing and 1/2 right:
There was a return policy. No returns. Customers new this and they valued the product.
Salesmen also create the perception or knowledge of value in a product when it does not exist with the customer.

Car salesmen are a dime a dozen. Some if not many have no real knowledge of the car itself. Like you said, they are there to "close the deal" and most if not all salesmen don't have the authority to sign off on the deals themselves. So why are they so important to the car industry?

Salesmen having no authority to sign off on the deals is a sales tool. It is also a precaution against pricing error. RUPERT posted earlier in the thread. He found a great salesman that fills his product needs.

A BIT OF a READ HERE, sorry.

Not only do good salesmen close deals; they also take care of the customer, make them feel good about their purchase and get repeat business. The better they do the job the more/easier commissions they make and their salary goes up. Most are largely motivated by commissions. The dealer/store profits too.

Clients who are treated well can become fiercely loyal, bring family, friends and always give the salesman a opportunity to close ever deal the customer wants to make.

Companies with great product still require a great sales team. The sales team is the first line of personal contact.

Salesmen, providers of consumer desires have been valued since the day after someone really screwed up a deal by being a clerk and a salesmen fixed it up.....how old is trade?

Yes, I have had my fill of some salesman so I see both sides of the coin. Recently I had several "salesmen" waste my time on a major purchase for my home. Uninformed, deceptive, lazy....I refer to them as clerks....less than 1/2 did the title "salesman" justice.

sm
I think I am all typed out....so if I did not type enough....if you want read a few good books about making sales and things might be clearer.

Jeff-TheBiz

Feb 14th, 2009, 10:56 AM

I'd like to see how salesmen react to the idea of getting paid hourly or salaried....40hours work week, no quotas, no high pressure sales tactics, just a job you can be passionate about what you love, make real friends with the people who wanna buy a car, present what you know best.....

Jeff? Karabum? T-Man? Insights?

Honestly I havent read the whole thread only because it went a little off topic but I did catch the drift.

I know how bad things are at other dealers/manufacturers and I have made it my goal to do whatever I can, without the game and the BS that makes buying a car a PITA.

Maybe I am doing it all wrong, but I like the idea of previous clients stopping by when they are in the area or in for service just to say Hello and ask how my daughter is doing.. and the coffees are always appreciated.

A friend of mine that used to work at a different manufacturer was with me Christmas shopping a couple of months ago and he suddenly ducked into a store to avoid running into one of his past clients.. I could only shake my head. How can that be a good way to sell. No idea what he did or what happened..