
Car sales have traditionally been a closed retail business operated via authorized dealerships, with dealers typically fighting against any outside business models (e.g. Tesla has had trouble establishing dealerships in certain U.S. states).
But retail’s heaviest hitters, including Walmart, Amazon and Costco, have all entered the auto sales business, albeit indirectly, giving consumers yet another reason to shop their brands.
The RTP team discusses what this blurring of traditional lines means for auto retailing, whether car sales are the next big opportunity area for retailers.
Debbie Hauss, Editor-in-Chief: Honestly, I’m not exactly sure why retailers would want to take on the business of selling cars. But the car selling industry certainly has undergone changes, which could be inspiring some of this shakeup. With Carfax and other automated research tools saturating the marketplace, the old days of haggling in a dealership for hours are disappearing. Educated consumers know exactly what they want at the price they’re willing to pay. Enter: Walmart and others. Tesla also has helped break down the traditional car-selling barriers, by opening stores in malls and selling direct-to-consumer. I’ll be interested to see how this develops, especially as cars become more connected. Automobiles could be the next great commerce channel, which sounds like a match made in heaven for retailers and consumer brands.
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Adam Blair, Executive Editor: The very idea that retailers were getting into auto sales initially seemed strange to me. Auto sales have long been a closed-loop proposition, with powerful dealer networks fighting fiercely against any encroachments. Then I read some of the articles explaining this phenomenon (e.g. Costco facilitates car purchases as a means to pump up the value of its all-important memberships) and it made more sense — particularly in a retailing world where traditional lines are not just blurring, they’re disappearing. Auto sales seem like a good area for retailers to investigate, but they should certainly tread carefully. At a minimum retailers will need 1. Solid business reasons to try this in the first place; 2. Meaningful ways to add value to the car buying experience (shopping assistance, deals on service plans); and 3. Some way to guarantee the quality of the car the customer eventually purchases. If you buy a piece of apparel that doesn’t wear well, it just gets buried in the back of your closet. If you buy a “lemon” of an automobile, it leaves you with a bad taste in your mouth — and a negative association with all the organizations that led you to it — for years and years to come.
David DeZuzio, Managing Editor: At first pass, auto sales might seem like a strange place for Walmart’s focus. But when one considers that Sam’s Club already sells them and Costco sold 465,000 vehicles through partnerships with auto dealers in 2015 — enough to make it the No. 2 auto retailer in the U.S. behind AutoNation— things come into focus a little more. And, lest we forget, Amazon is always in the mix. Now, Costco itself does not sell the cars, and doesn’t make any money on the auto sales, but it does use the program as a way to attract new members and maintain existing members’ interest. To monetize this huge opportunity, Walmart will have a landlord/tenant relationship with CarSaver, as it does with other companies that occupy the leased spaces at the front of its stores, including McDonald’s and Smart Clips. It’s a great move that might spur people to think of Walmart as a place where they can get everything…just like Amazon. And let’s not forget that this move could increase its visibility as an e-Commerce auto parts retailer, an industry that is on track to clear $10 billion. At this point, any move to combat Amazon is absolutely essential to keep retailers from running out of gas.
Klaudia Tirico, Features Editor: At first glance I would have argued that auto sales are a dealership’s job. I understand that lines are constantly blurring in retail, but the lengths some retailers go to “differentiate” themselves from others has kind of gone too far, don’t you think? But on second thought, these exact retailers — Walmart, Amazon and Costco — began selling caskets online a few years ago. So it’s safe to say nothing is off limits anymore. I am curious to see how consumers react to these retailers getting into auto sales. Could they offer more than a car dealership can? As someone whose husband scrolls through eBay looking at cars for sale (for fun, that is), I can see how people would find these offerings helpful, whether it’s to actually purchase a vehicle in the most convenient way or as a form of research before heading to a car dealership. One thing is for sure: There’s never a dull moment in the retail industry!
Glenn Taylor, Senior Editor: I welcome any competition within the auto industry, especially given the cartel-like atmosphere the dealership world appears to provide. If consumers are able to buy Fiats on Amazon, then let them do it. Amazon’s case for car sales is still up in the air, as most consumers aren’t ready to buy a car online, but the move to sell auto parts is certainly intriguing given the competition we’ve seen from brands such as Advance Auto Parts and AutoZone. Amazon has just as much right to sell auto parts as anyone else, and if they can manage their recent introduction of private label clothing, they are likely to gain a consumer base here. For myself, I generally need in-person advice regarding auto parts purchases so I know exactly what I’m getting. This kind of in-store interaction is probably necessary for a lot of uneducated auto shoppers like myself, so I can’t see the major auto parts brands being overly shaken up by this, at least in the near term.