Saturday, September 14, 2013

Independent Dealer or Factory Store?

Once again Tesla versus the dealers made the front page of Automotive News (September 9, 2013). Tesla wants their dealerships to be factory stores; the dealers contend that this violates most states' franchise laws. I lean towards Tesla's vision.

In my life I've worked for four or five dealers and with one exception they were pretty sleazy. Even the one exception employed some sleazy salesmen. Now that was almost a lifetime ago so maybe things have changed. But in my dealings with dealerships during my time working for the state I didn't really find that it had.

I think most of the franchise laws were enacted a long, long time ago to protect small, independently owned businesses from the big, bad corporations. But that was then. Now a large percent of dealers are part of big corporations. There was no protection for the mom-and-pop dealers who were gobbled up by the corporations and little help for those who were forced out of business by the auto companies.

So many products today are sold exclusively in stores owned by the company that makes them. And it seems to work well. Tesla wants to sell their cars in the manner used by Apple. Although I've never bought an Apple product I think it's a good idea.

I hate dealing with salespeople. And I don't think I am that much different than most people. Their job is to seal the deal quickly. I like to know what I'm paying before I buy. I do admit that I am an abnormal shopper - my mom would hate the fact that I like to pick a store and just go there and buy, not shop around.

It's no secret that a car salesperson is still one of the most reviled "professions" in this country. In fact a study by Gallup found that car salespeople rank lower than Congress. That's pretty bad.

That's not to say that an Apple type store would be perfect. I went into one about eight years ago because I needed a new laptop. I spoke to one of the employees and felt like I was talking to a cult member, someone who wanted me to join their way of life not buy a product. I don't know if Tesla would be the same but I do know one thing; when I left the Apple store I didn't feel like I needed to go home and shower or have to check my pockets to make sure I still had my spare change.

When I worked for some auto makers they always stressed that their customers were not the buying public but the dealers. I never bought into that. If you've ever had a warranty problem you've heard that too but not in those exact words.

The dealer groups should be afraid of the Tesla "model" not because it would put them out of business but because it might make them change their business practices. The dealers fear that if Tesla is successful other auto makers may follow suit. Some may but for most the cost of acquiring and operating thousands of dealerships makes me think not.

The dealers are also afraid auto makers yet to show up in the US may follow Tesla. Yes they might but again, if they want to reach every market, it is doubtful (to me) that they would have the finances to set up in hundreds of cities. They may open factory stores at first to get their feet in the door but unless they are selling to a relatively narrow audience they'll need many, many stores.

Tesla sells a unique product not a car for everyone (yet). Times change and so should sales avenues and techniques. Dealerships, other than becoming corporate chains, really haven't. Yes they've put some lipstick on the pig but it's still a pig. And yes there are some exceptions.

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