Tuesday, 24 April 2018 13:31

Fixed Price, No-Haggle "Retail" Dealerships. The pathway to customer satisfaction? Image used under license: Shutterstock

Western Australia has seen growth in the "Warehouse" style dealership sector over the past 3 years, with the promise of a large range of vehicles, fixed pricing and low "sales pressure". Often coupled with lower vehicle margins, these businesses typically earn profits through aftercare products including finance, insurance, warranties and accessories.

WhichCar motoring news have reported that Toyota Dealerships in New Zealand are implementing a similar strategy in their new car sales departments, whereby the dealerships become retail stores and offer "made to order" solutions with fixed prices and less inventory on hand. The article, written by David Bonnici, states that the rollout is part of Toyota's "Drive Happy" project.

Perth has examples of vehicles being displayed within shopping centres, though this trend is larger in the Eastern States. There are also examples of fixed-price, haggle-free dealerships (usually being used car warehouses). The merging of the two into one model is a reasonably new concept, however, which also poses many questions, including;

  • If there is restricted inventory on hand, how will customers adequately test-drive and compare new model variants (e.g. base model to luxury pack)?
  • How will trade-ins be treated if on hand stock is to be reduced and negotiations are taken away?
  • Will the removal of sales-based commissions (as is the case with Toyota New Zealand) also apply to used car sales?
  • What does this mean for inventory management for existing large dealerships?
  • If customers can order a new car and don't have the full suite of advantages of test-driving, will they skip the dealership altogether?

These are issues for manufacturers to explain, as taking away some of the choice in the current dealership model also reduces the role of the dealership and in turn - customer choice and satisfaction. Whilst not directed at Toyota specifically, the reduced reliance on dealerships is advantageous for the manufacturers, but does not provide a future plan for the many loyal dealers, who for decades have stocked, serviced and sold the vehicles that have given the manufacturers the brand status that they benefit from today. Their role is often challenged, but their importance should not be understated.

If customer satisfaction is the key driver and justification for such business model changes, it's important to consider that dealerships are often the “messenger” and do not necessarily cause customer dissatisfaction itself. When vehicle manufacturers make rulings on warranties, implement or takeaway incentives without proper consultation (such as temporary 5 year warranties that have been the subject of much frustration among customers), do not provide adequate dealer resource support with regard to common vehicle problems, recalls or outright refuse to acknowledge wide-spread faults- it is the dealership who usually take the backlash, despite their hands "being tied". Dealerships can only deliver customer satisfaction to the extent that manufacturers provide long-term, strategic customer care and assurance programs in cohesion with dealerships. With the exception of poor conduct and presentation, which is most definitely a management issue, most dealerships are restricted by the goods, services and programs that they are mandated to provide when it comes to meeting customer expectations.

The issues highlighted are not directed at any manufacturer specifically, they have been noted to raise awareness for the need for better consultation between manufacturers, dealerships and customers alike.

Whilst some dealerships are subject to criticism for “pressure tactics”, taking away the many services that dealerships provide does not solve the customer satisfaction issue, it simply removes some of the customer service benefits of the dealership business model. Consumers are likely to suffer in the long term if dealerships are utilised simply to “take orders”, as it provides no obvious benefit over ordering a vehicle online, though many disadvantages – most notably the lack of tangible interaction with the product. If dealerships start closing due to the reduced ability to service customers above and beyond the ways that online platforms can, everybody loses. Regional customers know firsthand the impact resulting from a lack of access to dealerships. If there is no sales yard, there’s often no dealer service centre. That is not in anybody’s best interest. If made-to-order, haggle-free new car dealerships are headed our way, there are a lot of issues that need to be discussed to ensure the ongoing viability of our dealerships.

The original article regarding Toyta New Zealand's rollout written by WhichCar can be viewed here https://goo.gl/u5qKMF

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