It used to be that a dealer’s only competition was the dealer down the road. This is no longer the case. We are all aware that the internet has shrunk the size of our world and made it easier than ever to buy things (including vehicles) from great distances away. The world continues to change, however, and now retail giants like Walmart and Amazon are joining Costco to add a whole new level of competition for dealers.
While it is not likely that retail giants will ever replace dealerships, it is important that we are aware and stay prepared the changing market environments. Here is a closer look at what these retail giants are up to.
It is no secret that Costco has been selling cars for many years. According to Fortune magazine, Costco sold more than 465,000 vehicles in 2015 through partnerships with manufacturers and auto dealers. While dealerships understandably prefer to deal directly with customers, the symbiotic Costco-dealer relationship model has certainly proved to work for both parties.
Costco’s arrangement is unique, however, in that they are a membership warehouse, and the deals are only available to Costco members.
Walmart / CarSaver
With the success of Costco vehicle sales, Walmart is now taking a shot at this model by partnering with online car buying site CarSaver.com. Alongside pharmacies, nail salons, eye doctors, and restaurants, you will soon start to see CarSaver kiosks opening in many Walmart stores across the country.
CarSaver is effectively a brokering service which utilizes Chrome Data Solutions to provide a robust platform for vehicle comparison and selection. CarSaver has partnerships with Auto Nation as well as other large auto groups. In addition to detailed comparison and selection tools, CarSaver also offers financing (Automotive News has reported that CarSaver will provide financing through preferred lender Ally Financial), and a free lifetime warranty.
Once terms are reached and a vehicle has been selected, a local dealer will bring the car to Walmart for a test drive and to finalize the deal. While it is still unclear exactly how the process works and whether it violates any dealer brokering agreements, what is clear, is that Walmart will have an impact on vehicle sales in participating markets.
CarSaver, Walmart, and 20 participating dealerships ran a 1-store pilot of this program in Stuart, Fla. in April, 2016 with impressive results. More than half of the appointments scheduled led to a sale, with an average savings of $3000 off of MSRP, based on CarSaver’s No Haggle price structure.
While Amazon does not yet offer the ability to buy a vehicle on the site, it does appear poised to do so at any time. Amazon Vehicles is a tool for vehicle research and comparison that allows visitors to explore models, options and compare features across several vehicles at the same time.
Amazon has also been experimenting with Hyundai on a program they call Prime Now Drive Now. This program allows Amazon shoppers in certain markets to request a dealer representative to bring a vehicle to the shopper’s location for a test drive.
With all of the other innovations Amazon has brought us in recent years, don’t be too surprised if they find a way to innovate and change the face of car sales in the coming years.