March 11, 2009
Grocer Sees Discounts Driving Online Auto Sales
Back
in 2002, RetailWire published a story on a survey by Accenture
that said traditional car dealerships in Europe would see profits drop
by as much as 40 percent by 2010 because new formats including supermarkets
would get into the business of auto sales. That same year, RetailWire
reported on Wal-Mart Stores leasing parking lot space for the purpose of
selling used cars.
Back
to the present, reports this week say Lidl, a discount supermarket chain
based in Germany, has decided to sell a Volkswagen Cross
Polo and Opel Corsa through its website at 25 percent
below manufacturer suggested retail prices.
Lidl
is working with the German car distributor ATG-Automobile GmbH, according
to Petra Trabert, a spokesperson for the grocery chain.
“Lidl and
ATG-Automobile GmbH work with the same target audience,” Ms. Trabert
told The Associated Press. “We are geared toward the customer
who seeks quality in conjunction with
a favorable price.”
The
German economy, like that in the U.S., is suffering from a recession with
unemployment above eight percent. Ferdinand Dudenhoeffer, the director
of the Center for Automotive Research, told the AP, “I think
it will be very difficult for Lidl. People don’t want to buy high-value
products from a discount grocery store.”
“Germans
like to go to the dealership,” he added.
Discussion Questions: Will we see retailers
in the U.S. going into side categories such as Lidl has done with cars
in an effort to drive incremental sales and profits? Do you see car sales,
whether online or on lots, as an opportunity for retailers not currently
in the auto dealer business?
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Costco has sold cars for years here. When you consider the real estate of most major supermarkets, it would be little risk to reserve a few spaces for car sales, and even less risk to do it entirely online. The major indoor mall here always has a few cars from local dealerships.
With the auto industry in the tank, they could reach a much broader audience without the typical intimidation factor that exists at the dealership, if they sold cars at retailers in general, not just supermarkets. How about some Chevy/Fords parked outside a Sears/Kmart, Target, or Honda, Toyotas, or BMWs outside some freestanding restaurants?
Also, the retailers get more traffic to linger on their property and potentially cross-sell general merchandise outside. It is time to get creative.
The right question isn’t whether consumers would buy cars from a grocer–indeed, many would do so. The real question is whether most grocers could sell cars at least as effectively and efficiently as car dealers. But given their ineffectiveness/inefficiency in selling CPG products, I wouldn’t bet on it.
On the other hand, if we’re talking about Walmart….
Grocery chains continue to look forward to meet their customers needs and grow sales. For example, many have added fuel to the mix although few maximize their return on this investment. The current economy has even more pressure to find ways to do both. The trick is to find items/services that fall within what a customer finds reasonable for your format to be selling and that does not require a large investment (in case it does not work out).
Frankly, not sure that selling cars would have been on my list of new items. However, selling autos online means that you do not have to invest in the inventory (an assumption on my part), employ a sales staff, or service the vehicles. It does mean that the discount has to be large enough that people will go to a dealer, select the car they want and then be willing to buy it over the internet. Most buyers today understand that any of the brand’s dealers will be glad to service the car. I think 25% off list would make this an attractive alternative for many buyers.
Not sure that we will see anyone here try this soon, but given the automakers’ current situation, they might welcome the chance for a Sam’s, Costco, or BJ’s to expand into auto sales. They would likely rewrite their agreements so that they are not tied into long-term franchises (done originally to protect the dealer who was making a large investment). Their issue would be how to deliver the actual vehicle. I don’t see the local dealer being too happy about providing this service.
Definitely, the large club stores are already venturing into large commodity items. For many others, this would take away from their focus and main bread and butter! For the large club stores, it’s a possibility.
As auto manufacturers trim the number of dealerships as part of their overall cutting, there could be real change in the retailing of autos of all brands–American or foreign.
In the next five years, purchasing a car will likely be radically different, whether it is at a supermarket, club store, or otherwise–it will be different. A statistic I saw published yesterday indicated that over 90 percent of those purchasing a car (new or used) use the internet as part of the process. That change alone is radically different than even 5 years ago. In fact, I recently purchased a used car with the internet being the driving factor in locating the vehicle of my choice.
Traditional auto dealerships as we know them today will be very different–if they even exist like we know them today–in five years or even less. The innovator that finds the right model for the consumer in this market will be a huge winner. It will be a completely new experience. It will likely be a combination of internet and outlet. Those that can become the outlet will win. If supermarkets can–they’ll win. They are winning in gasoline. That might just be the ticket to finding a way to winning in a larger commodity than a box of cereal.
Once we see some of Detroit’s auto brands start to fold up, perhaps Big Lots or similar closeout retailers will begin selling them at a steep discount. Lidl’s main competitor is Aldi. Will it follow suit on its website in Germany or elsewhere?
Hypermarkets in Europe have sold cars for years. How many cars are sold is another issue. The auto industry is seeing a significant decline in the number of dealerships both planned and un-planned. Food retailers have increased–and continue to increase–gasoline sales, so are cars far behind?
Some food retailers may rent space to a dealer like they do with health clinics or dry cleaners. If they do this it will be an outsourced business with internet support, not unlike what we are seeing in real estate. Selling cars at supermarkets is unlikely to replace the dealer networks, but I do expect a new approach to car selling to evolve over the next few years.
The main question that popped into my mind when I read this thread is “how the heck did they wind up with a 25% discount off list price?” I haven’t seen any deal close to that at a Costco or Walmart auto sale. Anyone who lets today’s consumer in on the fact that they have 25 margin points to give away in their “regular retail price” on a major ticket item like a car is asking for trouble to start with!
Why not sell cars? It would be another point of differentiation for some but not really viable for others. The retailer must remain true to their vision and not go down the path of “being all things to all people all the time.”
Sure, why not? Alternate formats for the sale of automobiles is an excellent idea. The traffic’s there several times a week, much more so than at a dealer.
The whole notion of tying in your products to high traffic areas is not new. Banks and financial services have been doing it for years.
The real question here may be, are grocery stores the new mall?
Given the typical customer experience at a car dealer, even higher-end ones, there should be a number of customers that will buy online from a grocer with the offer of a 25% discount to retail.
As transparency increases in the automobile market, it opens things up literally and figuratively. Merchants like Costco and WMT are already doing this.
The key in Germany and elsewhere in Europe is not only space but the ability for a merchant like a grocer to buy the cars through a distributor. It will be interesting to see if this happens in the U.S. If so, we’ll likely see fewer automotive retailers owning professional sports franchises!
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Costco has sold cars for years here. When you consider the real estate of most major supermarkets, it would be little risk to reserve a few spaces for car sales, and even less risk to do it entirely online. The major indoor mall here always has a few cars from local dealerships.
With the auto industry in the tank, they could reach a much broader audience without the typical intimidation factor that exists at the dealership, if they sold cars at retailers in general, not just supermarkets. How about some Chevy/Fords parked outside a Sears/Kmart, Target, or Honda, Toyotas, or BMWs outside some freestanding restaurants?
Also, the retailers get more traffic to linger on their property and potentially cross-sell general merchandise outside. It is time to get creative.
The right question isn’t whether consumers would buy cars from a grocer–indeed, many would do so. The real question is whether most grocers could sell cars at least as effectively and efficiently as car dealers. But given their ineffectiveness/inefficiency in selling CPG products, I wouldn’t bet on it.
On the other hand, if we’re talking about Walmart….
Grocery chains continue to look forward to meet their customers needs and grow sales. For example, many have added fuel to the mix although few maximize their return on this investment. The current economy has even more pressure to find ways to do both. The trick is to find items/services that fall within what a customer finds reasonable for your format to be selling and that does not require a large investment (in case it does not work out).
Frankly, not sure that selling cars would have been on my list of new items. However, selling autos online means that you do not have to invest in the inventory (an assumption on my part), employ a sales staff, or service the vehicles. It does mean that the discount has to be large enough that people will go to a dealer, select the car they want and then be willing to buy it over the internet. Most buyers today understand that any of the brand’s dealers will be glad to service the car. I think 25% off list would make this an attractive alternative for many buyers.
Not sure that we will see anyone here try this soon, but given the automakers’ current situation, they might welcome the chance for a Sam’s, Costco, or BJ’s to expand into auto sales. They would likely rewrite their agreements so that they are not tied into long-term franchises (done originally to protect the dealer who was making a large investment). Their issue would be how to deliver the actual vehicle. I don’t see the local dealer being too happy about providing this service.
Definitely, the large club stores are already venturing into large commodity items. For many others, this would take away from their focus and main bread and butter! For the large club stores, it’s a possibility.
As auto manufacturers trim the number of dealerships as part of their overall cutting, there could be real change in the retailing of autos of all brands–American or foreign.
In the next five years, purchasing a car will likely be radically different, whether it is at a supermarket, club store, or otherwise–it will be different. A statistic I saw published yesterday indicated that over 90 percent of those purchasing a car (new or used) use the internet as part of the process. That change alone is radically different than even 5 years ago. In fact, I recently purchased a used car with the internet being the driving factor in locating the vehicle of my choice.
Traditional auto dealerships as we know them today will be very different–if they even exist like we know them today–in five years or even less. The innovator that finds the right model for the consumer in this market will be a huge winner. It will be a completely new experience. It will likely be a combination of internet and outlet. Those that can become the outlet will win. If supermarkets can–they’ll win. They are winning in gasoline. That might just be the ticket to finding a way to winning in a larger commodity than a box of cereal.
Once we see some of Detroit’s auto brands start to fold up, perhaps Big Lots or similar closeout retailers will begin selling them at a steep discount. Lidl’s main competitor is Aldi. Will it follow suit on its website in Germany or elsewhere?
Hypermarkets in Europe have sold cars for years. How many cars are sold is another issue. The auto industry is seeing a significant decline in the number of dealerships both planned and un-planned. Food retailers have increased–and continue to increase–gasoline sales, so are cars far behind?
Some food retailers may rent space to a dealer like they do with health clinics or dry cleaners. If they do this it will be an outsourced business with internet support, not unlike what we are seeing in real estate. Selling cars at supermarkets is unlikely to replace the dealer networks, but I do expect a new approach to car selling to evolve over the next few years.
The main question that popped into my mind when I read this thread is “how the heck did they wind up with a 25% discount off list price?” I haven’t seen any deal close to that at a Costco or Walmart auto sale. Anyone who lets today’s consumer in on the fact that they have 25 margin points to give away in their “regular retail price” on a major ticket item like a car is asking for trouble to start with!
Why not sell cars? It would be another point of differentiation for some but not really viable for others. The retailer must remain true to their vision and not go down the path of “being all things to all people all the time.”
Sure, why not? Alternate formats for the sale of automobiles is an excellent idea. The traffic’s there several times a week, much more so than at a dealer.
The whole notion of tying in your products to high traffic areas is not new. Banks and financial services have been doing it for years.
The real question here may be, are grocery stores the new mall?
Given the typical customer experience at a car dealer, even higher-end ones, there should be a number of customers that will buy online from a grocer with the offer of a 25% discount to retail.
As transparency increases in the automobile market, it opens things up literally and figuratively. Merchants like Costco and WMT are already doing this.
The key in Germany and elsewhere in Europe is not only space but the ability for a merchant like a grocer to buy the cars through a distributor. It will be interesting to see if this happens in the U.S. If so, we’ll likely see fewer automotive retailers owning professional sports franchises!