THIS BLOG IS THE OPINION OF THE AUTHOR. PLEASE READ THE DISCLAIMER AT THE BOTTOM OF THE PAGE BEFORE READING.
UPDATE: TrueCar Responds. This analysis was discussed in the LinkedIn Automotive News Group. To view the entire series of comments, that include comments from Charles Kim (Director of Dealer Development at TrueCar), please click here to view a PDF copy. Note: Kim’s comments start on page 6.
Before you read my lengthy analysis, I will let you know that if a feasible alternative existed, eliminating the new car sales staff would tremendously increase my dealership’s bottom-line. I’m pursuing ISO9001 certification for our processes, and I tackle the “variable and unpredictable challenges” of the sales staff each and every day. My responsibility is to improve the company’s bottom-line, and I certainly would eliminate any unnecessary expense, even if it was my own position.
My post, or rather analysis below, is long and at times seemingly unending. It’s deliberately detailed, as I needed to substantiate my opinions with relevant details rather than abstract thoughts. Please enjoy.
Death of a salesman? Or dot-com bust: TrueCar.com
TrueCar.com, a site that claims to allow shoppers to “find what others paid for new cars,” recently raised $200MM in pre-IPO financing. As we find with many pre-IPO companies, the company’s management has made, in my opinion, overly bullish statements regarding the company’s potential. In a recent interview with Automotive News, TrueCar.com’s CEO Scott Painter flamboyantly described his company’s role in revolutionizing the new car sales industry, specifically; the elimination of the new car sales staff from all of today’s franchised dealerships. In his interview with Arlena Sawyers(Automotive News), Painter elaborated on his “vision of dealerships where new-car showroom sales staffs will be obsolete.” As he explains, “Things are fundamentally changing so fast….If dealers and manufacturers don’t embrace new ways of communicating with the customers, they won’t survive.” Painter states that on his online site, cars become commodities, “the car sells itself at that point. It’s effectively a commodity.” Painter feels that shoppers using TrueCar.com can avoid the haggling and awkward negotiating conditions found in many new car showrooms today, and ultimately receive a better deal without any aggravation.
You can read the article here: “Painter’s vision: Sales with no sales staff;” http://www.autonews.com/apps/pbcs.dll/article?AID=/20110829/RETAIL07/308299963/
Painter’s Model of Commoditization…
When I think of commoditization and the auto industry, I always remember Henry Ford’s quote “any customer can have a car painted any color that he wants so long as it is black.” And innevitably, Ford’s credo of mass production and non-uniqueness gave way to the success of other manufactures – notably General Motors. GM created various cars and brands to appeal to different market segments and customer preferences – something Henry Ford wouldn’t do, and therefore allowed GM to gain success because of his stubborn nature.
And as with Ford’s mistake, Painter’s plan of assassinating the new car sales staff, and instead replacing it with his “haggle free” website where “cars become commodities” is certainly problematic for auto manufacturers. While the concept of a negotiation-free marketplace is tempting, the customer experience will suffer and brand loyalty would dissipate with Painter’s online model.
I oversee stores in the Long Island Market. I cannot imagine spending hours in my showroom demonstrating a vehicle, building a relationship with a customer to understand their exact needs, and then redirecting this client (who is on the verge of making an important financial decision) to a website that presents my premium product as a commodity! Moreover, how could I represent any automotive brand, but not have staff that is confident, capable, and trustworthy enough to assist a client with a purchase after the client concluded it was the right car for their needs and wants? Well, Painter says I can’t.
Painter’s idea of spreading the contagion of mistrust in our new car showrooms is not only harmful to the dealership, but detrimental to the manufacturer and the customer. Painter wishes for car shoppers to become “lame ducks” incapable of differentiating vehicles based on value, loyalty, and the customer experience – instead he wishes for customers to concentrate on price. (prices that as I will point later, are potentially irrelevant or even misleading).
On paper, most cars are almost identical with the exception of price. In order for auto manufacturers to avoid the “on paper” commoditization, it’s necessary for customers to visit the dealerships, drive the vehicles, and appreciate the entire experience of the vehicle’s brand in order to make the correct decision for their automotive needs. Shopping may start online, but the sale ends in the showroom.
Maximizing the customer experience is necessary for auto manufacturers to avoid commoditization
When Apple introduced the iPod to the MP3 market, Apple was certainly late to the “MP3 dance.” From a price and feature standpoint, the product did not stand out in the marketplace. However, because of Apple’s approach to the user’s experience, the iPod became the market leader. Apple understood the necessity for a ‘simple to operate’ device, a device that allowed you to seamlessly download/sync MP3s and movies, a device that was chic and felt great to hold in your hands, and was all backed by a company where you could make an appointment to meet with a real person. Apple turned commodities, the iPod and iPhone, into the most desired gadgets of the decade because of the company’s relentless dedication to maximizing the customer experience.
The new car dealership is an extension of the franchised brand…It’s not the auto retailer of 20+ years past…
Today’s car shopper demands an elevated customer experience. Auto manufacturers are moving away from product centric models to customer centric models intended to accomplish the experience goal – which is the key to loyal, referral generating, customers that act as ‘brand ambassadors‘ of the products they drive. Customers are loyal to brands, and not products, and this is why dealer development remains a forefront issue for auto manufacturers today.
Customer interactions and brand touch points requires consistency, personalization, and trust. This applies in the showroom, at the service drive, on your brand’s website or even when the customer is speaking with your brand’s financial services division on the phone – everything should be seamless and consistent for your mutual customer.
Auto manufacturers have developed their own customer experience models, and we even see some trying to emulate Apple’s success by trying to appear “chic and modern.” Manufactures realize that maximizing the brand experience is critical to averting commoditization. We see more personalized features than ever before; entry-level cars equipped with Facebook status updates, iPhone integration, driver profiles, and much more. Thousands of dealers have invested billions into their facilities to become compliant and consistent with their franchised brand. Millions have been spent on IT and CRM systems, to share customer information, and unify marketing/recall/advisory and relevant information distribution.
Just last month, VW created a new position for an auto manufacturer, the VP of Customer Experience with VW veteran and former COO Mark Barnes at the helm. Why? VW realizes that in order to maximize the $1 billion investment made in US manufacturing infrastructure, the company must offer VW customers a superior customer experience within the VW dealer network. Mark, and his gang of sidekicks, launched a major offensive to train and develop the VW dealer network on VW brand values and top-notch customer experience models. VW plans to steal marketshare from Honda & Toyota without competing solely on price(a battle no one can win), but by establishing a unique and memorable customer experience for the VW customer.
Like the Apple Store, car dealerships need to have trusted staff on site to sell the customer that chose the brand, and not discredit the brand and the dealership by redirecting the customer to a website that presents the brand’s product as commodities. Second to purchasing homes, buying a car is the most significant purchasing decisions our clients will ever make it. Outside of all the technical and logical information they can obtain online, they need to be guided by humans in a personal and real experience. Whether it’s the physical appreciation of the vehicle’s brand or the assistance of the dealership’s staff to understand the brand/products, auto customers must be guided and have confidence instilled in order to complete a sale.
While alternatives to negotiating exist (as I will explain later in this post), the actual sale of the products must be arranged within the dealership. No customer should be redirected from a dealership to a third party website offering a competing brand’s products, it will completely damage the customer experience and also discredit both the dealership and the car’s brand. What does it say about a dealership or manufacturer if it cannot sell its own products in a transparent and fair manner? Would you trust a product from such a brand? Humans are emotional beings, and when shoppers are contemplating one of the largest financial expenses they will make in 5 or more years, they need to feel comfortable with the team they’ll be around for the next 5 years – this applies in both sales and service.
Manufacturers realize that the commoditization of automobiles desired by Painter will only allow super- low-cost manufacturers to thrive. Therefore, Painter’s model will effectively ruin the credibility of established brands – in some cases that took over 100 years to build. A favorable customer experience model and brand differentiation cannot be realized by shoppers purchasing from a commoditization website (e.g. TrueCar).
Alternative Transparent & One-Price Pricing
I recently read an article where Lisa Schomp, of Schomp Honda in Colorado, explains how she implemented a one-price policy in her store with great success. And we certainly all remember Saturn’s “no haggle” model, but even with Saturn’s demise, it still had a loyal base of non-haggling followers until the very end.
As Mark Rikess, the self-proclaimed “champion of the One Price Selling movement” (employed at over 150 franchises) states, “One-Price Selling is in sync with what today’s customers seek: a transparent, fast and simple process for purchasing automobiles. Today’s Web-enabled buyers make up 40 percent of auto shoppers who are demanding haggle-free pricing.”
Idealistically, I’m in favor of a one-price selling system in certain circumstances, and I’m certainly in favor of a one-price system for used cars (for velocity dealers). Like the Apple Store, I can envision salespeople acting as true advisors with the one-price system, simply concentrating on the customer’s needs and then removing the entire awkward negotiating stage (and even the dreaded foursquare model – got the blue markers?). Wow, this thought of near bliss almost sends Goosebumps down my spine.
But how realistic is one-price selling? In my market, Long Island, some of the most successful volume dealerships advertise prices below cost and will often sell vehicles below cost. You will find, in many cases, the vehicle purchase price from one of these dealers much less than the TrueCar marketprice. How? These dealers will place “gimmick” ads to get customers to come in, and will often bait/switch shoppers to another vehicle, but still will quite often sell the vehicle below cost. These dealers are motivated by volume incentives by the manufacturers, incentives that change each month and each quarter. Depending on the sales of one month or quarter, these high-volume dealers will do anything to move units. And as long as these below-cost dealers can place an ad online or on their website showing a price much lower than TrueCar’s market value, then customers will visit their showrooms – who wouldn’t want a better deal? Because, as we find out, in many cases these absurd deals are actually real.
Flat or one-price pricing is an entire debate within itself. Right now, for new cars (in contrast to pre-owned), I see the practice as a branding tool to market a dealership that doesn’t want to deploy a price-war strategy with its competitors. They are selling the perception, not always the reality, that other “negotiating” dealers use gimmicks or bait/switching pricing, and that their customer will ultimately receive a fair deal with the one-price store – which may be the case or may not.
Either way, for new car flat pricing to work in the truly ideological sense, it must be a practice followed by all dealers and all manufacturers. Otherwise, if only certain dealers participate, then other dealers can quickly develop price related competitive advantages. And if certain auto manufacturers participate but others don’t, then non-participating auto manufacturers can lure customers into competing brands. For this reason, and many others, the auto-industry has been slow at adopting the one-price practice for new car sales.
So how successful and accurate is TrueCar?
After reading the Automotive News article, I immediately visited the TrueCar.com website. One of the first things I noticed was 848 Facebook likes. I was surprised to see a low number, in comparison to other large websites, for a seemingly well-known site that claims it will sell “250,000 new cars and trucks to consumers shopping on their site this year…” So, immediately after, I visited compete.com, and while the data on compete.com is largely unscientific, it still didn’t seem consistent with Painter’s claim – it was too low. I subsequently found another article where Painter was again cited, and it was implied that the majority of “leads” originate from affinity relationships with companies like American Express.
“TrueCar says it has helped users buy over 350,000 cars since its inception (20,000 last August alone), in part thanks to the auto buying program partnerships it built with the likes of Farm Bureau, American Express and US Bank.”
Source: http://techcrunch.com/2011/09/07/car-price-comparison-company-truecar-raises-200m-gears-up-for-ipo/
In the Automotive News article, it was implied that the bulk of TrueCar’s dealer referrals were from customers actually taking advantage of the TrueCar’s market value tool, which would help explain to investors why Painter’s model is so exciting. And while this could be the case, it actually appears that most of the dealer referrals are coming from TrueCar’s affinity marketing. Which basically means, TrueCar’s current brand equity is only as strong as the companies(brands) it associates with. However, I do not know the definite answer on this point, and either way it certainly doesn’t change my opinion of TrueCar’s worth.
However, from my experience with the Costco Auto Buying Program, I found many shoppers would purchase vehicles without ever trying to negotiate. These buyers had such faith in the Costco brand, that they felt the same “buying power” and “economies of the scale” that made their Costco shopping experiences superior, would also apply with Coscto’s affiliates. And, when they dealt with my dealership, we certainly did our best to maintain that reputation. However, when the dust settled, Costco shoppers were not saving much more (if anything) when compared to our average sale.
In comparing the TrueCar’s market values against actual transactions in the past 30 days, I found the site to be often irrelevant and even inaccurate. This was especially true when it came to conquest cash, leases, or other variables that are often hard to find and sometimes specific to dealers/customers – even though in many cases TrueCar publishes this confidential information.
However, in most cases, the site appeared to be accurate. However, keep in mind, as I will note later the TrueCar model is subject to many theoretical vulnerabilities.
Why it’s “working” now: Right Place. Right Time. Right Story (Hype).
In my opinion, TrueCar is gaining traction for two reasons. First, Painter was able to use the brand equity of some of the world’s top brands (e.g. American Express) to establish the credibility of his service. In turn, he sold companies like American Express a rosy colored promise: a lucrative referral fee for each successful transaction and the opportunity to provide a value added service to their existing customers. Second, Painter is selling hype and appealing to the buyer’s emotional fear of car dealerships. Can you find me a customer who enjoys haggling? Who wouldn’t want to purchase in a haggle-free and transparent environment?
Whether TrueCar customers are actually saving money or not saving at all, currently remains impossible for me to determine without a thorough analysis and the assistance of an outside and independent firm. If anything, there are customers going into dealerships thinking they are receiving an excellent no-haggle price, but in actuality they could be receiving a manipulated and highly fallible price (as I explain in my “Legal Threat” hypothesis below).
Legal Threats to TrueCar.com
Franchise Laws
I remain unsure of Painter’s intentions even with his flamboyant comments regarding his “endeavor to revolutionize the auto-industry.” However, when Painter implies that vehicle transactions can occur entirely on his site, he should note that various franchise laws prohibit this practice. It is entirely unrealistic that TrueCar can ever sell new cars, directly, on their website as it would violate the various dealer/manufacturer franchise agreements.
Moreover, there are other hypothetical issues with respect to franchise laws. Painter has made it clear, he wants his site to “reinvent trade” and therefore create disruption that interferes with the fundamentals of existing franchise agreements; his model of redirecting customers to a web-based model that eliminates dealership sales staff, will clearly affect the territorial limits of franchise agreements. By allowing Painter to continue to utilize auto manufacturer information, or by the willful participation of manufacturer’s in TrueCar’s model, the manufacturers will violate their territorial protection duties as stated in their franchise agreements and therefore be legally vulnerable.
In my opinion, auto manufacturers that allow Painter’s model to continue are indirectly participating in the violation of various franchise laws because of the dilutive nature his site poses on established franchises and the agreed terms of transacting business as defined by the franchised agreements. Manufacturers cannot take refuge in a “laissez-faire” approach.
Unfair Trade Practices & Collusion (Willful Negligence)
While the anti-trust or unlawful pricing aspect of Painter’s model is very hypothetical, it remains a possibility.
TrueCar justifies vehicle acquisition prices based on market pricing. So, if you live in San Francisco or a small town in the mid-west, you will receive different pricing based on actual sales in your market. This model creates opportunities for participating dealers to create illegal and deceptive pricing.
- For example, two dealers in a specific market, can “cushion” the data sent from their DMS to artificially inflate the sales-price. To a shopper using the TrueCar pricing, they could be mis-guided by inflated prices that TrueCar is showing as market averages and therefore be used to substantiate and inflate the “non-haggle” price, ultimately resulting in the customer being manipulated into a higher price.
- Rest assured, if TrueCar’s model grows, whether colluding together or not, dealerships will “cushion” their prices. Without real financial auditing in place, it is impossible to be certain that the data sent to TrueCar is accurate.
- Additionally, without ample dealer participation in a certain market, the site cannot provide an accurate representation of a specific market, and is therefore providing market pricing that maybe inaccurate or misleading. While I’m sure TrueCar will claim to have ample dealers in each market, who is auditing this process? Without inclusion of the high volume dealers in each market, TrueCar’s pricing may be entirely irrelevant and therefore misleading.
Since TrueCar is making a profit from utilizing dealer information, they are obligated to ensure that reasonable measures are in place to prevent this type of abuse. If they fail to do to so, then they are a negligent accomplice to collusion and deceptive advertising.
Let’s Rob Peter to Pay Paul
Finally, as with traditional bait/switch pricing, dealers on the TrueCar site will inevitably use bait pricing to lure customers into a purchase. As we’ve seen before, the customer will be upsold in “the box” (F&I office) with finance reserves or some other means for the dealership to generate a profit. So in essence, how is this even a non-haggle and fair price? It’s not unless specific safeguards are in place to prevent upselling from occurring – and we all know that’s almost impossible because of the nature of financing.
The manufacturers can shutdown TrueCar & its network within two weeks: How? Intellectual Property Violations.
It can be argued that TrueCar.com is infringing on the intellectual property rights of all the manufacturers represented on their site. In theory, in just a matter of two weeks, the manufacturers can shutdown TrueCar’s websites and affiliate programs by sending cease & desist notices (more commonly known as DMCA Takedown Notices) to the ISPs and Web hosting companies that provide services to TrueCar.com and their affiliates. The Digital Millennium Copyright Act requires ISPs/Web hosts to remove potentially infringing content, upon notification of the infringing content by the trademark/copyright holder, within a short timeframe of only a few days. Further, sending a DMCA notice does not require a Judge’s order, it can be sent by anyone who has a valid claim to a copyright/trademark and simply believes their intellectual property rights are being violated. While TrueCar would likely dispute the below complaints, most third party affiliates will almost certainly and abruptly remove the infringing content, rather than risk a disparaging lawsuit.
Here are some of the legal areas that that I feel the manufacturers should be looking at:
- Unlawful and infringing use of trademarks for a commercial purpose (outside of fair use)
- “Fair use” of trademarks allows any seller (even unauthorized sellers) to advertise products containing the product’s trademark. So, for example, I can sell a Honda Accord on eBay that I own, and advertise as such, as the trademarks “Honda” and “Accord” are necessary to display in order to accurately describe the car I’m selling. However, fair use, in theory does not allow “lead companies” to use manufacturer trademarks for their own financial purposes– specifically selling leads. TrueCar is using the manufacturer trademarks to gain search traffic to their site, and in turn, sell leads to dealers. They are not selling automobiles directly to consumers and therefore are not protected by the fair use exemption. TrueCar is promoting their own product (the actual lead they sell to the dealer) at the expense of the brand equity and likeliness of the manufacturer’s trademarks. And unlike eBay, the dealer isn’t populating TrueCar’s site with the trademarks in order to sell the product, instead TrueCar is populating their site in order to generate sellable leads.
- The actual posting of manufacturer content on the TrueCar site (including but not limited to logo and trademarks) for a commercial purpose (outside the sale of tangible product offered specifically by TrueCar) appears to constitute copyright/trademark infringement.
- TrueCar’s use of specific manufacturer trademarks in meta-tags, is a practice that the courts have ruled in other cases as illegal, as it hijacks a trademark in order to gain search traffic (this is in contrast to Google AdWords, in which the practice is permitted so long as the trademark is not displayed in the Adwords Ad).
- Brand Dilution
- Posting of inaccurate information that dilutes the manufacturer’s brand value
- TrueCar provides information/opinions to consumers based on criteria that in my opinion is sometimes misleading and largely unaudited (but claims to be accurate). This information, when inaccurate, can have a disparaging effect on the manufacturer’s ability to sell vehicles, interrupt trade cycles and retail channels, as well as damages the manufacturer’s brand.
- Unauthorized posting of confidential information that disrupts trade
- TrueCar posts confidential information from manufactures, specifically dealer rebates and other internal information. This confidential and competitive information could be viewed as exposing trade secrets, and again it could be disparaging to the manufacturer’s brand. Keep in mind, TrueCar has no legal right to post this information, and is knowingly, posting confidential information on their site in an effort to generate “sellable” leads.
- Referral of search engine traffic (using manufacturer’s trademarks) to show competing brand products
- As I explained above, TrueCar optimizes their website to gain “organic search traffic” by the inclusion of manufacturer’s trademarks as keywords in meta-tags. In addition to obvious trademark infringement, this activity is especially damaging to manufacturers when TrueCar redirects a user search for a specific brand to a competitor’s brand that is offered on the site. The use of manufacturer’s trademarks as search engine “bait” is a brand diluting practice.
Remember, TrueCar is not an independent press source, and therefore is not covered by the protections provided to the media. They get paid when leads convert on their site, and therefore, have a vested interest in guiding shoppers to make financial transactions based on the unaudited information (and potentially inaccurate/misleading information) that they provide – even if unintentional. To be clear, I’m not saying TrueCar is intentionally steering customers, I am merely explaining that the possibility exists without a strong system of checks/balances.
Note: The reason I have an understanding of trademark law is because of my history as an e-commerce merchant. Nearly every week, for several years, I would receive DMCA takedown notices from electronics manufacturers that did not want their products sold on my site. Eventually, in order to sell certain products, we could not use pictures or descriptions provided by the manufacturers, but only trademarks which were considered “fair use.” Keep in mind, we owned the inventory, so we were the actual sellers of the product. The practice of sending DMCA takedown notices to online stores became so common, that I actually helped Yahoo!’s Legal Team draft a policy to protect merchants, but also identify companies that were using the DMCA as a means of controlling pricing(restricting trade) and not actually protecting their intellectual property rights.
Will NADA & the Auto Industry Step-up to the Plate?
In addition to the steps that could, in theory, be enacted by the manufacturers to stop TrueCar’s attempted commoditization and disruption of our industry, it’s also time for the manufacturers to let the dealers know, we don’t want you sharing information with TrueCar. Manufacturers should be informing dealers to cease/desist the sharing of DMS information with TrueCar – information collection that is being assisted by DealerTrack (thanks to a recent equity deal). Moreover, NADA, should take a more proactive role in protecting the dealer network. Painter has declared his assail on new car dealers, and has raised over $200MM in the process, I think it’s time for the industry to take him seriously.
Conclusion:
“the TrueCar team and business is poised to transform one of the largest and most dysfunctional retail categories in America.” – Stan Shuman of Allen & Co
While I consider myself a progressive automotive executive, I find it offensive for TrueCar followers and executives to state we are a “dysfunctional retail category.” I also find it foolish because these investors don’t seem to understand the complexities of franchise laws, customer experience models, or even market pricing.
There’s no doubt that many automotive dealers are inefficient and stubborn. I appreciate companies like AutoNation & CarMax that have paved the way for new ideas, both in terms of processes and marketing. However, the very notion of eliminating the new car sales department is a mere fantasy.
Generally, I could consider Painter’s remarks as instigating rhetoric intended to attract attention to a relatively boring business model. But then I become worried by the $200MM he raised in pre-IPO capital. I can only speculate that the growth of Painter’s site(s) was simply the result of using the brand equity of his affiliates to promote the idea of haggle-free car shopping. The actual future he talks about, the elimination of the sales-staff and revolution of the industry, I’m assuming is his attempt at creating hype for his company and showing potential investors that TrueCar is a great investment – at least this is my opinion.
Venture capitalists and other investors prefer investing in companies with existing revenues and experienced management. It proves to their clients, and other investors, that the company has a favorable track record and is on the future path to greatness ( which will be amplified by their investments). I believe Painter was able to raise $200MM in capital because of his company’s track-record and revenue from the affiliate lead generation model –which is a well strategized and successful business model – but still a model with limits. After fundamental analysis, the chatter and hype of TrueCar’s revolution of the auto industry, is largely speculation.
Finally, we must realize that TrueCar’s success(and fate) is controlled by franchised dealers and auto manufacturers. Whether it’s via DMCA takedown notices or other means, eventually, our industry must not accept the constant assail on our attempts to provide our customers with the ultimate customer experiences. While we are not perfect, US car dealers remain one of the most successful and iconic business groups in our country, keeping millions of Americans working, and our economy moving forward. It’s no wonder that emerging markets, notably China, are adopting our existing dealership models at a record pace – so much for a dysfunctional industry needing an overhaul.
Related Posts:
- Winning the ‘race to the bottom’ : In competitive markets, TrueCar may cause negative branding and lost opportunities for some dealers.
- Should auto manufacturers implement strict MAP (Minimum Advertised Price) Policies?
- OPPORTUNITY KNOCKING FOR OEMs? SET UP YOUR OWN AFFINITY PROGRAMS!
- Is AutoNation’s President Mike Maroone violating his fiduciary duties by joining TrueCar’s Board?
Necessary Disclaimers:
- Opinions AND VIEWS SET FORTH HEREIN are my own AND DO NOT REPRESENTS FACTS. SUCH OPINIONS AND VIEWS COULD BE WRONG. They do not represent the companies named or cited in this blog.
- I am not a lawyer. This information, especially legal advice, can be completely incorrect. No warranties are provided or expressed. Any reliance on such information is solely at your own risk.
- I am not privy to ANY details of the backend operations/analytics of any company mentioned in this blog – notably TrueCar.
- This blog does not provide financial advice, and should not be interpreted as such.
- All trademarks are properties of their respective owners.
- I am not compensated, in any way, for writing this blog.
Interesting! I spent some time on the site – it seems to want to find me a dealer who has signed up with them. I ran several different makes & models, in all cases the “certified” dealers were 25 to 50 miles from here. (Western Suffolk) That happens to coincide with the distance to the Queens border, and the east river. After inputting a few zip codes, it became obvious that all the certified dealers were in heavily populated areas. My guess is that space for inventory is limited and expensive, they need to move product as quickly as possible. That being the case, the sales team is undoubtedly under pressure to not only move product, but to make a profit as well. Taking it to it’s logical conclusion, the TrueCar model means that instead of 6 new car sales people & 1 F+I, you will now have 1 new car sales person, & 6 F+I.
Posted by Ian Stovall | September 20, 2011, 1:35 PMThanks for the comment Ian! Here are my thoughts, which I also shared on a LinkedIn discussion about this topic:
Great comments! And now some of my opinions:
I’m tired of IPO models that give selected insiders a way to make quick and risk-free windfalls. I don’t feel TrueCar has a sustainable business model, except for the continued growth of leveraging the brand equity of their partners (e.g. American Express) to generate referrals for their dealers. While I feel the automotive retail sector can enhance efficiencies (mostly in terms of processes), I believe the OEM’s need to augment dealer development and branding to maximize a seamless customer experience for our mutual customers.
For the most part, many US Dealer Principals can remain millionaires, while keeping their businesses on “cruise control.” The protections provided by the franchise agreements makes this possible, but it also contributes to the inefficiencies in the selling processes that give way to models like TrueCar. Selling models should change, and it needs to start with the OEMs assisting/motivating dealers to improve profitability with strong processes, and only the OEMs have the best shot at implementing these efforts consistently on a brand basis. There are literally thousands of dealers in the US that could double their EBITDAs simply by implementing best practices. This in turn will allow dealers to be more profitable, and therefore help pave the road to a more efficient sector that could move to uniform pricing models. With the exception of used cars, I enjoy envisioning a “customer centric” retailing model that has uniform new car pricing. However, so much more will need to occur first.
I’m certain that TrueCar will continue its growth because of the perception of “fair pricing” and the “risk free pay for conversions only” pricing model. With a war chest of a few hundred million, Painter will steal market share from Edmunds, KBB, and others because of the bad reputation of the car selling process and his “revolutionary” new model to fix it – at least for now. Dealers and the OEMs need to team up and erase the negative perception of the past by showing today’s customers transparency. However, since many dealers are resistant to change and don’t understand customer experience models, the OEMs will need to lead/financially motivate this effort.
Posted by Jeremy G. Alicandri | October 2, 2011, 12:56 PMI think you lost credibility when you said “DO NOT REPRESENTS FACTS”.
Dealerships brought this on themselves – there is no reason a car should change in price so substantially when they are exactly the same (i.e a commodity) and the dealerships are 50 miles apart.
Dealers can bitch and moan, as i’m sure travel agents did when flights became available to book online.
200mil – before IPO and before critical mass – I’d be petrified.
Posted by Robbie | October 5, 2011, 1:45 AMDisclaimers are a necessary part of any blog. But I welcome and invite you to challenge every opinion or statement in this post, as I appreciate your interest!
Some points:
US car dealers must improve the customer experience. It cannot happen by furthering the distrust of consumers. Dealers should be providing a customer centric approach, but this business model requires some level of customer loyalty.
It’s foolish to believe “huge” price differences of 30% occur with new car pricing, believing such information is just drinking the “Kool-Aid” of hype. As I stated in my other post,” speak to any dealer, and find examples of when one customer paid 30% more than anyone else. It’s so rare, and in many cases, these deals won’t even be funded by the finance company.”
Moreover, there’s no convincing proof that customers who use TrueCar, Edmunds(or any other source) are actually saving money vs. other methods, it’s only a perception that they are saving. And in fact, they could be paying more by basing decisions on potentially inaccurate/misleading/unaudited information.
I agree that there’s an unfortunate perception of car dealers that does need to change, and I agree many dealers are responsible for this perception. If anything, I hope TrueCar can be an impetus for change.
With respect to your comment, “200mil – before IPO and before critical mass” – you should look into Painter’s other “successful” business model – CarsDirect.com. Remember, as I pointed out, I do not believe TrueCar is favorable to the OEMs. The OEMs control everything, if they agree with my standpoint, then I cannot imagine how TrueCar will survive.
I could be wrong, but these are my opinions.
Posted by Jeremy G. Alicandri | October 5, 2011, 12:36 PMI agree that OEM’s might on the outside seem to not like truecar (esp to appease other car dealers that are franchisees), however, behind closed doors I think it would be a different story. They are still moving cars and at better price, just through fewer distribution points – which is the way of the future. As all industries do – they will kick and scream as they are dragged into the future but change is never easy. anyone bought a CD lately? of course not is all online data files but im sure the CD salesman critized MP3′s when they first came out.
Re customer centric approach, I agree – however car dealers do not have a long term view, the principals generally do – but mostly the car dealer wants to make as much as possible on every car and if I was a car dealer I would to (which is why they keep the price close to their chest). However, because of this view they cant be customer centric – this is coupled with an unlikely repeat business to that same salesman 3 years down the track it just wont happen.They will pretend to have a good relationship with you but in the end if he can get an extra 1000 out of you he will as a % of that goes into his pocket, its just self interest and its natural.
Re cars direct – the model did work (sort of), but customers still need to feel and touch the car – which they can via truecar and this is an element that cars direct neglected. They can inspect first then decide to purchase or not – that’s the beauty of the truecar system.
However on that note, facebook was facemash, groupon was some sort of activist website before it sold coupons and I’m sure truecar is the same with cars direct – its a simple evolution to what the market (ie customers) will respond to. In the tech space no one gets it right the first time – im sure being someone that worked a bit at Yahoo you know that.
If OEM’s come down on true car the PR storm will be funny to watch as it will seen in the media as manufacturers want to keep prices high and anti competitive and therefore screw the customers – which they couldn’t do/ be seen to do – esp given truecars connections/ partnerships and strategic direction. they are stuck between a rock and a hard place and this is even if they think it is a bad idea, which im pretty sure they dont as cadillac are already advertising on ‘drive your dream’ (a subsidiary).
given the pace of technology there is no way, cars should be bought the same way as they were in the 50′s.
My thoughts
R
Posted by John | October 5, 2011, 11:41 PMHi John,
Interesting points, but naturally I have a few comments, and please excuse all the references to Apple:
With intense new competitors emerging (India, Korea, and China), today’s OEMs are doing everything possible to avoid the commoditization of their brands – because competing on price alone will not win in this economy. Thus, commoditization by TrueCar isn’t just bad for the dealers, but it’s also bad for the OEMs. Purchasing decisions outside of the dealership and instead on a 3rd party website that presents ALL cars as commodities, and therefore creates advantages for manufacturers with cheaper products, is a problem for OEMs. Can TrueCar show the difference between a Honda, Toyota and Hyundai if the differentiating basis is just on price? No. There are obviously disadvantages for the OEMs and dealers that aren’t the cheapest, which is why the OEMs will not benefit. Is an iPod the same as an MP3 player – on paper it is – but in reality we both know there are huge differences. A website, guided by price only, cannot accurately represent the OEM’s products or maximize the brand.
There are other challenges for OEMs with the TrueCar model. Statistically, the odds of selling a new car drops dramatically if the customer leaves the showroom before purchasing (aka a “be-back”). If a customer visits an online site after a showroom visit, in addition to dealership defection, they could also leave the OEM(brand). For these reasons, and many more, it’s important that the dealerships have the right process in place from the beginning – just like the seamless experience offered by Apple – so that’s why I continue to push the importance of the brand’s customer experience.
It is true that many OEMs are frustrated with franchised dealers, and the case for dealership consolidation remains an issue today. And, even though I work for a dealership, I reluctantly must admit that the consolidation from 2008 was favorable to the remaining dealers, OEMs, and even the customers. But in 2011, it’s a different world.
Back in the 50s, the new car departments of car dealerships actually made a profit for dealers. Cars were sold at profitable margins – 18% and higher. Today, that’s not the case at all. If you read financial statements of car dealerships, you would learn that selling new cars is very unprofitable (exceptions include brands like Lamborghini & Rolls-Royce, but in most cases the front end gross of $1000 to $2000 gross/car cannot support the costs of running the department; it’s a financial model that just doesn’t make sense). The real profits come from service and parts(fixed opps) – warranty repairs, maintenance, etc…. The income from fixed operations combined with manufacturer incentives are the actual profits for the dealers. New cars sales for many dealers is just the means to get “units in operation,” so they can be serviced by the dealer later. In addition, units are just sold for bonus income (often below the line on financial statements), and not for the small profit margin that TrueCar attempts to measure.
With respect to your theory on PR storms, I disagree. It is my opinion that TrueCar is violating the intellectual property rights of the OEMs to make a profit. TrueCar is also providing unaudited and potentially inaccurate/misleading information to consumers. The OEMs are not attempting to restrict trade, but instead ensure that their products are represented accurately– while also protecting their brands. Just like the manufacturers prevented my dot com site from advertising their products, the OEMs can stop TrueCar from using OEM intellectual property to sell leads to dealers. The OEM executives have a responsibility to protect their shareholders, brands, intellectual property, and lastly their dealer network (never mind protecting consumers from potentially false information as well)
Finally, one last point. I don’t see a sustainable business model with TrueCar. The whole company’s value is based on the hype that consumers are ripped off by new car dealers and they can fix it. With companies like Edmunds offering TMV and even AutoNation moving to a transparent model, it’s entirely believable that certain OEMs may soon adopt Saturn’s non-haggling model without even considering TrueCar as a factor – we are all moving to “transparency” models because we know the consumer, in many cases, is more informed than us! Rest assured, in the unlikely event that TrueCar actually became a threat, the OEMs would almost certainly be forced into a flat pricing mode. The dealers and OEMs are the ones in control, and don’t want to compete on a website with just price.
The future of the car business will be defined by brand loyalty, customer experiences, and customer centric approaches. OEMs can only sell via dealers because of franchise laws, and only dealers can service their vehicles. This is a mutual dependent relationship that will not change.
PS: I’ve read online that NADA’s legal team considers TrueCar a hot topic at the moment and they are actively reviewing the company (and others).
Posted by Jeremy G. Alicandri | October 6, 2011, 4:15 PMnice post. HOWEVER – its not the OEM competing on price – its the dealerships. truecar is neutral as to what car you buy, OEM’s can differentiate the brands all they want, but the specific make and model of any car is the same, ie a commodity and therefore should be the same price. ie to use an apple reference – there are many different laptops (dell, sony, apple ect) all at different prices that are advertised differently given their target market (which OEM’s can still do), but when you go into an apple store the exact same laptop is the same price in each of its stores (i.e has minimal price variation), how it should be, you should get huge price variation on the exact same product.
Re dealerships and fixed costs- i know that is where about 75-80% of gross profit comes from, but I also know that 50% of the gross profit is eaten away on paying sales people. I know some of the fat can be trimmed as that is not an efficient business model truecar/zag are showing that as they are starting to get traction – put simply if there wasn’t room to play in this industry they would not be getting traction and would get squeezed out and not grow at an insane rate in a highly competitive market.
Re the NADA and the legal side of things. I think litigation would be the best thing to happen to truecar – and i mean that in a positive light. controversy is interesting, and will raise its profile to general public. I’d probably even run this as a strategy, and im sure they have thought about it. E.g a vague comparison but Air Jordon sales went through the roof when they were classified as “banned” because of their bright colours in the 80′s. different market, same principle. think about the perception of a mum and dad in the burbs and how they would view this website that shows the lowest price in the market then it getting sued by a big bad OEM. then think about how that same mum and dad would then view the OEM. that is why they are stuck in a hard place.
you could say truecar wouldn’t work if none of the dealers use it, which is true, but its the classic “prisoners dilemma”. look it up, it will shed some light on why it works. IF OEM’s do adopt transparent pricing – truecar’s job has been done, and on to the next project. but that is 20 yrs away as OEM’s are as slow as turtles and love keeping their head in the sand re problems. eg keeping credit default swaps on their balance sheet – when they are car manufacturers. my god.
Re legals – Im sure they will spin it to make it look as though they are the victims with the consumer in mind and if OEM or dealer groups do anything to restrict is trading, it’s resale price maintenance and anti competitive conduct, and that is a lot more extreme than publishing pictures on your website (which they have permission to publish, btw) as image credits have been given. If anything happens, im sure truecar would get the SEC to investigate the OEM’s conduct for anti competitive conduct.
J
Posted by John | October 9, 2011, 7:31 PMGreat points! I am away at a convention, but I will address tonight.
Update:
Hi John,
Viva Las Vegas! I’m writing this lengthy comment from Las Vegas, but for a geek like me, this is more fun than all the entertainment in this city! Moving on…
First, a little clarification, I interchange the word “brand/manufacturer/make/OEM”; for the purpose of this post the “word” is intended to be “unique manufacturer.” So, I consider a GMC Yukon and Chevrolet Tahoe as unique products with separate brands – even though they are almost identical GM manufactured products – because they are marketed/sold as unique products under a unique brand with unique designs.
Second, with average new dealer grosses running between $1000 to $2000, dealers can only compete on price within a small margin. The real price differentiation is found by the invoice prices of the manufacturers- less the rebates/incentives. So, unless a shopper is sold on a specific vehicle, their decision to shop price does not favor most OEMs (except the cheapest). Effectively, the OEMs are competing more on price than the dealers, as the OEMs have the larger fluctuations in price when compared with competing OEM’s prices.
Third, humans are emotional beings that need to be guided and made comfortable with making the second largest purchase decision they’ll ever make (first is their homes). Buying a car isn’t the same as buying a laptop or other tangible items – there are several more factors – including safety, residual value, service, features, etc…. Study after study has proven, including the recent JD Power analysis, that the #1 reason for a car buyer to buy from a specific dealership is a comfortable experience with the brand and dealership. Dealers that create a haggling and awkward environment are ill-fated regardless of TrueCar.
50% of a dealership gross does not go to paying salespeople! While they are a huge expense, salespeople are a required part of the ability to sell a vehicle to a customer – they need to understand the customer’s needs, compare the products with other manufacturers, bring the customer on a test drive, and obviously explain the points for the customer to purchase the car. So, while the actual sales process could be improved in many showrooms(e.g. the elimination of over zealous negotiating), you cannot eliminate this staff from the showroom because then the customers become incapable of making decisions.
I believe TrueCar management and investors do not understand the dynamic of the average car shopper. With the exception of brand loyalists, many new car shoppers are easily swayed from brand to brand based on their experience with the dealer and the presentation of the product – and this is excluding price as a variable. Years ago, we all thought residential real estate agents would become irrelevant with the Internet – why couldn’t buyers just deal directly with the sellers and the homeowners could save thousands? Well, they couldn’t, and instead real estate agents became more efficient (and cheaper) because they’re still needed in facilitating transactions because of the dynamics of customers making large financial decisions. While this isn’t a perfect comparison, I want to illustrate the emotional dynamics of humans and decision making.
Fourth, I think there are many great lessons to be learned from Apple. But Apple’s products are not sold with huge price differences; because Apple controls the customer experience, distribution channels, resellers, and arguably the market share. In addition, Apple’s products are not commodities when compared to similar products because their products are unique, so you can’t compare their products with similar manufacturer’s products just based on price – you need to experience them (just like cars). Apple took a boring MP3 player and reinvented the product to become a “must have” for everyone. They understand the importance of the customer experience – which is something the OEMs are slowly adopting (and I agree the OEMs are slow to adopt just about anything). But with your other point – where are the major price variations you seem to suggest? Most car deals are within a couple hundred of dollars of each other – the variables that could lead to significant differences (e.g. F&I, reserve, trades, etc..) aren’t even covered by TrueCar and should be the areas of real concern for the car shopper seeking a “fair deal.”
Fifth, the OEMs will not face any sustained brand tarnishing as the result of the enforcement of their intellectual property rights. If their dealer network pressures them to take action, combined with Painter’s plan to disrupt their business models, then I feel they are obliged to take corrective action. As part of another upcoming post, I will explain how OEMs can move more dealer income “below” the line to render “market pricing” even more useless. I should note that IP enforcement is very popular on the Internet and occurs regularly – when a brand is being tarnished online – the DMCA helps protect the IP owner.
The images on TrueCar are from a third party provider, so yes, they can use them. But for your reference, if they weren’t, providing a disclaimer of the image’s copyright does not provide immunity from legal action as the image is still being used for an unauthorized commercial purpose. A better example of intellectual property violations can be found in TrueCar’s SEO practices – look at page http://www.truecar.com/prices-new/mercedes-benz/cl-class-pricing/ – and then view the HTML source in your browser. You’ll note in the tag there is the trademark “Mercedes-Benz.” So, in this scenario, TrueCar is using a registered trademark to generate traffic to their website (for a commercial purpose – selling leads).
Sixth, the SEC does not regulate trade practices. The FTC or other enforcement agencies would handle such a matter. But could TrueCar even ask the FTC to investigate the OEMs since their own business model is potentially fallible and unaudited – and potentially misleading? Should the FTC investigate TrueCar price justification tools to ensure consumers are being provided with accurate information? These are great questions. Keep in mind, the OEMs are only enforcing their intellectual property rights and protecting their brands – they aren’t fighting TrueCar’s model or making an opinion on it.
If there is an outcry for transparent market data that would disappear if TrueCar left the dance, then simply consider Edmunds! Edmunds.com TMV is a very similar service to TrueCar’s service. (Incidentally, I’ve been told that Edmund recently pursued legal action against TrueCar for trademark infringement over the similar names of their tools). So, if car shoppers want to use “market pricing” tools, they can always go to Edmunds.com – regardless of the fate of TrueCar.
The difference with Edmunds vs. TrueCar is that Edmunds has a long standing relationship with the automotive industry. Their brand is highly respected. Their site receives millions of more visitors each month than TrueCar. Their pricing models are different. And perhaps the most notable difference is that their CEO and their investors have NOT publically attacked automotive dealers!
As far as TrueCar pulling out the mission accomplished banner if OEMs move to non-haggle models; the company has raised $200MM on the promise to revolutionize the auto-industry and generate sustainable profits for their shareholders based on the automotive industry being dysfunctional. If their only goal is to change the way cars are sold, then I do not think they are in a position to pull out the “mission accomplished” banner and generate returns for their investors. I think of business models all day – and my #1 concern is generating returns for my investors.
I’ll say it 100 times. People are loyal to brands, and not products. With China, Korea, and India now in the car business, it’s important that manufacturers do everything possible to avoid commoditization trends, because when their brands become irrelevant and lost, they will become extinct.
Posted by Jeremy G. Alicandri | October 11, 2011, 10:54 AMI missed one of your points in my previous comment. I feel that Truecar is growing based on two variables. One, their strong affinity programs with Zag – this is the major source of referrals for TrueCar since there’s no major offensive to promote the site. Painter’s decision to use the brand equity of companies like American Express was smart, and I give him credit for that, Edmunds should have done this years ago. You could sell sand in a desert, and put Amex’s name on it, and referrals will be generated. Second, TrueCar is receiving referrals from selling the “hype” of non-haggling dealers. But in reality, as I pointed out in my analysis, the no-haggle pricing is just a ruse for dealers to make money with other methods. TrueCar does not have enough dealers on the site (yet), to make a major impact on retail pricing. But if they raise enough money, who knows what’s possible in the short term.
Posted by Jeremy G. Alicandri | October 11, 2011, 11:18 PMJohn, A couple of points from someone that has been in the car business for 27 years, manufacturers do not sell vehicles to the public, they sell cars to licensed dealers. They have a captive customer base and will sell every car they produce. Secondly, sales comp to gross is typically in the 17% to 20% range not 50%. I went on the TueCar site and did not see anything that was new and revolutionary.
Posted by Mark Reeves | October 21, 2011, 12:43 AM“The real profits come from service and parts(fixed opps) – warranty repairs, maintenance, etc…. The income from fixed operations combined with manufacturer incentives are the actual profits for the dealers.”
Then the current truecar model, at least around here, should be a boon to the suburban dealers. I’d be willing to make a couple of trips to Brooklyn to save a few thousand dollars. However, I’d be taking the vehicle locally for service.
Brand loyalty had been one of the defining things about car sales for the past 100 years. Of course, 90-100 years ago brand loyalty had a bit to do with which user interface you were used to!
Having been in an industry that sold high end goods (food) for more that the commodity price, when there really was little to differentiate – From the customers side the sales process had to be engaging, but also had to replace what was to some a tedious process. Warranty issues were instantly resolved with no questions asked (The steak was tough? We’re fed-ex’ing you a replacement today).
From the sales side the main issue was the pre-qualification. We used a 2 stage sales strategy, the initial contact was by phone or at a “home & garden” type trade show. We had to determine quickly that the potential customer fell within the parameters that typically lead to a sale. Those that met the initial criteria were then scheduled an appointment with an in-home sales rep. One thing we did do with the sales force was to separate the hunters from the farmers – critical when branding is why the customer is buying.
Posted by Ian Stovall | October 11, 2011, 5:39 PMDon’t you guys have work to do?
Posted by Ken | October 23, 2011, 10:54 AMI have a passion for this industry, so this is an enjoyable hobby for me. Regardless, I think we’re all interested in the future of retail automotive.
Posted by Jeremy G. Alicandri | October 23, 2011, 2:23 PMLead generators have come and gone. True car is not transactional because it can,t be. Painter had done a great job of setting up Amex to leverage their market credibility. His claims on volume are ridiculous. At the end of the day true car patrons can print out all the price guarantees they want. They still have to visit a dealership, deal with salesperson and work out a fair deal for both parties. How does true car get away with price guarantees.?
True does not actually guarantee the price or the delivery date. That alone seems actionable to me.
I enjoyed your analysis. Well done.
Posted by Joe | October 28, 2011, 9:56 PMJeremy a lot of interesting points in this post and a lot of holes in the TrueCar model that I agree on. That being said I think we might be missing the point all together here.
The bottom line Scott Painter isn’t the first to try to eliminate the sales staff or dealer in the name of “Revolutionizing the car business” and he’s not likely to be anymore successful than Cobalt in the late 90′s, Jack Nasser & The Ford Auto Collective or even Autonations failed early used car superstore & more recent attempts at complete online selling.
The fact of the matter is that while technology has given consumers access to more information human nature haven’t changed. People have always wanted to be informed when they make a purchase it’s just easier to,do that now. TrueCar isn’t the first, edmunds has been posting dealer cost for years and it’s not made a huge effect on dealer profit, nor will TruCar’s online tool.
What should dealers be concerned about with TrueCar? What are they doing with your data? What are they doing with your customers? These guys are accessing your DMS and they’re not just getting the customers they sent you they’re getting ALL of them & I’ll ask the question is that all they’re getting? I’ll wager dealers don’t know what TrueCar is extracting from their system and we know even less about what they may be doing with that data after they get it.
What should we do?
1. Get a hold harmless from TrueCar so if they do something some customer decides to sue over the dealer can have some protection on.
2. Get a data privacy agreement with TrueCar that states they will only use the data from your DMS for purposes the relate to your dealership only.
3. Only give TrueCar the data they need to match the sale (name, address, phone, email) any other data isn’t nessesary form them to perform the match to charge the dealer.
4. Dealers you need to control the feed and push to TrueCar not allow them access to pull. That way you know exactly what data TrueCar is getting and you can cut it off when & if you want to.
Those are my thoughts, I hope they help.
Posted by Larry Bruce | November 3, 2011, 8:29 PMHello Larry,
Thank you for the comments. Yes, while I agree with many of your points, it’s important to note that TrueCar raised $200MM in capital – so I have to take them somewhat seriously. When Scott Painter was quoted on his plan to completely eliminate our sales departments, it motivated me to remove fiction from reality and write this analysis. As I said to Charles Kim, TrueCar is ultimately a glorified lead provider with a speculative value. I agree, there won’t be a revolution because everyone loses under TrueCar’s model – except TrueCar and the affiliate.
Posted by Jeremy G. Alicandri | November 4, 2011, 6:36 PMthe site is NOT that good considering it only does a year before and a year ahead. you cant get quotes for a car more than a year old.
Posted by Leo F. Venuti | November 25, 2011, 5:06 PMUMM..
Anyone rememeber Carsdirect.com? Autobytel Direct?
True Cars may last maybe 6 months more, maybe a year…..
As with anything, Return on investment will make the Dealers quit fast.
Posted by Robert Nadel | December 2, 2011, 12:41 PMAfter reading the Truecar/Zag White Pages it seems their business model is based on the precipice that there is a need for their service stemming from the sole assumption that todays consumers are unable to anonymously attain pricing information on new car models they may be interested in. I beg to differ, I understand every manufacturer prominently displays their pricing in the window of every new car as well as on their own website and I find it hard to believe that OEM’s and dealers alike have made it difficult to get a “fair price” on their product. New Car margins are so slim how is paying sticker price not a fair deal? There is typically less than 10% mark up in any given new vehicle these days. I am sure if you asked anyone what they thought is an acceptable or “fair” profit on an investment they wouldnt balk at that. Heck, a large Soda at a fast food restaraunt cost anywhere from 20-40 cents to make yet sells for no less than a buck anywhere leaving the business with a 60-80% return on investment and consumers dont drink it feeling cheated. I do know that alot of people search out coupons or sales to get a discount on said product. To say that dealers keep price close to the vest is not entirely accurate as MSRP’s are attached to every new car, it is the consumer that is seeking to negotiate or “haggle” a lower price to save money. There is nothing new there and it is the whole reason we advertise sales. It really pisses me off this whole idea of Dealers being deceptive because they dont advertise their “best price”….does McDonalds advertise all the coupons they have available when you are standing at the counter getting ready to order? Of course not. When you paid retail for that Big Mac and went home and saw that you could have gotten it half price with a coupon do you feel cheated?
I have seen where Zag states that todays consumers hate to “haggle” but to the contrary sites like Craigslist.org are filled with those millions of consumers who are haggling on just about every good and service out there. Sites like Priceline are also popular because they give the consumer an opportunity to haggle a better deal. I know there are people out there that do not like to haggle but I think that if you asked those same people if they would suck it up to save money they would.
Why not a Truetv? I would love to know invoice on a tv and if there any manufacturer incentives to the Bestbuys of the world….and their salesperson wont have to spend hours with me going over the product and years calling, emailing, sending birthday and holiday cars to me like my Car salesman. The whole eliminating salespeople comment is asinine. I doubt an hourly employee is going to go out of their way to earn anyones business with no incentive to do so. Good luck getting that guy to come pick your car up for service.
In closing ,Great blog and awesome rebuttals to your detractors! Keep em coming.
Posted by Shawn Baxley | December 2, 2011, 6:21 PMOkay Honda has taken a courageous stand and banned TrueCar pricing with it’s dealers. I know for a fact VW is strongly considering doing the same. I hope VW realizes that they’ve just began to get some incredible momentum in the market AND now is NOT the time to allow an invader like truecar to devalue the brand in the public’s eyes. No matter what you sell, TrueCar cheapens your brand.
Group 1 made sure their dealers cancelled after looking at the exposure of having these people rooting around in their DMS, especially with AutoNation’s CEO on the board of Truecar…
Group 1 was smart enough to see the writing on the wall and run as from away from these people as possible. When is Asbury, Penske, Sonic and others going to awaken and realize they people appear to be a huge threat? Even large private groups like Rick Hendrick should be looking at the evident danger we’re all perceiving here.
Where are Ford, General Motors and especially…where is Toyota in this escalating skirmish? I am embarrassed that mark Reuss, president of general motors would actually go to TrueCar Headquarters and play with Painter showing him a 750HP Camaro.
I did not mention Nissan because their dealers are using Truecar to sell way below invoice so they can collect stair step money. You guys are smiling now BUT if Nissan takes away the program, you’re screwed royally because of the benchmarks you set with TrueCar making your brand image “Ultra Cheap Nissan”
Does Mark Reuss NOT understand that his dealers are being raided by these people cheapening the product down to unprofitable and below? I find it hard to believe that Reuss would publicly suck up to these people if he truly understood.
There are a few investigations of TrueCar popping up here and there AND we’re still urging dealers to put more emphasis with your dealer associations to get off of the sidelines and represent us… I know a couple of associations are doing their best while others limped off of the battlefield without firing a shot… weak.
I am especially disturbed about Toyota staying quiet while Honda takes a stand. It’s like sending a message that Toyota has less value.
This thing will gather increasing momentum and I predict TrueCar will find some high-profile weak suck who will sellout their integrity for the publicity or hard cash and take a stand publicly backing them and betraying dealers.
Of course, this is all a lot of conjecture, speculation, supposition and opinion…I might be wrong.
Posted by Jim Ziegler | December 16, 2011, 4:02 PMI think it is prudent to admit that car dealers have brought this type of online sales mechanism on themselves. Hardly a week goes by that I don’t hear from a friend where they have been offended by a salesman at a car dealer and walked of the lot and bought somewhere else. Nature abhors a vacuum…The vacuum here is a 100% reliable customer sales experience. Honestly, it just does not exist. Like saying…”quality, price and service…pick any two”.
Posted by Mark | December 28, 2011, 12:48 PMI tried to use Truecar.com in December for a 2012 Honda Civic LX sedan I was purchasing. Truecar cost me an extra $300 and wasted over six hours of my time.
Here’s what happened. I went to my local dealer to test drive a car for my daughter. We spoke to the salesman and I never buy a car on the spot, so I told him we’d be back. As we were leaving, he threw a “special” price at me, which nearly got me to move, but I held my ground. I was told to go to this new website, Truecar.com to check prices – just to make sure I was getting a good price. I checked and lo and behold, two prices almost $1,000 less. I printed the certificates and called the first lot to make sure they had the car. Yes sir, we have one right here in the color you want. An hour later, we arrive at the lot and talk to the Truecar.com guy. After he can’t find the keys, he fumbles around making phone calls and running in and out of the office. Finally, he tells us that they just sold the car, but he’s going to give us an even better “special” price on a Honda Accord. I tell him we don’t want the Accord and we want the Civic. It goes in one ear and out the other. Sir, you’ll like the ride of the Accord better than the Civic and you deserve a nicer car. The idiot is so clueless! I told him the car was for my daughter, yet he didn’t listen. I told him I only wanted the Civic, but again he didn’t listen. I shoved the certificate in his face and told him to give me the car. He leaves the office for over 1/2 hour, he never comes back, nor does anyone else, so a after about an hour of time at the Truecar.com lot, we left.
I called lot #2 and the Truecar.com rep told me they have the car. I told them about the fiasco at the lot we just left and they promised me that they had the car and would save it for us. So another 1 1/2 hours through traffic and we arrive. The Truecar.com rep takes us to his office, just like the first guy. We tell him who we are and he acts like we never spoke. I give him the certificate and tell him I want the car and I don’t want any games. He disappears for about 15-20 minutes. Then another guy comes and tells me he’s the special manager and apologizes, because the other guy got sick and had to go home. I told him that he has my certificate. He tells me not to worry and we start from scratch. I tell him what we came to buy and he goes to get the keys. He comes back with some keys and brings us to a Honda Accord (again). I tell him NO! WE CAME TO BUY A CIVIC! This jerk actually sneered at me and told me that they don’t have one. When I tell him that his rep told me they had one about 2 hours ago, he tells me that I’m too late and they just sold it. I turned around and walked to my car. When that jerk saw what kind of car I was walking toward, he chased after me and apologized. I did everything I could to keep from knocking him out.
So, I go back to my local dealer to buy the car. I tell them the story and they agree that is not the way to treat a customer. The guy had someone check the computer and he found out that both Truecar.com lots did not have the car in the color I wanted, nor had they had one for quite a while! I told the saleman to write up the sale. He entered my information into the computer, then went to see the manager. He and the manager come back and tell me that the price is now $300 higher, because I’m on the Truecar.com computer system and they have to charge me more to pay for the service fee. Unbelieveable! I got up and walked out the door. No new Civic for my daughter. We decided that we would pass down our family car and buy a new one for my wife.
Never again will I go with one of these internet scams and I surely will not even think of using this Truecar.com scam. In my industry, this is called Bait and Switch and it’s illegal. Truecar.com better pray that the next time they cheat someone, that person will be busy like me and chose not to have the state of California look into their practices.
Posted by Mr. G | January 14, 2012, 4:13 AM