Closing auto dealers: Dumb move

[Homeslice]

Again, how does it help them sell more cars?

Take 2 Dodge dealers that are within a reasonable driving distance of one another. First one sells 100 cars/year, the other one sells 200.

Closing the first dealer just because it sucks, doesn't automatically mean the other dealer is going to suddenly start selling 300+ cars.

[pauldun170]

Originally Posted by Homeslice

Again, how does it help them sell more cars?

Take 2 Dodge dealers that are within a reasonable driving distance of one another. First one sells 100 cars/year, the other one sells 200.

Closing the first dealer just because it sucks, doesn't automatically mean the other dealer is going to suddenly start selling 300+ cars.

Give me one good reason why you want two dealerships of the same brand close together?





I thought this was a nice way to put it...

Dear (former) 65 Chrysler Dealers,

You have asked for details on why your franchise was culled and we provided you with 22 criteria, including sales volume, market share, customer serivce and working capital. We also provided you with a scorecard for your dealership that has 13 factors, including minimum sales responsibility, customer satisfaction index and sales satisfaction index. You ALREADY know that we favored dealers who carried all three of our brands and who did not compete with other dealers of our brands in the same market area. An yet you say that our letter of explanation does not say which score was considered deficient by us as if we are keeping some big secret. When you were a young lad in school and you got a 65 on a test or an assingment the teacher didn’t have to explain what the score meant, you know it sucked. And you know if you kept getting 65’s your grade for the course was going to be D, F, or U and there would some ’splainin’ to do when your parents saw it. Do we have to spell it our for you, dear (former) dealer? Your rejection was based on one or more of the following: You didn’t have all three brands at your dealership; Your CSI was below par and your lousy performance was reflecting on the manufacturer; Your volume wasn’t high enough compared to other dealers in your area/in other areas similar to yours in population density, demographics, etc.; You were in the same market as another dealer who was much better in sales volume, or customer service, or better capitalization, or had a standalone store without products from rival automakers, or all of the above.

Now please, take your lumps like a (business) man or woman and stop bellyaching to the media and congress about how “unfair” this is. Life is unfair. Besides, if your dealership is really that good you should be able to attract another franchise like Toyota or Honda or Hyundai in no time. No? Well, I guess there’s always the Chinese or ZAP. But we sincerely wish you the best in all your future endeavors. All 65 of you.

Sincerely,
Chrysler

source
http://www.thetruthaboutcars.com/chr...llege-dealers/

[Homeslice]

Originally Posted by pauldun170

Give me one good reason why you want two dealerships of the same brand close together?





I thought this was a nice way to put it...

Sorry, none of that explains why they would magically sell more cars by closing dealerships. Nor does having two dealerships of the same brand close together magically hurt sales.

[pauldun170]

Originally Posted by Homeslice

Sorry, none of that explains why they would magically sell more cars by closing dealerships. Nor does having two dealerships of the same brand close together magically hurt sales.

2 dealers close together = Two dealers competing against one another.
Two dealers competing against one another = price competition
price competition = decreased market value of each car.
end result is that it reduces profits on each car sold, it hurts the market perception of the product you are trying to sell and negatively effects the bottom line.
Chysler and GM can only compete in certain market spaces and considering their individual market positions a large heavy onerous distribution network is counterproductive.

[Homeslice]

Originally Posted by pauldun170

2 dealers close together = Two dealers competing against one another.
Two dealers competing against one another = price competition
price competition = decreased market value of each car.
end result is that it reduces profits on each car sold, it hurts the market perception of the product you are trying to sell and negatively effects the bottom line.
Chysler and GM can only compete in certain market spaces and considering their individual market positions a large heavy onerous distribution network is counterproductive.

You are talking about long-term hypotheticals.
In the short term, inter-dealer price competition only hurts the dealers, not the manufacturer. The manufacturer gets paid the same amount for the car. Your hypothesis that it will hurt the market perception of the brand, and thus eventually force the manufacturer to reduce its price, is a longer-term hypothetical that may or may not be true. What if it also causes a customer to buy Chevy instead of Toyota because he was able to negotiate better at the Chevy dealer, while the Toyota dealer wouldn't budge? And flash forward to today, with fewer Chevy dealers around? Chevy customers won't be able to negotiate as well as they did before, therefore some of them might buy a Toyota instead.

Also, eliminating dealers causes a loss in brand awareness, since anytime you have new cars sitting on a lot somewhere, it is its own form of advertising.

[pauldun170]

Originally Posted by Homeslice

You are talking about long-term hypotheticals.
In the short term, inter-dealer price competition only hurts the dealers, not the manufacturer. The manufacturer gets paid the same amount for the car. Your hypothesis that it will hurt the market perception of the brand, and thus eventually force the manufacturer to reduce its price, is a longer-term hypothetical that may or may not be true. What if it also causes a customer to buy Chevy instead of Toyota because he was able to negotiate better at the Chevy dealer, while the Toyota dealer wouldn't budge? And flash forward to today, with fewer Chevy dealers around? Chevy customers won't be able to negotiate as well as they did before, therefore some of them might buy a Toyota instead.

Also, eliminating dealers causes a loss in brand awareness, since anytime you have new cars sitting on a lot somewhere, it is its own form of advertising.

Unfortunately for GM, Chrysler and Ford it is not "hypothetical"

I have provided the information you require. If you are unable to process this information then that it is beyond my control. The only thing I can recommend to you is to take some economics course to put you in a position where you understand markets and then follow that up with some readings on the state of the auto industry so that you can apply lessons learned to automotive sector.

[Homeslice]

Originally Posted by pauldun170

Unfortunately for GM, Chrysler and Ford it is not "hypothetical"

I have provided the information you require. If you are unable to process this information then that it is beyond my control. The only thing I can recommend to you is to take some economics course to put you in a position where you understand markets and then follow that up with some readings on the state of the auto industry so that you can apply lessons learned to automotive sector.

Too bad you only provided opinions from editorials, not proven facts. And too bad I actually worked in the industry (at a dealer as well as for a manufacturer).