Could Credit Markets Move U.S. Towards European Style Showrooms?

One of the standard operating procedures for the U.S. auto market has long been the privilege to walk onto a dealer’s lot and a few hours later drive off with your new car. That’s not the case everywhere else in the world where many buyers visit a dealership and then place an order for their car. In our land of instant gratification, many in the industry don’t think that U.S. buyers have the patience to wait when they can simply take a short drive to another dealer with a larger inventory and get their car today. That’s why a salesman will immediately retort “I can locate that car for you and have it here in a day” when you tell them that you can’t find what you like on his lot.

However, things are changing. Firstly, customers are showing an increasingly interesting in getting the exact car of their dreams. Just look to the brand MINI which brags that almost no two MINIs are exactly alike. How about smart where you configure your car online, drop a $99 deposit and then wait for it to arrive? Certainly these are comparatively low volume brands, but why couldn’t this work for other makes? Buyers like customization and are willing to wait and pay extra for that privilege. Additionally with today’s credit markets the cost of inventory financing for a dealership is becoming an ever costlier proposition. If a dealership only had to stock a few demo vehicles and a small fleet of hot selling models ready for immediate purchase instead of acres of cars in every size and color, then there could be tremendous savings and added profits. No longer does the dealer need to finance millions of dollars in inventory that depreciates by the day and pay for the acres of land that these vehicles sit on! Dealerships would be more portable, easily moved as market conditions or weather situations dictate. CSI scores would also be boosted as customers get exactly the car they were looking for.

The problem with this scenario is, our factories and dealers aren’t setup for this type of market. Auto plants have to crank out big volumes to operate at efficient levels and those cars have to go somewhere. The key to this, I think, is several fold. Firstly, manufacturer market-intelligence has to be top notch. What are potential buyers configuring online, what are they talking about on forums, what are dealers being asked for? This type of information has to be almost real-time and fed immediately into the production system. Has a powertrain configuration jumped in demand? Suppliers need to be alerted and the model mix has to be adjusted. If assembly lines are flexible, suppliers capable and dealers responsive, then I believe that we can move our marketplace to a pull rather than push model. We’d all be better off.