Though Tesla’s direct-to-consumer model has caused quite a stir in among the dealer industry over the past few years, leasing marketplace Swapalease.com took a look at the consumer side of things with interesting results.
Though data from its latest survey shows shoppers are mostly in favor of Tesla’s direct-to-consumer sales model, they aren’t sure it would work for other automakers.
And Scot Hall, executive vice president at Swapalease, said much of the results are due to the fact though Tesla has done well, it remains to be seen if this model will work long-term.
According to the survey — which was presented to more than 2,500 consumers — 67.4 percent of women and 75 percent of men are “all in favor” of the manufacturer-direct model.
As for the slight discrepancy between male and female perception, Hall said it could be due to men being a little more inclined to look into a new way of buying cars, while women could be more comfortable with the current dealer market, in some cases.
“I think that was one of the most interesting pieces of data we got out of the survey all together because I would have expected that number to be closer than it was. Male or female, it would be a new way of doing things, regardless of sex,” he said.
And for another opinion, commenting on the results of the study, Anne Fleming, president of Women-Drivers.com said, “This survey clearly indicates that there is a lot of room for improvement with the experience women currently have at the dealership. While our surveys also indicate that this is improving, it may not be occurring fast enough.”
Hall outlined a few driving factors behind consumer acceptance of the direct-to-consumer model for Auto Remarketing, one of which is Tesla’s successful marketing and large voice in the industry.
“No. 1, Tesla is doing really well and keeps themselves in the headlines, and a lot of people know there has been a lot of debate over whether they should go with a standard retail model through the dealerships or go direct, and since it has gotten so much press, I think it has opened people’s eyes,” said Hall. “And you know it put in their heads, that maybe there are other ways to do this other than the traditional dealer model we have been accustomed to for the better part of 100 years at this point.”
Hall explained though the industry can only talk “potential benefits” at this point to the alternative model, one upside could be that with taking out the middle man, or dealer, it’s possible there will be better value for consumers down the road.
According to the survey, many would agree: thirty-three percent of women and 31 percent of men feel they could get a better deal directly from the manufacturer.
That said, Hall noted one potential pitfall, as well, since dealers are also seen as advocates of their customers.
“When you have a dealer involved in the mix, say you are having a problem with your vehicle, you then have someone lobbying on your behalf to help you get that vehicle fixed and make whatever wrong is right. In the direct model, you are going to lose that third-party representation,” he explained.
Interestingly, the numbers weren’t quite as high as Hall would have expected when consumers were asked whether they think the direct model would work for all car and truck brands; 50 percent of women and 57 percent of men answered "yes."
“Part of it is that I’m surprised the number was actually that low because all we are asking is, ‘do you think it could work for other makes?’ Not whether or not they are going to do it. I was surprised it wasn’t a higher percentage than that,” said Hall.
Though he noted he is neither a promonant of combatant to the alternative model, Hall said, "I think it was interesting that only approximately half of the people thought that would work with other existing makes. The reality is at the end of the day, it would be very difficult to remove the current model because of all the state franchise laws.”
That said, Hall pointed out, “If it works for one, it should work for others.”
For those consumers still loyal to the dealer model, 14 percent of women said they would still want to pick up their car at the dealer, compared with 26 percent of men.
Also, 50 percent of women said they can do service and financing without the dealer compared with only 38 percent of men.
When asked what would prompt consumers to go direct to the manufacturer for their next car purchase or lease, 50 percent of women said they wouldn’t mind avoiding the dealer negotiation process, compared to 46.5 percent of men.
Many in the industry have cited a distaste for negotiation and haggling as a factor that have driven many consumers away from dealerships.
And a lot of testing has been done among dealers on this point, with many dealer groups, such as Auto Nation’s SmartChoice Express digital sales site, adopting a one-pricing approach.
Hall thinks, though, many consumers still find negotiation as fun, or a little bit of a game, even though they might be loath to admit it.
“I think it’s also interesting that even if you do have a no-negotiation type process on the new-car side, I’m not sure how well that is going to work on trade-ins and other aspects of the transaction, such as arranging financing, and potentially aftermarket products and what have you. It remains to be seen how thoroughly that non-negotiation idea will be held to,” Hall added.
At the end of the day, Hall, who has experience in automotive retail prior to his tenure at Swapalease, said much of the acceptance of the new model among shoppers could be due in part to a lingering “used-car salesmen” mentality.
“I don’t really think that exists anymore in 2015, but a lot of people still have that in their head. I think for that reason, people are open to different ideas and whether it works for Tesla, which remains to be seen — it seems to be working well so far — which would be more representative of the luxury brands, but I don’t see any reason why it couldn’t work other household nameplates, like your Chevrolet and Ford, as well.”
As for what can be done in the auto industry to reverse the negative stigma often held for automotive dealers, Hall said a lot of things have been done, such as manufacturer customer satisfaction surveys, for example — “but it’s a hard fight to fight.”
“What is has typically see in many markets is 98 percent of dealers will do a great job, and it’s unfortunate that where you have a couple that don’t or maybe are a little bit older-school, if you will, and maybe have prolonged that stereotype, that negative noise gets heard above all the positive noise. And I think that is unfortunate."
In other words, “I don’t think public perception has really caught up with reality yet. Hopefully, that will happen sooner rather than later," he concluded.