By Sandy Myhre
Toyota New Zealand’s recent announcement they’re transforming the new car buying experience has had considerable coverage.
In what they’ve termed the ‘Drive Happy Project’ car dealers will no longer be dealers, they will be agents. If the franchise car-selling model has been made defunct, how will that affect existing Toyota dealers?
There are two elements central to the change: Transparent pricing means every Toyota agent in the country will sell stock at a given price under a ‘no haggle’ structure that Toyota says was off-putting for most customers. Moreover, Toyota says that under the new regime the price of a new car will be reduced by a substantial amount.
The dealer now becomes an agent, not a franchisee, and the showroom will no longer carry substantial new car stock. Instead, new cars will be available from a ‘pool’ warehouse sited (initially) in Auckland, Wellington and Christchurch giving the agent much greater stock selection.
Of all Toyota dealers, arguably most affected will be those in regional and rural areas. Bryce Woodward, CEO of Northland Toyota, says it’s a ‘paradigm shift’ in selling methods which will, in fact, be more beneficial to his business.
“We had a problem with customers coming to us for a price and then going to Auckland to shop that price around the city in anticipation of getting a better deal.
“We want people to support local businesses because you can guarantee that Auckland dealers don’t put any sponsorship money into our local community whereas we invest a substantial amount of money into our own Northland community.”
It will also eliminate inter-dealer stock movements, the ‘swapsies’, where dealers negotiated with other dealers for a customer preference and which tended to benefit metro dealers more than regional or rural dealers because of the number of new cars available in close proximity.
Under Toyota’s new selling structure, the drive to Auckland or any other major metro centre to conduct a shopping exercise, or a Dutch auction on price, will now be unnecessary because the price on every Toyota is fixed.
Neither will dealers, or agents, carry as much new stock as in the past. The majority of Toyota’s new car stock will be stored in those three metro hubs, or pools. The local showroom will now carry a combination of new cars (probably already purchased and waiting delivery) and an increased number of demonstrator cars. Bryce Woodward says it means a more efficient use of showroom space and a change of function.
“We have turned about a quarter of the showroom into a waiting area to enhance the customer experience and can now offer a delivery suite for when customers come to pick up their car,” he said.
As for the traditional car sales man (and they are still mostly men) it also means a change to the take-home pay structure. Sales staff will, for instance, no longer receive bonuses based on gross profit because prices are firmly fixed. It doesn’t mean they will be paid less and it won’t remove the competitive selling spirit inherent in all sales people worth their salt, but the willingness to lock down a deal coupled to the financial imperative to do so, is now not as great as it once was in the ‘old’ Toyota dealership.
Toyota sales people are now vehicle consultants, or product experts, or even a ‘store concierge’ there to assist customers arrive at a happy car-buying conclusion. Potential buyers will have done most of their research online anyway and can customise accessories via the website or investigate finance options and warranty information, so the need to sit in a showroom to discuss preferences simply isn’t critical.
Could this be just one step away from side-stepping the dealership altogether? It’s been tried before. When Daewoo arrived in New Zealand in the late 1990s, customers simply dialled an 0800 number to order a car. Daewoo Direct didn’t last however because discounts were rampant, the warranty package was expensive for the company to maintain and there was no infrastructure through which to on-sell used product. It basically ran its course.
China, USA and Singapore are adopting something similar but through a vastly more modern method. Gone is the sales man altogether. You can buy a car through an app on your phone and take delivery from a car vending machine.
That is car selling too, but not (yet) as we know it in New Zealand.