Thought I'd give my $.02 on this. I'm CEO of CarWoo! and we are right in the middle of disrupting the space and you guys are right it is extremely difficult, but it is possible. It's not so much of a disruption as it is an effort to level the playing field and bring an online buying experience to car buying.
It is possible to innovate here, you just have to do it the right way, within the laws that have been setup to protect the consumer and the dealer. It doesn't have to be a race to the bottom. What we see on CarWoo! are dealers offering market competitive prices and then competing with each other on things outside of the vehicle price. Things like professionalism and responsiveness become extremely important when all other things are equal (price and vehicle). Over half the consumers on CarWoo! buy from a dealer who didn't have the lowest price. A race to the bottom only exists if the only dimension visible to the consumer is price. On CarWoo! we emphasize the customer experience you're likely to get from the dealer which adds another dimension to the decision. Dealers love this, so do buyers.
The big issues in question are the brokering laws (getting paid a fee to refer someone who buys a car), privacy issues and dealership advertising laws (all vehicle offers must come with a vin and stock number). From day one at CarWoo! we have been keenly aware of these issues and worked within the rules to provide a highly valuable consumer experience, while working within the laws. It is absolutely harder to do it this way, but it can be done.
We don't believe haggling will ever go away, even if manufacturers move to a "single price" system like Scion. There is a distinct advantage for one dealer to break the rules and provide a lower price, so they will and the single price systems break down. We see Scion dealers discounting all the time, by the way. The only way to break out of this if you're a dealer is to be better at customer service and cater to your buyer's specific requests. Automation can not solve that problem, so selling cars will always have a dimension of personal touch and relationship.
What needs to be in place is a platform where buyers can shop multiple dealers online and dealers can work out the details of their car purchase before they show up at the store. This let's great dealers shine and helps them keep their margins in a highly competitive market. This is what CarWoo! provides and we've done it within the complex and ambiguos web of rules in this space. Innovation is possible here, and yes it is extremely hard. Harder than I ever imagined. But that's why it's such a huge opportunity.
One other thing I'd like to point out is the laws surrounding dealership advertising and brokering are extremely important to protect the consumer, therefor the scrutiny in the article. We agree with the laws and they do need to be in place. Here is why.
Dealership advertising laws require a vin/stock number and an expiration date to come along with all price offers. This protects the consumer from bait and switch problems which are rampant in this space. Without these protections dealers and vendors can simply make up prices to draw people into the store and when they show, switch them to something else.
I understand in depth the challenges involved in doing this right from a product standpoint and it would be orders of magnitude easier to provide a product that doesn't include a vin/stock number (a topic for another post). But the problem is consumer perception is wrong and misleading. If someone comes to my product and car buyers can get prices on a vehicle that may or may not exist (no vin/stock number) you are enabling bait and switch scenarios. On CarWoo! you will not have this problem, all offers have a VIN/Stock number and an expiration date.
Brokering laws (getting paid a referral fee from the dealer when someone you sent to the dealership sells a car) are also in place to protect the consumer. I had one of our ex-dealers that work for us explain this to me, because at first I didn't understand why this was a consumer protection issue. He used this example. It may be a bit out of date, but it illustrates the point. Let's say you're in a town with three or four car dealerships and the preacher in the town establishes a relationship with one of the dealers where the dealer will pay the preacher $500 for every customer the preacher sends their way that buys a car. On Sunday this preacher uses his influence to recommend people should buy from his favorite car dealer. The people in the congregation listen and when they go to buy a car, they go to the preacher's favorite dealer. The preacher gets paid, the dealer marks up the car $500 to pay the dealer and the consumer essentially paid $500 more than they had to. The brokering laws are in place so disclosure about the financial relationship between the buyer, the dealer and the broker are transparent.
Essentially you can get a better deal as a buyer without a broker and you should know upfront that's the case.
Hope this helps, it's taken me four years to understand all this stuff.
Tommy, I appreciate the fact that you are working to disrupt this industry, but it appears that you are treading on eggshells when it comes to the real meat of the disruption process. This whole thing sounds like a classic CARtel. Pun intended.
Are there really laws in place that block the process of open market pricing competition for cars? If so, that is crap and you should be focused on fixing that. I believe that a race to bottom on car pricing would actually give dealers an incentive and opportunity to better market and highlight their ability to consult and service consumers vs. haggling for a widget.
Dealers better start understanding that the race to the bottom is already in progress and it is only a matter of time when the well established model will have to adapt.
I'm the Creative Director at CarWoo! Just wanted to focus in on a few things Tommy said above, as I think it will provide some good input to the discussion going on here.
2nd paragraph - "What we see on CarWoo! are dealers offering market competitive prices then competing with each other on things outside vehicle price. Things like professionalism and responsiveness become extremely important when all other things are equal (price and vehicle)"
CarWoo! has a dealer rating and ranking system. In the same way, for example, Amazon or eBay has seller ratings. When buyers go through the CarWoo! product they choose which dealers they want to work with based on ratings and reviews (among other things).
Let's say you go to Amazon and are looking to buy some headphones. You find these headphones for the about same price. One is $10 cheaper. However, one seller has a 2 star rating and the other has a 5 star rating. Which one are you going to buy from?
Now, let's say you go to Amazon and you're looking for those same sweet headphones BUT there are no ratings. All you can see is there are two sellers. One is $10 cheaper than the other. Which one are you going to buy from?
The same thing is at play here in the Automotive space. This is why above Tommy said "A race to the bottom only exists if the only dimension visible to the consumer is price".
> Automation can not solve that problem, so selling cars will always have a dimension of personal touch and relationship.
Why not? Other than stricter law(?), what is the differentiating factor of selling a car vs selling other physical stuff (e.g. laptop, camera lens or jewelry) which makes it hard to automate (or 1-click purchase, more or less)?
The opaque car market does tend to increase revenues for dealers, but no one has explained how it incentivizes them to provide a better product. How could it? Car purchasing may well be a multi-dimensional problem, and price only the most visible dimension; innovation could explain those other dimensions better (like TrueCar is doing for price). But why should opacity remain a part of this process? Every car may be a unique snowflake (really?), but the price should be a function not of the buyer's bargaining power, but the car options.
The wrong incentives are unlikely to produce the right result; we know this from ECON101, why should markets for cars be exceptional?
Did not like the self-promotion here.
Finally: this article was not nearly opinionated enough. The article explains that the cars industry doesn't like TrueCar; but then it doesn't explain the argument against TrueCar. This is a common journalistic mistake; I'm happy to disagree civilly, but don't sacrifice the discussion to civility. If side X doesn't have a point, then just say so. In a debate, I'd rather have my points demolished than politely dropped. And readers are confused; I reread this article because I thought I had missed something...
It is possible to innovate here, you just have to do it the right way, within the laws that have been setup to protect the consumer and the dealer. It doesn't have to be a race to the bottom. What we see on CarWoo! are dealers offering market competitive prices and then competing with each other on things outside of the vehicle price. Things like professionalism and responsiveness become extremely important when all other things are equal (price and vehicle). Over half the consumers on CarWoo! buy from a dealer who didn't have the lowest price. A race to the bottom only exists if the only dimension visible to the consumer is price. On CarWoo! we emphasize the customer experience you're likely to get from the dealer which adds another dimension to the decision. Dealers love this, so do buyers.
The big issues in question are the brokering laws (getting paid a fee to refer someone who buys a car), privacy issues and dealership advertising laws (all vehicle offers must come with a vin and stock number). From day one at CarWoo! we have been keenly aware of these issues and worked within the rules to provide a highly valuable consumer experience, while working within the laws. It is absolutely harder to do it this way, but it can be done.
We don't believe haggling will ever go away, even if manufacturers move to a "single price" system like Scion. There is a distinct advantage for one dealer to break the rules and provide a lower price, so they will and the single price systems break down. We see Scion dealers discounting all the time, by the way. The only way to break out of this if you're a dealer is to be better at customer service and cater to your buyer's specific requests. Automation can not solve that problem, so selling cars will always have a dimension of personal touch and relationship.
What needs to be in place is a platform where buyers can shop multiple dealers online and dealers can work out the details of their car purchase before they show up at the store. This let's great dealers shine and helps them keep their margins in a highly competitive market. This is what CarWoo! provides and we've done it within the complex and ambiguos web of rules in this space. Innovation is possible here, and yes it is extremely hard. Harder than I ever imagined. But that's why it's such a huge opportunity.