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Entries in Manufacturers (2)


Thoughts on "The Spread"

Do you remember when the spread was at least 15% and all the product information resided in the showroom?

This goes back to the days when dealers were of questionable ethics (presumably), and customers were victims. Knowing the "dealer cost" was the key to empowerment for CMS (Citizen Main Street).

Fast forward to 2016 and keep an eye on 2020.

The spread is down to often less than 10 points (10%) on new vehicles.

Invoice or the "dealer cost" is irrelevant.

What the "other" paid is also irrelevant with a ton of trades upside down, accident reports, and various credit scores.

There is an increase in the variables. Who really has a grasp of all the variables? Obvious that everyone is hanging on to "something" to at best uphold their position, and sense of causality.

The advent of dynamic pricing has empowered who? Where does the money to execute aggressive dynamic pricing come from?

A simple example...

When the spread diminished from 15 to lets say 10 points, lets say that 5 points went into the dynamic pricing reserve.

If a manufacturer retains 5 points, and they go into the "dynamic pricing reserve", and no one knows from month to month where the reserve will be applied. It makes for interesting times in the auto business.

What motivated manufacturers to embrace dynamic pricing, and have a reserve? Its a conversation for another time, but think "dealer groups" as a starter.

If you conclude that the spread is still 15% + you might be correct.

If you conclude that the dealer no longer controls the entire spread, you might be correct again.

But CMS is empowered, he/she has all the product information, can compare, has dealer cost all readily at hand. Sure they do!

Does CMS know where the "dynamic pricing reserve" will be applied from month to month by all the manufacturers?

More important does CMS care?

In 2016 CMS in Canada cares about a monthly payment, and "shopping a lesser deficiency".

The spread has not changed for decades, its being repackaged by manufacturers. Reflect on this for a moment, connect your own dots, and fast forward to 2020. will get dramatically more interesting, exciting, and it might just take your breath away if you are ill prepared.




Digital Transformation in Auto Retail

Thought provoking presentation from Capgemini ...especially for auto dealers.