The Future of Car Dealerships

DETROIT: More than 2,000 auto dealerships around the country are expected to close in the coming months, eviscerating a mainstay of TV station ad revenue. The closures were a result of the bankruptcy of Chrysler and an expected filing from General Motors. Now The Economist is proposing a similar fate for the showrooms left standing.

“Surely new-car dealerships have been disintermediated by online information sources just as thoroughly as travel agencies were a decade ago?” Economist posits. “What few dealers seem to have grasped is that making and selling cars has become a commodity business. The Ford Focus in a dealer’s showroom in Santa Monica is exactly the same as the one at a Ford dealership in Tallahassee. Why would anyone pay more for one than the other? No one would be so daft when buying a computer. Nowadays car buyers realize they should not have to endure variable prices.”

People can now easily go online to compare prices and features and simply order the car. However,the venerable British publication does fail to take into account two very American characteristics of car-buying. Nothing is as informative as a test drive with a salesperson gripping the dashboard, and for some, the price negotiation that follows. The full Economist car dealership article, including coverage of a relatively new online transaction price aggregator, is available here