I'm going to use an FT Alphaville post as a jumping off point to a tangentially related idea.
Be of good cheer, we'll come back for the meat of the FTAV piece tomorrow.
First up:
US protectionism, or what happens when there’s too much of a good thing
Ah, technology.And from NPR's 'This American Life':
You’ve got to love it. Or hate it.
Especially if you’re an auto dealer or a US refiner at the moment.
Both currently find themselves in a similarly challenging period. Call it the curse of being a middleman in a world moving to direct everything.
Over in the auto world, for example, a stealth revolution is currently being waged on car dealers by manufacturers. Thanks to the internet, there’s simply no reason why car manufacturers can’t deal directly with customers. Orders can be gathered online, and customers — rather than being targeted by pushy salesmen — can take full control of the decisions they make. Prices, extras and specs can be decided upon with the helpful advice of independent experts, fans, enthusiasts, and journalists on auto forums.
The “feel”of the car, if not adequately conveyed by scores of independent write-ups propagated online, can be enhanced via a handful of test centres and showrooms run and managed by the manufacturers directly. Think Apple store with genius bar rather than conventional showroom.
From the manufacturer’s point of view, selling through a central sales hub, can help achieve the sort of economies of scale — when it comes to model and spec availability — that finally close the gaping arbitrage opportunities lost to dealers prepared to make bulk orders and quick deals, and which push up prices for end users as a result. (Despite the popularised myth that discounts are being provided all round)
In some ways it’s akin to the platform revolution that hit the FX world. What car manufacturers lose in talked-up pushy sales they gain in greater price competitiveness. Car manufacturers become systematic internalisers of order flow, matching supply directly with demand as needed, rather than as anticipated (at the risk of dealers who take the overflow/minimum quotas so as to ensure their own margins)....MORE
129 Cars
We spend a month at a Jeep dealership on Long Island as they try to make their monthly sales goal: 129 cars. If they make it, they'll get a huge bonus from the manufacturer, possibly as high as $85,000 — enough to put them in the black for the month. If they don't make it, it'll be the second month in a row. So they pull out all the stops. Photo gallery here. NOTE: the Internet version of this episode includes un-bleeped curse words. Bleeped version here.Here's the homepage for the episode complete with alternative methods to listen in, web exclusives, photos and more
Transcript
Originally aired 12.13.2013Note: This American Life is produced for the ear and designed to be heard, not read. We strongly encourage you to listen to the audio, which includes emotion and emphasis that's not on the page. Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio before quoting in print.Prologue.
Ira Glass
Freddie is the general manager of a car dealership these days, but he used to be a car salesman. And he was a good one, partly because he's got what he calls the gift for the gab. His go-to move in lots of situations is to finish a sentence and then laugh, even when the sentence is bad news. Like here he is, assessing his chances of making a sales goal for the month.Freddie Hoyt
I'll give it a 50/50 right now, because it's early.
[LAUGHING]Ira Glass
Or this is him talking about a month when the car dealership did not make its sales goal.Freddie Hoyt
And I'm strictly commission, so I make nothing.
[LAUGHING]Ira Glass
So when Freddie is not laughing, you know it's bad. And this October, Freddie did not laugh much at his weekly meetings with the guys who sell cars for him.
[FREDDIE COUGHING]Freddie Hoyt
All right. Good morning. All right. In the beginning of the month, I went through the room and I told everybody where they had to be. Jason, you have 16 cars out. You need 10 more for the month for 26. I want to see you there.
Bob Lender, you have six out. You need nine more. Scottie, you're at 10 right now. You need to be at 18.Ira Glass
Last month, they didn't make their sales goal. That was September. First week of school is always bad for car sales in the suburbs. They were supposed to sell 127 cars and trucks. They sold 82.
So they have to make October. And when I say "have to make," this is not some sort of abstract, feel good, compete with the dealership down block just for fun kind of competition. They're part of Chrysler. And if they sell 129 cars and trucks by the end of October, Chrysler will pay them a bonus that's pretty much the difference between the dealership being in the black or being in the red for the month-- somewhere between $65,000 and $85,000, depending on which models they sell. Different cars are in different amounts. If they sell 128 cars-- fall just one car short-- they get nothing.Marc Brodlieb
That's the worksheet that Chrysler sends us to show us what money we can earn by how many cars we sell.Ira Glass
And there's a new one every month?Marc Brodlieb
Every month.Ira Glass
In the middle of the month, the owner of this dealership, a sweet-faced guy named Marc Brodlieb, and Freddie, show me the document where Chrysler set their October sales goal.Freddie Hoyt
No. No. This changes every month.Marc Brodlieb
At their whim.Freddie Hoyt
At their whim.Marc Brodlieb
And that's another frustration. We have no idea what the number's going to be and really how they compute it. We've had numbers as high as 159. And we fight and we go crazy. It's cockamamie, if anyone knows what that means.Ira Glass
Because basically, they shift around the ground rules on you.Marc Brodlieb
Every month.Ira Glass
What makes all this tricky is that there are four other Jeep dealerships within 10 miles of Marc and Freddie. And Marc says that most customers will shop price at two or three of them. So to stay competitive, Marc and Freddie do what pretty much everybody else does. They set lower prices, knock hundreds of dollars of the price of the cars, sometimes sell them for less than they paid Chrysler for them with the hope that they're going to hit their sales goal and get the bonus to make up the difference....MUCH MORE including the payoff promised in the headline.
