Pub. 13 2014-2015 Issue 1

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 2 , 2 0 1 4 24 new jersey auto retailer At the height of the dot-com bubble, Wall Street analysts, academicsandconsumer advocates claimed that “factory-direct” new car sales would reduce costs, lower prices and deliver superior customer experiences. Despite the lack of evidence to support this contention, the debate has resurfaced as state legislatures consider changing franchise laws toallow some factories to sell directly to consumers. Past experiments by factories to sell directly have rarely, if ever, proven successful, and the results have only reinforced the need and value of having a network of franchised new car dealerships. In the end, the franchised dealer network benefits consumers and manufacturers alike, providing fierce price competition among dealers and an extremely efficient distribution network that is acutely sensitive to local markets. In 1997, Ford Motor Co. tried to realign its sales distribution model with the Ford Retail Network. Ford believed fewer stores in a single market would concentrate sales and reduce marketing, employee and inventory expenseswith the addedbenefit of lower facility investments. But fixed prices and salaried employees had little appeal and Ford lost market share in each of the five metro areas of the experiment. Ford ended its experiment and sold the stores back to its dealers in 2002 having realized none of the supposed savings. Another highly publicized factory sales experiment was General Motors’ online direct salesmodel inBrazil.With the perceivedbenefits of e-commerce swirling, GM Brazil opened a new assembly plant in The Benefits of an Independent Dealer Network BY MARYANN KELLER