It began with General Motors’ Saturn brand, picked up speed with the Internet and got a massive push from the COVID-19 pandemic.“No-haggle” pricing is gaining converts as the auto industry tries to cope with changing buyer expectations and a surge in online shopping.
“I think the car business is the only industry on this planet in which the consumer buying patterns have leapfrogged dealer operations,” said Greg Carrasco, general manager of Oakville Nissan and Oakville Infiniti in Ontario.
For Carrasco, the answer is the dealer-set fixed pricing for new vehicles instituted in mid-May. He implemented fixed pricing for used vehicles in 2019.
For others, it could be the agency model taking root in Europe in which factories set prices and pay dealers a set fee per sale, or a Tesla-style approach with posted prices and no independent dealers. Or it could involve a less drastic shift to so-called transparent pricing, with factories and dealers collaborating to lessen the gap between the suggested retail price and what buyers actually pay.
But whether any of these approaches could become the standard is unknown.
“It’s a state of confusion,” Carrasco said.
No-haggle pricing is nothing new. Saturn was launched in 1990 with a set-price approach. It had strong initial sales before the brand disappeared in the morass of the 2009 GM bankruptcy.
But at the same time, the Internet was emerging to arm consumers with information about the marketplace — and increasingly, to become the marketplace itself.
Then came COVID-19.
NO GOING BACK FROM DIGITAL
“There are so many people who have transacted for things other than cars in the last 12 or 14 months digitally, and they don’t want to go back to the way they did things before,” Adam Paterson said recently, prior to leaving his post as Nissan Canada marketing director to lead Nissan’s operations in Australia.
Even if few people are making an entire car purchase online, more expect to conduct at least part of the transaction on their phone or laptop, Paterson told a panel on the future of digital retailing that was part of the Automotive News Canada Congress Conversations.
Customers also expect to find on dealer websites the same pricing specifics they would see for a yoga mat on Amazon, or, for that matter, for a Model 3 from Tesla, which from its 2008 start has operated with fixed prices.
It’s a quandary for an industry that has traditionally treated a sticker price as a starting point, with the final figure determined across a salesperson’s desk, often after protracted negotiations.
In response, some retailers are turning to the no-haggle model. In the United States, fixed pricing is standard at Sonic Automotive’s 100-plus new-vehicle franchises. Newcomer auto brands Polestar and Genesis both debuted with Tesla-like “all inclusive” stickers.
In the used market, startup Clutch Canada hopes to mirror the success of the U.S. platform, Carvana, in appealing to buyers who seek quick, here’s-what-you-pay online purchases. Backed by $20 million in venture funding, Clutch, founded in 2016, plans a national expansion and promises consumers a “hassle-free” experience with market-competitive prices, online checkout and delivery to their door.
Fixed used-car prices are a hallmark of Quebec’s HGrégoire group, which has 32 dealerships in Canada and the United States. CEO John Hairabedian said the no-dicker, no sales-commission approach builds credibility and trust, but the strategy doesn’t extend to new-vehicle sales.
“A lot of our value proposition, we haven’t done in the new, just because it’s harder. As an example, we offer a seven-day money-back policy [for used]. We can’t do that in new; once a car is registered, the warranty starts.”
NO-HAGGLE HATED, WANTED
Many shoppers abhor the need to negotiate. In consulting firm Deloitte’s 2018 global automotive consumer survey, haggling was grouped with paperwork and the lack of available stock as “the top three things consumers dislike about the purchase process.”
In a recent CarGurus study, however, only 41 per cent of respondents said they would prefer to buy at a haggle-free price. Buyers often believe negotiations “are necessary in order to get a good deal,” said Madison Gross, CarGurus’ director of customer insights.
That pursuit of the lowest price can hurt dealers who try to package a fixed price with a heightened customer-service approach, said Carrasco.
“The reality is, it doesn’t matter how well you treat the customer. If somebody down the street is willing to sell that vehicle for less, and they don’t have to pay for that service [that I am providing], guess what? The customer’s going there.”
TRY MORE TRANSPARENCY
Dealers and automakers agree on the need to provide price transparency — industry-speak for clear, detailed information on the cost of a car and options, dealer charges, rebates, incentives, etc. — for what consumers view as an opaque process.
The industry has made progress in smoothing customer transactions and giving consumers the information they want, said Tim Reuss, CEO of the Canadian Automobile Dealers Association.
While some dealers might not adopt no-haggle policies, Reuss’s view is that rigid, industrywide pricing would serve neither dealers nor consumers.
“It’s not necessarily price uniformity, but price transparency, absolutely. That’s a key difference.”