Republic Industries Inc.'s plunge into no-haggle pricing has renewed pressure on dealers to abandon price negotiation.
The aggressive campaign by the nation's largest dealership group, the advent of Internet marketing and a push from some manufacturers could make no-haggle pricing the rule, not the exception.
'I think that over the next five years a large percentage of dealers will go to no-haggle pricing,' said Ross Roberts, president of Ford Investment Enterprise Corp., the company set up to run Ford Motor Co.'s growing chain of factory-owned dealerships. 'Traditional negotiation will go away.'
Roberts and other speakers and attendees at the Automotive News World Congress discussed the new pressure.
Perhaps the biggest push for no-haggle pricing, also known as one-price selling, is coming from Internet shoppers. Consumers can find out dealer invoice prices online and negotiate lower prices.
'The knowledge that consumers have drives prices down and accelerates the move to one-price selling,' said Steve Girsky, auto analyst for Morgan Stanley & Co. in New York.
Major Internet buying services that refer shoppers to dealers require dealers to offer a nonnegotiable quote. Automakers that have set up similar Internet buying services also are promoting no-haggle prices.
'The Internet is a facilitator for one-price selling,' said Ron Zarrella, president of General Motors North America, which has online buying with no-haggle pricing.
BIG RETAIL FANS
The Internet is not the sole factor behind the push toward one-price selling. Large auto retailers are warming up to the concept, and are teaming up with manufacturers to make it work.
Manufacturers have tried to get their dealers to switch to no-haggle pricing in the past. But Saturn Corp. has been the only company able to make the sticker price stick at most of its dealerships.
'The reason Saturn works is because one dealer controls a large territory,' said B.B. Hollingsworth Jr., chairman of Group 1
Automotive Inc., a Houston-based publicly held dealership group. 'If we owned all seven Toyota stores in Houston, we would be fixed-price dealers, too.'
Manufacturers and dealers have joined forces to change the sales process.
Mercedes-Benz of North America Inc. has been trimming available profit margins over the past six years and coaching the retail sales force to get all dealers to stick to the sticker price.
'It's very difficult for an individual dealer to implement one-price selling and stay with it' because of competitive pressure, said Mike Jackson, president of Mercedes-Benz of North America. 'It's a whole different story if a manufacturer has embraced it as a principle of its brand and is working systematically with retail partners to implement it.'
The nation's largest dealership group, Republic Indust-ries, has made no-haggle pricing the keystone of its brand marketing campaign. 'No-haggle pricing is part of providing a consistent customer experience,' said Mike Maroone, president of Republic's Auto Retail Group.
Republic is causing an uproar among competitors in Denver after its Christmas debut of low, no-haggle prices and an aggressive ad campaign promoting the AutoNation brand. (See story, Page 32.) Competing dealers say the ads demean dealers, and some are struggling to match AutoNation's prices.
John Schenden, president of the Metro Denver Automobile Dealers Association, practices low-pressure, friendly price negotiation at his dealership, Pro Chrysler-Plymouth-Jeep in Denver. 'I don't want to be a one-price store. That is a take-it-or-leave it proposition to the customer,' he said.
Mark Rikess, president of Rikess Group, a Los Angeles dealership consulting firm that specializes in no-haggle pricing, intends to promote his services heavily in Denver. Said Rikess: 'We have had three calls from three different dealer groups in Denver who are interested in one-price selling. The manager of a big Toyota store asked me how long can Republic keep giving cars away. I told him: As long as it takes to make it work.'