DaimlerChrysler dealers soon will have their own warehouse club where they can buy almost anything from office supplies to health insurance at discount prices.
Initially, all 4,450 U.S. Chrysler, Plymouth, Jeep and Dodge dealers will be able to use the new Five Star Market Centers when they open beginning in early 2000.
If dealers want to remain members, though, they will have to become Five Star certified within 24 months of joining, said Jim Holden, DaimlerChrysler executive vice president of sales and marketing. There is no dealer fee to buy from the market centers.
Five Star dealers must adopt, maintain and document best business practices.
DaimlerChrysler believes it will save its dealer body $1 billion annually in fixed costs, or the equivalent of about $500 a vehicle, said Holden. DaimlerChrysler dealers buy about $40 billion worth of goods and services annually, not including the cost of vehicle inventory, he said.
'This will be a competitive advantage that is not readily copyable,' Holden said.
DaimlerChrysler will open the market centers in New York, Atlanta, Miami, St. Louis and Los Angeles, but dealers will place orders via the Internet. DaimlerChrysler's procurement, sales and marketing staffs will run the market centers.
Before the national roll-out begins, however, DaimlerChrysler will open a test center in October in Indianapolis. The business model should be finished by Christmas.
Dealers will be able to access the centers from a personal computer and select from a wide range of business products, including office and maintenance supplies, uniforms, computers, telephone services, advertising and Internet services.
'It sounds like we will be able to order just about anything imaginable,' said Scott Reckley, new-car manager at Eastgate Chrysler-Plymouth-Jeep in Indianapolis. 'It's in the early stages. We've only attended one meeting on it, but it sounds like it will be easy to place an order.'
Dealers and DaimlerChrysler should save money, Reckley said.
Kevin O'Brien, president of Tom O'Brien Chrysler-Plymouth-Jeep in Indianapolis, said the market centers could help dealers cut their fixed costs. O'Brien said he will participate in the pilot program.
If dealers use the market centers, the non-dues income of most state and metro dealer associations would decline, said Tim Dowling, executive vice president of the Automobile Dealers Association of Indiana. That's because most associations offer products and services at a reduced cost to dealers, Dowling said.
'So from that standpoint, it is not good news,' Dowling said. 'However, if the same products can be purchased for less (through DaimlerChrysler), it will be a victory for the dealers and indirectly good for the associations.'
Dealers can buy group hospitalization insurance, long distance phone service, group disability insurance, and other products and services through the Automobile Dealers Association of Indiana.
DaimlerChrysler has a tough job ahead, Dowling said. The suppliers that dealers now do business with will not roll over and play dead, he said. 'They will fight for their business, and we may even see a price war break out.'
A telephone company told DaimlerChrysler it would drop its preferred rate 40 percent for dealers who buy through the centers, Holden said. Dealers can even buy health care for their employees through a market center, Holden said.
Don MacKenzie, co-owner of Crossroads Chrysler-Plymouth-Jeep in Indianapolis, said he is not willing to jump on the bandwagon just yet.
'It sounds interesting, but I don't know if it will work,' MacKenzie said. 'I've jumped into factory programs in the past and then regretted doing so. It would be very time-consuming for us to fill out all the forms that they want and to look up old bills.'
MacKenzie said he would be more comfortable waiting to see what happens in the pilot program.
'They told us we could buy tons of things, from toilet paper to health insurance,' MacKenzie said. 'We're used to buying our own health insurance and getting competitive bids.'
`THIS WILL BE HUGE'
'I think this will be huge,' Holden said. 'There won't be anything heavy handed. If you don't like the price, don't do it.'
To earn Five Star status, dealers must go through a time-consuming and costly certification process. Dealers must adopt, maintain and document best business practices. Most are geared toward improving customer satisfaction with the buying, delivery and service activities at the dealership.
It has been taking dealers about a year to obtain Five Star certification. So far, 1,635 dealers have earned Five Star certification. That number is expected to reach 2,000 by year's end.