Should GM Be More Like Amazon.com?

In other words, should it offer "direct-from-the-manufacturer" purchases online to slash car dealer costs? I think this is a cool idea, but I've never bought a car so I'm not sure what inconveniences it would pose to a buyer. But hey, the Washington Post's Steven Pearlstein also thinks it would be a great idea! On the other hand, he also thinks that local dealers will love it too, and unless many car dealers secretly hate being employed, I can't imagine that's right. Let's think this through:


Today, I can go online to GM.com (as I'm doing right now) and browse images of cars arranged on a virtual rotating stage, like albums on iTunes. If I click one -- the Cadillac XLR-V looks pretty sweet -- it takes me to a page with specs, a price range, and a "Request a Quote" option. But I have to go to the dealer to make the actual purchase. The "Amazon" solution would eliminate the part where you haggle with the dealer for a number around the price range. Instead it would just give you a reduced price, you would click to buy/reserve the car, and then head to a stripped-down dealership (which now is more of a holding station than a dealership) fill out the paperwork and drive your car home.

In addition to being convenient, this plan would also "facilitate the desired decrease in the number of traditional dealers." Responding to the Bowie, MD, reader who hatched this crazy idea, Pearlstein loves it:

"I've been a proponent of that idea for years now, but I don't think it necessarily has to be contrary to the interest of the local dealers. The dealers can still have showrooms so people can come in and see and test drive the cars. They can still prepare the new cars for delivery. They can still offer service contracts. And with your model, they don't have to tie up a lot of capital in inventory. Their profits on new cars has been so beaten down that at this point I'm not sure they wouldn't welcome a new business model. But you are right: when they get the new factories that can produce lots of different cars from the same line, this is the way things will go."

I actually don't see dealers loving this idea, but I agree with Pearlstein that the Amazon plan doesn't cut out dealers entirely.* Functionally, they'll just be more like the folks in white shirts at an Apple store, assiting customers who bypassed the option to buy online. Buyers like to kick the tires of most big purchases, and cars happen to be extremely big purchases with actual tires. But I can't imagine car dealers leaping at the idea that GM is closing some of their shops and turning others into warehouses for pre-sold cars. It essentially turns some car salesmen into clerks.

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*Open question: Would it make sense under the Amazon plan to allow car dealers to distribute cars from multiple makers (GM, Ford, Toyota, etc), like a CompUSA for cars? If there's going to be more purchasing online and car dealerships become warehouses for already-sold vehicles, would it be economical to allow each shop to sell multiple cars? Or would that create a undue burden on transportation costs, since cars would have to be delivered one-by-one as they're ordered, instead of ten Chevy Impalas hooked to the back of a truck?