Tred, a new start up company in Seattle, is turning the concept of car buying on its head by bringing the test drive to you. Why is that significant? Because now, a person can engage in every (productive) aspect of purchasing a car without having to set foot in the dreaded new car dealership.
Prior to the advent of the internet, unless you happened to find a review in an auto magazine, you couldn’t find out anything about a car without stepping into the dealer showroom. By the late 1990s, you could look up information about cars online. Saturn pioneered selling direct to the customer online shortly after. Ebay connected millions of car sellers and buyers. And now, many car dealerships offer online sales and have dedicated internet sales managers. So as long as you don’t care to test drive a car before plunking down your money, you had the ability to do so (indeed, an internet search yielded studies that showed up to 28% of cars are purchased without test drives, and even more people test drive only the car they buy but not the competing products). But most of us are not comfortable with spending a large chunk of our savings without sampling the product.
Enter Tred. In addition to researching, getting pricing, and purchasing a car online, with Tred you can have competing cars delivered to your home for a test drive for just $19. What does that money get you? A ride with a Tred representative (not a dealership employee), a packet of information about the car itself (including dealership forms), no haggle pricing, and best of all – no dealership salesperson. You might think that this would result in fewer sales without someone manipulating the customer’s decisions or pressuring the customer to “seal the deal.” But Tred is counting on their service to actually improve the take rate on vehicles that have been test driven. According to a Gallup poll from last December referenced in the article, “… car sales people ranked below members of congress in trustworthiness…” Therefore, the company is willing to bet that if they can remove as much contact with the dealership as possible from the process, they will increase sales for the dealership and improve the car-buying experience for the customer.
Tred’s financial backers also believe this to be the case. Some of their current investors even know a thing or two about selling cars, including Rick Wagoner, former CEO of General Motors; and Fraser McCombs Capital (their largest investor), whose equity pool includes capital from the owner of eight car dealerships in the San Antonio area. A principal from Fraser McCombs is quoted in the article saying that “A customer asking for a car to be brought to their house is in my opinion converted from a shopper to a buyer.”
What do you think about Tred’s new test drive service? Have you had any particularly bad experiences that have made you want to stay as far from a car dealership as possible?
http://money.msn.com/business-news/article.aspx?feed=OBR&date=20130619&id=16612466
I think this is an excellent idea and suggests that the founder of Tred are in touch with current public sentiment. Self-service is increasingly important to many consumers and I would expect anything that shifts control of the car buying experience from the salesman to the consumer to eventually gain traction. Carmax has been successful because the lack of haggling and their flat commission structure means that their employees are more aligned with the customer rather than always pushing people towards a more expensive model. Tred feels like a similar idea but with the ability to draw from an even larger inventory pool.
I think Tred has an amazing idea. This company has found a niche within the car market, and has also played into the popularity of online shopping. Consumers nowadays are quite savvy when it comes to doing their research on items within the technological industry, and of course cars. This company makes it easier for individuals to purchase cars! Especially in areas that maybe don’t have car dealerships very close to them, a person may be more apt to purchase a different brand of car simply because they are able to test drive it with Tred’s test drive option of coming to your house. As we have discussed in class, it’s companies like these that help to see a new way of doing things, and capitalize on it in order to compete within the market.
I think Tred’s idea will work. People that are not even ready to buy a car would like to test drive a car fro $19 if they are sure there will be no sales guy pressuring them to buy it. In addition, people buying 2nd or 3rd version of the same car are confident to buy it online without test driving it because they are familiar with the car. The only issue is for Tred to build a reputation as a trusted party. When it comes to putting money down people want to be sure they know who they are giving there money to. They want to be sure that Tred is not a scarm.
Lastly, Tred business model can easily be expanded nation wide because there is no physical infrastructure involved in red’s business model. Sales people that need 2nd part time job nation wide can do this on their free time.
Wow – to avoid a car dealer – I would pay double the amount Tred is asking. As if it wasn’t painful enough to be pressured into a final sale of a car, the worst part about sharing personal information with a dealership is the communication from the dealers of which you do not partake in a sales transaction. I purchased my last car in fall of 2011. As late as spring of this year (2013), I still had dealers calling my cell asking if I was still interested in one of their cars. I had nothing else to say other than “Do you really think it is 18 months later and I still have not decided on a purchase?” Tred would have resolved this issue from the start and hence I think their business model is a major improvement to customer service in this whole process.
I think this sounds like a great idea that definitely has potential to grow. Having the ability to avoid car salesmen and the dreaded car dealership will certainly help Tred win over customers. I like how more car companies now use the internet as a way to help make car purchases easier for the customer, but Tred seems to be going a step further by selling test drives over the internet.
I agree that their focus on customer service will be critical and will help them win over customers. I believe that online companies that tie their technology in with excellent customer service often create a formula for success (such as Zappos, for example).
This concept is very interesting. As Lance stated, the idea reminds me of the Carmax model. One question it raises, however, is how many insurance and finance options will the customer have when buying through Tred? Typically, the dealership doesn’t make that much money on just the sale of a vehicle. A dealership will still benefit from selling vehicles through Tred because by selling more inventory they will have more say when it’s time to order vehicles, but how cooperative will dealerships be if they don’t have the option to sell other products? If they have a customer actually in their dealership that they can sell a certain vehicle to I have a feeling that they would much rather sell to the person actually in their store. Will Tred customers truly get to test drive whatever they want, and how many dealerships will be jumping at the chance to have inventory leave their lot? Also, will customers receive adequate education on financing/ insurance options?
I don’t think Tred will have anything to do with insurance or financing, unless they decide to branch out into those sectors. It’s really just a way to get a car into a customer’s hands to improve both the experience of purchasing a car as well as the chance that a customer will buy a car. Also, the dealership usually doesn’t make much on insurance (which they don’t sell) or financing (which is usually done by the bank or financing arm of the manufacturer) so I don’t think Tred will have much impact on this.
The dealers do make money on additional options, which they can still try to push at the time of sale, and on service which Tred also has no impact on.
This is a really interesting concept, one which could change the way people buy cars. However, a small part of me wonders if car manufacturers could weasel their way into it by paying Tred to promote their cars heavier than other car manufacturers. If this happens, it will eliminate the car salesman at the dealer, but turn Tred into a third party. In my experiences, I am more likely to buy a car from a person who is friendly, who isn’t trying to constantly sell the car to me and isn’t trying to push all the unnecessary extras (e.g. Scotchguard, “cool” accent stripe, etc)
In it’s current state, Tred is a great idea, in that it eliminates having to deal with pushy salesmen when purchasing a car. To Kristen’s point though, how would financing be handled? Is the expectation that customers will have financing secured elsewhere? If Tred were to be able to partner with banks who would finance at competitive rates similar to auto manufacturer financial companies or better, they would make customers even more satisfied!
I think the idea is very good but it may be short lived if the business is not conducted with an honest approach towards the customer. Such service would save a lot of time and suggestive discussions with car dealers about superiority of their cars over the competition. The company like Tred would give us an option to test any car we want for a decent expense and ability to compare available price offers for all cars in consideration.
According to the article, the company is partnered by ex GM CEO and local car dealers. Such information makes me wonder about who would be the real customer for such a company. It would be very unfortunate for customers again, if Tred or similar businesses became just an extension to certain dealerships or carmakers.
The idea is very interesting, you bring up great points about peoples loathing of car dealerships. Many companies have tried to rectify the stereotypical used car lot with no haggle pricing and warranties, this seems like one step closer in helping consumers feel more comfortable buying used cars. On the other hand for such a large purchase I believe most customers will want a wide variety of cars. When look for a used car I may start online and find a car or two but once I see the car I find myself second guessing and going to another car in the lot. This is one reason I believe dealers like Carmax are so popular because they have the selection right in front of you. Tred reminds me a lot of Webvan or PeaPod where there is/was a market for them it did not take off like many believe it would.
As I was reading the article I too thought of the Peapod model. I think this new way of selling cars is a great idea. When talking to people, whether young or old, about their experiences at a car lot, it seems to me to be all the same. They get hassled by the slick sales people and feel like they were pushed into buying something. I like the idea of having all of the data right in front of me and choosing from my computer, and then having the test drive come to me. Call me lazy, but if I can deal with someone who is truly unbiased and will bring the car to me, it sounds like a perfect win-win.
Sorry Viv but I really think the idea is flawed and not effective at all.
I would like to see more of the CarMax model than the Tred crappy model! Let me start with some what ifs…
What if you do not like the car at all, not the first, not the second, not the third…how much money a couch potato person will spend before having to drive to a dealership?
What if you have to trade-in your car, what do you do then? Usually this is where car dealers make most of their money and new car buyers have most of their headaches and disappointments…
We are constantly complaining that our youth is getting too much attached to communicating over technology and not having enough face-to-face “negotiation” and “communication” so this should make it even worse.
I dread the Peapod and Tred types of business; I would like to see more people going out, establishing relationships, making new acquaintances and enjoying being with people instead of machines.
Wow Walney – why don’t you tell me how you really feel? : )
I think you are partly right that this does not fix the entire problem of what people dread about buying new cars, but I don’t think it’s intended to. It’s really a service that is supposed to benefit both buyer and dealer; as Justin said, a win-win. Nowadays most people get their information online so they pretty much have their options narrowed down to one or a few choices. If they had no idea what car they wanted, they wouldn’t start randomly asking Tred to bring cars to their house (though I might try it with a new Ferrari if the service gets to Chicago!).
I also had to say that your last comment was…interesting. I don’t know if you’ve purchased a car at a dealership, but the terms “establishing relationships,” “new acquaintances,” and especially “enjoying being with people” have not been associated with car dealerships in probably 50 years or more! Also, in reference to “being with people instead of machines”…you do realize that a car dealership is a place filled with machines, where you would go out to establish a relationship with a new machine that you will hopefully enjoy being with! The people are just there for your money.
I realize we live in a world where for the right price, we could have anything we want brought to us without leaving the front step. However, I think this is taking it a bit far. I would assume this service would be great for high end cars but I don’t think that someone who is willing to buy a saturn would want to spend 20 bucks to have someone bring it to their home for a test drive. Also, I have never had a bad experience at a car dealership and more so enjoy the opportunity to negotiate. However, I do a great deal of research before making a decision of which cars to go test drive and usually have it narrowed down to 2 in particular. I think I have turned negotiating into an art so going to the dealership has always been a pleasant and mostly rewarding experience for me. Therefore, I would assume I will not be utilizing this service.
Great post. I like it. Thanks for sharing with us.