468 Retail and Channel Management Blog

Sunday, March 12, 2017

Walmart is Selling Cars!

Sorry about the click-bait title, but it is not exactly what Walmart is doing. What Walmart is actually doing is leasing space in some Walmart locations to another company called CarSaver. Essentially, Walmart is selling cars as much as they are selling McDonald’s.

CarSaver themselves do not own cars either. They have a database that connects customers with nearby dealerships with the lowest price. CarSaver then gets a reference fee from the dealership and all Walmart gets is a rent cheque.

CarSaver has proven to be highly successful in its trial run. According to Forbes, CarSaver’s simple kiosk booth was able to convert 80% of the appointments booked into a sale at the dealership.


This success rate only adds value to Walmart. Instead of having dead zones like their knock-off Build-a-Bear stores, they will be able to increase their revenue per square foot with CarSaver.


I think it is surprising that Walmart has opted for another company to take on such a lucrative business instead of doing it on their own when they have means to do it, but it does make sense:

1.   The idea of letting a third party be responsible for adding to their product variety can be attributed to honouring their retail value proposition focused on price. Walmart has promised their customers low prices no matter the product. The issue with extending that promise to vehicle sales is not feasible based on the auto industry and their reluctance to change their pricing when their current business model continues to serve them well. But at the very least, they are still bringing in customers by offering more variety assortment… kind of.

2.    The purchase and sale of a vehicle require a high amount of customer engagement. Can you imagine asking one of the completely disengaged Walmart employees for help in buying a commitment you may be stuck with for ten years?! To be fair, this is not in their pay grade. The offerings of Walmart themselves is just not suitable for selling cars, they need someone else to do this.

3.   The environment of Walmart does not coincide well with the environment needed to purchase a luxury good, such as a vehicle. The threshold experience will be critical. In order for people to want to buy a vehicle at Walmart is to let prospective CarSaver customers know that they are in a different store and that they can spend some time to invest in purchasing their dream car. Ideally, CarSaver kiosks will look a little something like this.




I think this new venture Walmart has taken on is a smart decision. Because of Walmart's current retail value proposition, their customer engagement offering and environment, taking on the auto industry alone may not be the smartest decision. Now customers can finally just go to one place to pick their milk, eggs, bread and a Hyundai Elantra!

References:
http://www.businessinsider.com/walmart-dives-into-the-car-business-2017-1
https://www.carsaver.com/en/how-it-works
https://www.forbes.com/sites/greatspeculations/2017/01/31/walmart-is-looking-to-provide-car-buying-services/#17ef9ad5176f
http://www.walmartcanada.ca/our-story/our-commitment
https://www.yelp.ca/biz_photos/walmart-edmonton-13?select=RT7jhUkQr6DdeQBN-rompw

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