Ask a car salesman anything...anything at all (Vol. 2).
Discussion
jamoor said:
The kelloggs cereal needs to be a competitive offering in the first place, we have seen how Infiniti failed in Europe. If the value offered by the kelloggs cereal is acceptable to enough people in the market then people will be interested in buying it. If kelloggs tripled their cereal prices overnight then their market share would diminish to the competition.
The direct sales model means they may invest the money they would in "volume sales bonuses" in lower pricing to attract customers away from Nestle cereals.
Competition between Kelloggs, Nestle, Jordans etc means they will, if market failure isn't occurring, lead to lower prices.
The lack of the retailer profit element means the prices of cars should be less as the manufacturers can compete down to the wholesale price of the cereal rather than the retailer looking to compete down to the the wholesale cereal price + retailers overheads + retailers profit margin.
This isn't a revolutionary business model, in fact it has just simplified what already exists.
In theory sound, in practice not. Car prices the pst 3/4 years have skyrocketed. An MX5 has gone from around £20k to £25k. Golfs have gone up, Megan RS280 gone from £36k last year to £30k this year. Sales (excluding CV19 shutdown) have not slowed down at all. This is driven by finance models disguising price rises.The direct sales model means they may invest the money they would in "volume sales bonuses" in lower pricing to attract customers away from Nestle cereals.
Competition between Kelloggs, Nestle, Jordans etc means they will, if market failure isn't occurring, lead to lower prices.
The lack of the retailer profit element means the prices of cars should be less as the manufacturers can compete down to the wholesale price of the cereal rather than the retailer looking to compete down to the the wholesale cereal price + retailers overheads + retailers profit margin.
This isn't a revolutionary business model, in fact it has just simplified what already exists.
Ive worked in many businesses where we have gone D2C instead of retailers and every time the extra cash has gone into the business, not back to the customer. Take the Kelloggs example, at best they would hold the price. That banks the saving on retailer terms (generally 10-20%) and pump the margin they would make (roughly 40-50 points of margin) alongside manufacturer margin. They have no incentive to lower the price since customers want that brand, and they cant get it anywhere else. This happens even now in a different method. Take for example Henry vacuums. 5 years ago you could pick one up for £90. Now the cheapest you will get them is £105 because Numatic raise the price every year since customers cant get the same product elsewhere. And sales continue to rise YoY
ToastMan76 said:
In theory sound, in practice not. Car prices the pst 3/4 years have skyrocketed. An MX5 has gone from around £20k to £25k. Golfs have gone up, Megan RS280 gone from £36k last year to £30k this year. Sales (excluding CV19 shutdown) have not slowed down at all. This is driven by finance models disguising price rises.
Ive worked in many businesses where we have gone D2C instead of retailers and every time the extra cash has gone into the business, not back to the customer. Take the Kelloggs example, at best they would hold the price. That banks the saving on retailer terms (generally 10-20%) and pump the margin they would make (roughly 40-50 points of margin) alongside manufacturer margin. They have no incentive to lower the price since customers want that brand, and they cant get it anywhere else. This happens even now in a different method. Take for example Henry vacuums. 5 years ago you could pick one up for £90. Now the cheapest you will get them is £105 because Numatic raise the price every year since customers cant get the same product elsewhere. And sales continue to rise YoY
That's a great post, but not what jamoor wants to hear. Ive worked in many businesses where we have gone D2C instead of retailers and every time the extra cash has gone into the business, not back to the customer. Take the Kelloggs example, at best they would hold the price. That banks the saving on retailer terms (generally 10-20%) and pump the margin they would make (roughly 40-50 points of margin) alongside manufacturer margin. They have no incentive to lower the price since customers want that brand, and they cant get it anywhere else. This happens even now in a different method. Take for example Henry vacuums. 5 years ago you could pick one up for £90. Now the cheapest you will get them is £105 because Numatic raise the price every year since customers cant get the same product elsewhere. And sales continue to rise YoY
I can only suspect he overpaid for a car once, or his sister was left up the duff by a car salesman or something. He has that Apple-acolyte approach to anything Tesla does, and everything else is wrong. Gets a bit boring TBH, and I don't even work in the industry!
DanL said:
This already happens - a Golf is more expensive than a Focus, etc. People don’t just buy a 5 door car of a certain size - they try a few, then decide they want the car from brand X. When all of brand X’s cars are sold by the same entity, the price is the price.
This is the argument they’re making.
Edit: let’s do this with corn flakes. You want Kellogg’s cornflakes. You’ve tried a few, but Kellogg’s flakes are the ones for you. When you have Sainsbury’s, Tesco, Waitrose, etc. all selling them, this creates a market opportunity for competition.
I think you believe that if they were sold direct by Kellogg then they’d be cheaper, as you’d be buying at wholesale rather than retail? I think this is incorrect, for two reasons:
I make you correct. I am a plumber, and if I want to buy (as an example) a tap from a leading British manufacturer it is far cheaper to buy from one of their distributors than directly from the manufacturer. If I buy it from the distributor, Lo-and-behold it is mailed to me directly from the manufacturer. I have asked the manufacturer why they can't give me a trade price, but they won't budge, even though (presumably) the distributor is being paid something. I could understand if the distributor was buying 100's or 1000's of the item, paying for it and keeping it in their own warehouse, but when the distributor is just passing on the money and not even holding stock or mailing the goods it makes little sense to me.This is the argument they’re making.
Edit: let’s do this with corn flakes. You want Kellogg’s cornflakes. You’ve tried a few, but Kellogg’s flakes are the ones for you. When you have Sainsbury’s, Tesco, Waitrose, etc. all selling them, this creates a market opportunity for competition.
I think you believe that if they were sold direct by Kellogg then they’d be cheaper, as you’d be buying at wholesale rather than retail? I think this is incorrect, for two reasons:
- direct sale would mean that Kellogg would increase the wholesale cost to match retail.
- it ignores the concept of loss leaders.
Edited by DanL on Saturday 14th November 17:13
ToastMan76 said:
In theory sound, in practice not. Car prices the pst 3/4 years have skyrocketed. An MX5 has gone from around £20k to £25k. Golfs have gone up, Megan RS280 gone from £36k last year to £30k this year. Sales (excluding CV19 shutdown) have not slowed down at all. This is driven by finance models disguising price rises.
Ive worked in many businesses where we have gone D2C instead of retailers and every time the extra cash has gone into the business, not back to the customer. Take the Kelloggs example, at best they would hold the price. That banks the saving on retailer terms (generally 10-20%) and pump the margin they would make (roughly 40-50 points of margin) alongside manufacturer margin. They have no incentive to lower the price since customers want that brand, and they cant get it anywhere else. This happens even now in a different method. Take for example Henry vacuums. 5 years ago you could pick one up for £90. Now the cheapest you will get them is £105 because Numatic raise the price every year since customers cant get the same product elsewhere. And sales continue to rise YoY
Serious question.Ive worked in many businesses where we have gone D2C instead of retailers and every time the extra cash has gone into the business, not back to the customer. Take the Kelloggs example, at best they would hold the price. That banks the saving on retailer terms (generally 10-20%) and pump the margin they would make (roughly 40-50 points of margin) alongside manufacturer margin. They have no incentive to lower the price since customers want that brand, and they cant get it anywhere else. This happens even now in a different method. Take for example Henry vacuums. 5 years ago you could pick one up for £90. Now the cheapest you will get them is £105 because Numatic raise the price every year since customers cant get the same product elsewhere. And sales continue to rise YoY
Do you know what inflation is?
The numatic has gone up in line with inflation...
If Kellogg’s has such a powerful brand that they can increase the prices, would they not increase wholesale pricing to retailers?
Edited by jamoor on Saturday 14th November 19:23
jamoor said:
BrabusMog said:
Sales channels will always exist for most products, it’s more efficient for the manufacturers.
I think IKEA would disagree on that one!I know some are franchisees but most aren’t.
JPJPJP said:
Car dealers and estate agents
Both should have been disintermediated by the internet by many theories
But so far, despite rightmove / autotrader / zoopla / webuyanycar etc, both car dealers and estate agents continue to get by
You can addBoth should have been disintermediated by the internet by many theories
But so far, despite rightmove / autotrader / zoopla / webuyanycar etc, both car dealers and estate agents continue to get by
eBay
Deliveroo
Etsy
Amazon
To the list
The internet actually gave rise to more middlemen imo
jamoor said:
Serious question.
Do you know what inflation is?
The numatic has gone up in line with inflation...
If Kellogg’s has such a powerful brand that they can increase the prices, would they not increase wholesale pricing to retailers?
Without derailing the thread, yes I know what inflation is. Its also not an accurate measure of prices. The price of steel and plastic this year is cheaper than last year, the price of labour in the UK is static. Saying ‘oh its inflation’ is incredibly naive, and just tells me you dont know what youre talking about.Do you know what inflation is?
The numatic has gone up in line with inflation...
If Kellogg’s has such a powerful brand that they can increase the prices, would they not increase wholesale pricing to retailers?
Edited by jamoor on Saturday 14th November 19:23
ToastMan76 said:
jamoor said:
Serious question.
Do you know what inflation is?
The numatic has gone up in line with inflation...
If Kellogg’s has such a powerful brand that they can increase the prices, would they not increase wholesale pricing to retailers?
Without derailing the thread, yes I know what inflation is. Its also not an accurate measure of prices. The price of steel and plastic this year is cheaper than last year, the price of labour in the UK is static. Saying ‘oh its inflation’ is incredibly naive, and just tells me you dont know what youre talking about.Do you know what inflation is?
The numatic has gone up in line with inflation...
If Kellogg’s has such a powerful brand that they can increase the prices, would they not increase wholesale pricing to retailers?
Edited by jamoor on Saturday 14th November 19:23
And when did employers have to begin contributing to employees pension schemes?
I would understand if it was a piece of technology that was very expensive and should fall with the passage of time but the things that Numatic build aren't that.
I start to think you don't know what you're talking about.
jamoor said:
If Kellogg’s has such a powerful brand that they can increase the prices, would they not increase wholesale pricing to retailers?
That’s not what I said. People are demonstrably prepared to pay £x for a product from a retailer. £x includes retailer margin. If the manufacturer decided to sell direct, they would most often sell for £x because:- it’s more profit for them, as they already know people will pay £x.
- it doesn’t annoy their existing retailers by undercutting them.
DanL said:
jamoor said:
If Kellogg’s has such a powerful brand that they can increase the prices, would they not increase wholesale pricing to retailers?
That’s not what I said. People are demonstrably prepared to pay £x for a product from a retailer. £x includes retailer margin. If the manufacturer decided to sell direct, they would most often sell for £x because:- it’s more profit for them, as they already know people will pay £x.
- it doesn’t annoy their existing retailers by undercutting them.
If more manufacturers enter the market from China - Nio and Xpeng and decide to sell direct then it will cause problems.
Imagine if a new Brand called Shmelloggs came into the market with good quality cereals if not better and sold them for £x-1 direct to retail.
Kelloggs is in a predicament.
jamoor said:
Ah yes I understand now.
If more manufacturers enter the market from China - Nio and Xpeng and decide to sell direct then it will cause problems.
Imagine if a new Brand called Shmelloggs came into the market with good quality cereals if not better and sold them for £x-1 direct to retail.
Kelloggs is in a predicament.
Well, they’d sue Shmelloggs into the ground for copyright infringement I would imagine. If more manufacturers enter the market from China - Nio and Xpeng and decide to sell direct then it will cause problems.
Imagine if a new Brand called Shmelloggs came into the market with good quality cereals if not better and sold them for £x-1 direct to retail.
Kelloggs is in a predicament.
But I take your point as intended - yes, new players can be disruptive, but only if their product is up to snuff. As I said earlier in the thread - people don’t buy the cheapest 5 door car they can find, they drive a few and want a particular make or model.To stick with the general concept of goods, rather than cars - at the lower end of the market it is likely to always be a price driven decision. So, firm A offers a basic product that does the job well enough for less than firm B, they’re likely to steal some of firm B’s sales.
Moving away from the bottom tier and it’s not just price that drives buying decisions. People will even pay more for something because it’s expensive (Rolex being a good example here). Once you’re in this area of the market, Shmelloggs may even sell fewer units than they’d anticipated because they’re seen as cheap, marking the buyers out as cheap themselves and/or because there’s a (possibly unfounded) impression that being cheap means they can’t be as good.
Desirability can be a key driver of sales, and what makes something “desirable” isn’t always logical or driven by a single factor (like cost).
jamoor said:
DanL said:
I don’t think that depreciation has anything to do with the initial margin on a car. Surely it’s purely a factor of what someone’s willing to pay for a thing?
This suggests that the model 3 is very popular, and people are willing to pay to get hold of one quickly. If I were pricing it, I might well think that I could increase the list price as a result...
My thinking was the market determines what it’s worthThis suggests that the model 3 is very popular, and people are willing to pay to get hold of one quickly. If I were pricing it, I might well think that I could increase the list price as a result...
When you buy from Tesla you get a car for 40k. The manufacturer will not sell it cheaper so the market will think that it’s worth 40k
When you buy a car from a dealer for 40k the manufacturer sells it to the dealer for say £35k and the dealer sells it for 40. The market may think the car is worth 35k as that’s how much the manufacturer sells it for and the 5k for the dealer is just overheads.
The numbers above are made up fyi.
It doesn't matter if the dealer margin is 1% or 90%. It doesn't matter if it's a direct sales model or a distributor sales model. It's purely the relationship between supply and demand.
The question is whether there's enough demand at the retail price level to prop up the values. And at the moment, there is. At some point in time, as novelty falls and the size of the parc grows, there won't be that same level of demand, relative to supply of new and used cars, and used values will fall.
bristolracer said:
Boris has announced 2030 as the end of new ICE sales
What changes will this bring?
Less dealerships?
Less choice of cars? Some manufacturers withdrawing from the UK market?
Less workshops/mechanics?
Would mechanics need to pass some sort of test and be licensed to work on EV's?What changes will this bring?
Less dealerships?
Less choice of cars? Some manufacturers withdrawing from the UK market?
Less workshops/mechanics?
A house electrician needs to be licensed due to safety concerns, because if he gets it wrong he could burn a house down. Should the same logic be applied to a car with a 30Kw battery pack comprised of volatile lithium, which has the same, maybe greater potential for disaster?
https://www.businessinsider.com/rich-benoit-mechan...
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