STEERING CUSTOMERS TO DEALERSHIPS

Manufacturer dealer collections, consolidators and Internet buying services: everyone is looking for innovative alternative automotive retail methods. What's next? Buying a car atSears, Kmart or Wal-Mart?

Don't laugh. Customers already can get at least adequate service at Sears and Kmart. They can buy insurance and get their taxes done at Sears. Why not vehicles?

Wal-Mart's Sam's Club is bringing dealers closer to department store retailing with its auto program. Sam's auto program enlists dealers to be (in most cases) exclusive-make dealers that offer discounted, no-haggle prices to club members.

At times dealers are allowed to display vehicles in Sam's Club stores. Sam's Club members are card-carrying customers who get store discounts in exchange for membership dues.

Jerry Fraser, a salesman at Brighton Honda-Mazda in Brighton, MI, which participates in Sam's auto program, says, "I believe you could put a Honda booth in a Sam's Club and people would buy right there. Two customers drove right here from the Sam's Club 15 or 20 minutes away...and they bought."

Many state laws prevent that from occurring.

Dealer Chris Fletcher likes being part of Sam's auto program. His Fletcher-Tate Motors (Ford) is in Little Rock, AR.

"It works well," says Mr. Fletcher. "It lends instant credibility, particularly around here, since Sam's Club and Wal-Mart started here."

He charges Sam's Club members $100 to $500 over invoice, depending on the model the customer picks. "They know they're getting a fair deal up front and that it's backed by Sam's Club."

He says the Sam's Club customers seem to like the no-haggle aspect of the arrangement.

He guesses that about half of his Sam's Club customers would not have come to the dealership if it were not for the Sam's affiliation. Half of the people who come in with a Sam's Club card actually buy cars, Mr. Fletcher reports. "I wish we could do that well with everyone."

Mr. Fraser says prices he presents to Sam's Club members tend to be between 2% and 4% above invoice, depending on the vehicle and its availability.

"(Customers) know they're getting a good deal," he says. "They see exactly where we're making money."

In March, Mr. Fraser sold seven out of nine Sam's Club customers who came in. Overall, he says he delivers between 70% and 80% of the Sam's Club customers. Sam's Club officials say the average Sam's Club dealer closes between 20% and 40% of the deals sent his way.

Mr. Fraser says such sales are usually short and easy.

"These people call and set up appointments, so it breaks the barrier of the meet," he says. "I already know their name, that they shop at Sam's Club and that they don't want to negotiate price."

The Sam's Club auto program began a decade ago as merely dealers who advertised in a Sam's Club member publication. Six years ago, an 800 number was added and dealers had a more formal sign-up process.

"At that point, the program really took off," says William E. Nicholson, vice president of sales & business development for Member Services Inc., which administers Sam's Auto Club.

"Sam's Club really didn't get involved with the setting of prices," says Mr. Nicholson. "It's promoted as a low, no-hassle, no-haggle deal for the Sam's Club members."

Sam's Club, however, does give dealers guidelines, says Mr. Nicholson. Sam's Club says participating dealers should charge its members at least as low a price as they would their best volume customers.

"In fact they should charge them a little bit less, because a person coming in from a credit union has already arranged their own financing," says Mr. Nicholson. "The Sam's Club program doesn't get involved in the back-end profit. Dealers can sell financing, warranty, insurance, etc."

Dealers pay a monthly fee (usually between $500 and $1,000) to be in the program. The fee varies depending on the number of people enrolled in the particular Sam's Club outlet. Several dealers are involved in programs at multiple Sam's Club stores and pay extra.

Sam's Club dealers agree to establish contact people at the dealership to handle the Sam's Club members. They also establish a special price list for club members.

"The Sam's Club member goes into the transaction under Sam's Club's wing," says Mr. Nicholson. "We have 100% complaint resolution if for whatever reason they're dissatisfied with the transaction. We'll step in and get resolution on both sides."

Currently 2,800 dealers are involved in the program and so far at least 100 have been removed for one reason or another, usually because of customer complaints that can't be resolved, says Mr. Nicholson.

"There's always opportunity for more dealers to get into the program," he says. "In a perfect world, we'd have every make of vehicle represented in each Sam's Club."