Here’s Why Walmart Is Looking To Provide Car Buying Services
Reports suggest that WalMart (NYSE:WMT) is looking to partner with dealership groups to set up kiosks in its supercenters which will assist customers in buying cars. CarSaver, an online auto retail platform, will set up these kiosks in about 25 Walmart Supercenters. CarSaver’s digital platform allows car shoppers to select, finance and insure a vehicle through its website or on a touch screen kiosk. Staffers at CarSaver centers set up inside Walmart stores will explain the car buying program to Wal-Mart customers. A pilot version of this program was launched in April last year and nearly 80% of appointments scheduled through this program led to a sale, indicating that it was fairly successful. This program gives CarSaver a ready market in the form of Walmart customers and for the latter it is a good utilization of its retail space. While it is still not clear if Walmart will extend this program to all its 3,500 supercenters, it is a huge potential opportunity for the company. In 2015, Costco sold more than 465,000 vehicles through partnerships with auto dealers under its Costco Auto Program. This is double the number of cars sold by Costco five years ago and ranks the company along with top dealerships such as AutoNation and the Penske Automotive Group. Costco’s program is a big success as customers are looking for cheaper and easier ways to buy cars. Costco uses its bargaining power to negotiate high discounts for its members.
It is expected that Walmart will be able to negotiate similar discounts and provide a convenient and cheaper option for its customers to buy automobiles. Its current partnership appears to be an arrangement where Car Saver will use Walmart’s space to set up kiosks where consumers can be explained the car buying process though Car Saver’s platform. With this arrangement, Walmart can gain from optimal utilization of its retail space, increasing the revenue per square foot for the company.
A higher revenue per square foot can impact Walmart’s valuation positively.
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While Walmart is not directly selling cars, given Costco’s success in its Auto program , this is a huge potential opportunity for the company to build customer goodwill and repeat business. If Walmart can leverage its volumes and negotiate higher discounts for its customers, automobile commissions can become a long term revenue driver for the company.
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