TrueCar helps Sam’s Club get into the car business
Sam’s Club, the warehouse division of Walmart (WMT), has teamed up with TrueCar (TRUE) to offer members access to a new auto-buying program similar to rival Costco Wholesale Corp.
The auto-buying program will offer Sam’s Club members guaranteed savings off the manufacturer’s suggested retail price for new cars as well as discounts on used vehicles. Sam’s Club members will have access to more than 10,000 TrueCar certified dealers nationwide. The company says this is more than three times the nearest competitor in the warehouse club channel—a not-so-subtle jab at rival Costco (COST), which works with about 3,000 dealers.
And like Costco, Sam’s Club’s auto-buying program is not meant to be a profit-driver. Instead, it’s considered a “value-added” service, according to company spokeswoman Tara Raddohl. In other words, this is designed to capture and retain members. Sam’s Club doesn’t share how many member holders it has through its 653 club locations in the U.S. and Puerto Rico.
Costco’s auto program is operated by Affinity Auto Group, an auto-buying service that has been managing the program since its inception in 1989.
Costco doesn’t actually the sell the cars, nor does it make money on the sales. Instead it uses its tremendous purchasing power to secure exclusive prearranged savings for its 45 million members. The program has taken off in recent years. Last year alone, Costco members purchased nearly 400,000 vehicles through the program, according to the company. AutoNation, the largest automotive retailer in the U.S., sold nearly 533,000 new and used vehicles in 2014, according to its annual earnings report.
If the Sam’s Club auto-buying program has similar success, it could provide a much-needed boost to TrueCar, which has suffered from a spate of bad news, including weak earnings, the loss of its biggest client, and the departure of its founder and CEO.
The online car shopping service, which makes money by charging a dealer for each successful new-car transaction and for each used car sold through the service, reported a $14.7 million loss in the second quarter, or 18 cents a share, compared with a $15 million loss, or 22 cents a share, a year earlier. The company went public in 2014.
During the second-quarter earnings call, chairman, CEO and founder Scott Painter announced he was stepping down. In July, AutoNation cut ties with TrueCar after a contract dispute over sharing consumer data.
Despite its bumpy year, TrueCar is still growing. The company reported it grew 42% to 6 million unique visitors and that its certified dealers transacted a total of 190,358 vehicles on the platform, a quarterly record. New car transactions represented 4% of total U.S. retail sales in the quarter, according to TrueCar CFO Mike Guthrie.