Is this the future of car shopping?
Tred today is taking the wraps off a new service in the Seattle area, which allows car shoppers to test drive a variety of vehicles — everything from Hondas to Jeeps to BMWs — at their homes or offices for just $19 per car.
The six-person company, a TechStars Seattle grad that’s backed by Maveron; former General Motors CEO Rick Wagoner; angel investor Chris Sacca and others, has altered its business model and messaging since the initial pitch at TechStars Demo Day when CEO Grant Feek declared that consumers would never have to set foot in a dealership again.
That’s not entirely how Tred is positioning itself now. And Feek is working hard to insert himself in the middle of the decades-old process of buying a car off the lot, trying to play nice as matchmaker in the often contentious relationship between car shoppers and auto dealers.
Will Feek’s plan work? The jury is still out. Our initial attempts to test the Tred service, when it was still in private beta a few days ago, didn’t pan out.
However, Feek believes they’ve worked out the kinks, and now anyone who wants to reserve a test drive certainly can. Tred asks for insurance information and a driver’s license, and it does reserve the right to refuse service to anyone. (He said they are working on systems that could identify people with criminal backgrounds; poor credit histories and other potential red flags).
At this point, Feek has been happy with the results. The company showed an 80 percent conversion rate during initial tests, meaning that the vast majority of people who test drove a car (or multiple cars) through Tred ended up making a purchase. (Feek declined to say how many test drives they’ve conducted, only putting the number at less than 100).
The home-based test drives last about an hour, and they are attended by a Tred representative rather than a dealer. (In fact, Tred does not provide the name of the car shopper to the dealer until they are ready to buy). Car shoppers are encouraged to do more than kick the tires, installing a car seat; parking in a garage or loading golf clubs in the trunk for example. The test drives themselves cover a 15-mile route of the car shopper’s choice.
Unlike other lead generation services, Tred does not take a straight commission on car sales which are generated through the service. It makes money through the $19 test drive fee charged to the consumer, plus a fee that the dealer pays. Feek said the fees with dealers are still being worked out, and that it is “unclear at this point” whether that price would be higher than the $19 that consumers pay.
“Nobody is making a percentage of anything,” said Feek. “We really want to align incentives, such that everyone is making money if we keep people happy.” Tred will reward its staffers based on customer service reviews, similar to how Redfin compensates its real estate agents.
That system may leave Tred very little margin to maneuver, especially since it must employ representatives to coordinate pick up and delivery of cars as well as conduct the hour-long test drive.
Feek estimates that his four on-staff auto experts can conduct about two test drives per day, meaning that to start Tred can handle about 50 test drives per week.
Asked what would happen if initial demand exceeded that number, Feek said that would be a problem “we’d welcome with open arms.” He also noted that they can tinker with the $19 price point, potentially raising that if demand rises, or putting in more stringent controls on credit histories.
At this point, Tred is working with between 20 and 30 dealers in the Seattle area, including Michael’s Toyota of Bellevue, Ford of Kirkland, Walker’s Renton Subaru and Honda Auto Center of Bellevue. The company plans to expand the ranks of its dealer partners in the coming months, and it is also looking to move into other cities, eyeing areas such as LA and New York.
Of course, there’s nothing stopping a dealer from offering in-home test drives as well, though few do at this point. In fact, shoppers spend an average of 11.5 hours at a dealership when buying a new car, according to Polk/Autotrader.
“We get a lot of inbound from dealers and manufacturers asking about our platform, and they always preface the conversation with: ‘Hey, just so you know, we are kind of doing this already….’ I always laugh at them, and tell them exactly what we are doing, and by the end of the conversation, they are usually: ‘Hey, let’s partner.'”
Feek added that Tred’s approach is really different than the dealers, which are singularly focused on selling specific models on their lots. That’s part of the reason why the Tred representatives don’t focus on the price of the car in their interactions with customers, though they do guarantee competitive pricing.
“We don’t want to sell you a car. We want to make you happy, and we want to help you make the right decision for your family in the context of you,” he says. “And I think it is a very powerful difference.”
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