THE STRUGGLING AUTO BUSINESS : THE DEALERS : Revolution May Be Starting in the Way Cars Are Sold : * Retailing: One owner fired all his salespeople and set fixed sticker prices. The goal of a number of new approaches is to make buying hassle-free.
Throughout the 1980s, while the auto industry concentrated on learning how to design and build better cars, the retail end of the business remained virtually unchanged.
But the advances of the last decade have led to sharply increased competition in the marketing sphere that is forcing car dealers and the manufacturers themselves to fundamentally rethink the way cars are bought and sold.
One dealer fired his sales staff and put fixed sticker prices on all his cars. Another plays games with his salespeople designed to improve their attitude toward customers. Others offer unlimited free car washes. And an increasing number of dealers are massing in auto malls, where they can cut costs and consumers can take their pick of myriad brands at once.
Infiniti, Nissan’s luxury car division, requires its dealers to build facilities to architectural specifications designed to enhance customer comfort. General Motors’ Saturn Corp. has sought to eliminate rivalry between its dealers, encouraging them to focus on serving the customer and outselling competing brands.
The explosion in the quality and number of vehicles aimed at the U.S. market--there are now about 300 models of cars and 200 types of trucks sold in the United States--has created a buyer’s market where the way customers are treated by dealers can determine which car they buy and which dealerships survive.
“We are seeing a revolution in auto retailing,” says J. Ferron, a senior partner at J. D. Power and Associates, an automotive consulting firm in Agoura Hills. “The 1990s are the decade of distribution. Cars are going to be sold in different ways than anybody anticipates now.”
Taking his cue from Saturn, which set up a “no dickering” policy when its first models debuted in late 1990, Worcester, Mass., Honda dealer Barry Lundgren has set fixed prices on his cars to see if that will draw customers.
“The biggest thing customers hate about buying cars is the negotiation,” reasons Lundgren. “So we’ll get rid of it and see what happens.”
George Fischell, general manager of Swanson Chrysler-Plymouth in St. Petersburg, Fla., took the one-price theme a step further: He fired all his salespeople.
“It’s the greatest thing since Wheaties,” says Fischell, who sold his entire inventory a week after he jettisoned his nine-member sales staff in early January.
About 20 dealers from across the country have checked out Fischell’s novel setup. He predicts that a third of the nation’s car franchises will eliminate their sales staffs by the end of this year.
Taming overeager salespeople is nearly a universal priority among dealers, judging from packed seminars on the subject at the National Automobile Dealers Assn.’s annual convention here earlier this week.
“Let’s face it,” says Dick Young, one of the 16,000 car dealers. “They think we’re Mickey Mouse, flimflam men, smoke and mirrors.”
But Fischell’s drastic solution isn’t for everyone.
John Campbell, who runs a string of five franchises in the Los Angeles area, uses trust games and other training to help build a company culture based on teamwork. Campbell has reduced his turnover rate to 40% in a business where annual turnover rates of 100% and up are the norm. “People who have an ability to negotiate are less disciplined and less organized--just what the customer doesn’t want to see in a salesperson,” Campbell says. “With Saturn, we are attracting a radically different type of individual.”
Even more radical for the nearly exclusively male car business is the increasing recruitment of women--not to drape themselves suggestively on the hoods of the products but to sell them.
“They have more empathy, better listening skills,” says Peter Makrias, general manager of an Oakland, Ill., Chrysler-Jeep dealership.
In the current economic climate, selling a car isn’t worth much to the dealer unless he can draw the customer back to have it serviced. Price wars and low sales volumes made 1990 and 1991 the first time in the history of the business that the majority of dealers lost money on new-car sales. The parts and service department accounted for 85% of the average dealer’s profit.
“The glitz and glitter of new-car sales is an illusion,” says Mike Miller, who owns a Culver City Toyota dealership and Mitsubishi, Nissan and Infiniti franchises in Van Nuys. “Our profit margins are just too small. We can’t survive unless we have repeat customers.”
Miller, who has tried sending cookies and thank-you notes to customers, plans to install car washes. The hope is that the prospect of a free wash will bring customers back to have their cars serviced. If that doesn’t work, he’s thinking of offering to pick up and return vehicles that customers want serviced.
“The insurance might be complicated, but if that’s what makes it more convenient for the consumer, that’s what we have to do,” Miller says.
To car buyers skeptical that a breed of businessmen many have long considered the lowest of the low has converted, J. D. Power’s Ferron notes that the dealers’ eagerness to please is propelled by hard economic realities.
Ferron predicts that by the year 2000 about half the nation’s dealers will have been driven out of business by the intense competition, leaving about 23,000 outlets controlled by 8,000 owners.
Those that survive, Ferron says, will be the ones offering the most to the consumer. He points to the Thousand Oaks Auto Mall--where 38 franchises owned by nine dealers are grouped together in what amounts to a permanent auto show--as one wave of the future.
It’s too soon to tell which new approaches will prevail with consumers. But some dealers wonder whether customers can cope with a car-buying experience that is hassle-free.
“With some people, you could offer them a car at a thousand dollars below cost and they still don’t feel they’ve got a good deal because there was no arguing,” says Lundgren, the Massachusetts Honda dealer.
“There’s people out there that won’t be happy buying a car unless everybody ends up with a headache.”
