Local Brand Names Drive AutoNation’s New Strategy
AutoNation has shown that it isn’t afraid to make a U-turn if it finds itself heading in the wrong direction.
The Fort Lauderdale, Fla.-based auto retailing giant, which owns eight dealerships in the San Fernando Valley, shuttered its unprofitable used-car operation late last year.
And recently, the company switched from a planned strategy of promoting the AutoNation brand nationally. Instead, the company says it’s going to stick with local brand names that successful dealers have established over the years.
AutoNation, which owns 412 franchises at 295 dealerships in 19 states, has quickly realized that “the retail automotive business is still very much a local business,” corporate spokesman Oscar Suris said.
According to Suris and Jerry Heuer, senior district vice president who heads Southern California operations, AutoNation’s new strategy won’t mean any changes in the brand names of its Valley stores.
The company, which places a big emphasis on online sales through AutoNationDirect.com, last summer bought the five Terry York dealerships in Valencia, along with Magic Ford and Magic Lincoln Mercury in Valencia, as well as York’s Encino Land Rover location.
AutoNation changed the name from “York” to “Valencia” on the dealerships shortly after acquiring the operations last summer, a move that “departed a little bit” from what the company has done in other parts of the country, Heuer said.
“We found that there was a very strong neighborhood identity with the Valencia name, so we decided to change the stores’ names right away, which is unusual,” Heuer said.
The company previously had planned to promote the AutoNation brand nationally for its dealerships and to promote AutoNationDirect.com for its Internet sales. Now, according to Suris, it will stick with AutoNationDirect for online sales but won’t push AutoNation as a brand name for the brick-and-mortar dealerships.
AutoNation was smart to recognize its mistakes so quickly and to be willing to change directions, said Peter Hoffman, president of the Greater Los Angeles New Car Dealers Assn.
AutoNation closed its five Southland used-car stores, none of them in the Valley, in December, when the company decided to get out of the used-car business.
Of AutoNation’s recent decision to emphasize local brands, Hoffman said: “I think they’re correct that auto retailing is a local business. I think the most you can do in brand-naming is to establish brands on a regional or subregional basis. Nobody buying a car in one part of the country cares whether the dealership they’re doing business with is also a brand in some other part of the country.”
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The new marketing strategy also makes a lot of sense to John Clor, a former AutoWeek editor and now Detroit editor for Santa Monica-based Edmunds.com, which provides online information to aid consumers in buying cars.
“It’s expensive to try to establish a brand name all across the nation, and in many cases the local dealers have already established a very valuable brand name, so why would you want to change it?” Clor said. “A lot of money has already been spent to establish these local brands.”
The San Fernando Valley operations are part of AutoNation’s 49-dealership, 67-franchise Southern California district. The company is No. 83 on the Fortune 100 list with more than $16 billion in annual revenue and is the country’s largest online auto retailer, according to AutoNation announcements.
AutoNation does not disclose sales figures for individual dealerships, but Heuer said monthly sales totals at the company’s Valley dealerships are equaling or surpassing figures for the comparable months last year.
Heuer estimates that Valley sales will account for 15,000 to 20,000 of the approximately 100,000 vehicle sales the company projects for its Southern California dealerships this year.
AutoNation is counting on a growing percentage of its sales in the future to come from e-commerce buyers, Heuer said.
But the growth in Internet sales won’t take away from traditional sales, Heuer said. He said Internet buyers “will travel farther to buy a car,” so that by emphasizing online sales in addition to dealership sales, each of AutoNation’s stores will be able to attract buyers from a wider geographic area.
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Suris explained that more than 90% of the AutoNation dealerships nationwide have at least one person designated as an Internet sales specialist. He said the company’s training program ensures a uniform approach to online shopping in all of its dealerships.
Aside from what AutoNation contends is a superior system of online selling, the company believes its owning a group of dealerships can produce economies of scale that help cut costs, according to Heuer, but he said individual dealerships can still compete against the mega-dealers.
“We have some advantages in that we can negotiate combined rates for advertising, we can purchase oil and parts and employee benefits more efficiently by spreading the cost over many dealerships, and we believe we can develop, internally, a career path and a training model that offer greater opportunities to our people,” Heuer said.
Employees of a one-location dealership have to wait for someone to retire or quit before they can move up, but AutoNation can promote from one store to another, Heuer said.
However, Heuer added, well-run individual dealerships can still compete if they’re operated efficiently.
Hoffman, the dealer association president, said: “The economies of scale are not so dramatic that a 10-dealer group can walk all over a one-store operation. The biggest advantage of having multiple franchises is that you’re not totally dependent on one manufacturer.”
“It’s not pure size that’s going to win out,” Heuer said. “This is a business of people, and it’s good people that make it work. If we can acquire the right dealerships with the right management in place, we will succeed. Others in the business have just as bright a future as us if they do the same.”
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AutoNation “has stirred up the market to make it more competitive,” Heuer said. That competition is good for consumers, he said, because ultimately it drives prices lower.
Editor Clor of Edmunds.com challenged whether AutoNation’s online shopping system is better than anyone else’s.
But he said the combination of what AutoNation is doing with its online sales and what companies like Edmunds are doing in providing comparative data for car buyers “may lead the country farther and farther toward no-haggle pricing.”
“We may be heading toward the no-dicker sticker because the Internet provides so much information for consumers, but it will take awhile because people are slow to change,” he said.
Clor said there’s no clear evidence yet that the megaspore is a superior mode of business to the independent owner-operator, or vice versa.
“You could make a compelling argument for either side,” he said.
