"More information is available more freely than yesterday’s car shoppers could ever have imagined. Consumers still go to dealerships, but less to shop and more to buy"

BY JEREMY ANWYL. 

NADA used the occasion of its annual convention to release the results of a study it commissioned to evaluate the ROI of facility upgrades and standards compliance programs often required by the various automakers.  Mandated facility upgrades are an old issue, but it is one that seems to have become more contentious recently. Whether or not upgrades pay off is an interesting question, but my view is that the current ruckus is really a smokescreen for deeper issues.

It has been several decades since most vehicles were sold by dealers who had the bulk of their net worth tied up in a single franchise. While manufacturers have generally resisted this trend, the norm today is for dealers to own several stores. Public ownership has even become accepted despite intense opposition to the concept when it was originally proposed. In their dealings with manufacturers, dealers haven’t amassed the clout of a Wal-Mart as automakers feared they would, but the balance of power has definitely shifted.

This brings me to issue Nº 1. Many of the manufacturer’s facility upgrade programs are launched under the guise of brand standards. The question is: Whose brand?  Well-established brands represent a set of signals to consumers about what to expect. The golden arches, for example, represent a set of signals about the menu, cleanliness and the in-restaurant experience. McDonald’s goes to great lengths to ensure that these attributes are delivered consistently. 

But in the auto industry, manufacturers have limited control over retail processes. In theory, it would create value for consumers if the experience at all of a franchisee’s dealerships were the same. But the reality is that what consumers will encounter at one store can be — and usually is — very different from the experience at another dealership. So what exactly are brand standards signaling?  And what if the dealership chain is sophisticated enough to be working on its own brand?  (Its own set of signals.)  Doesn’t this create an obvious conflict?

The issue of ambiguity around who “owns” the retail brand has been brewing for some time. If I had to make a bet, it would be that we will end up with dealership brands that are independent from manufacturers’ brands. But this won’t happen without a struggle.

This brings me to issue Nº 2. Think back again to the time of single point dealers, whose fortunes were tied closely to a single manufacturer. Back then, dealerships were a key source of information for consumers as they started thinking about a vehicle purchase. Consumers would venture out, visit dealerships, ask questions and collect brochures. Once back home, they would lay them out across the kitchen table to plow through the data.

The internet has transformed this aspect of car shopping. More information is available more freely than yesterday’s car shoppers could ever have imagined.  Consumers still go to dealerships, but less to shop and more to buy. The old sales process has been broken down by consumers and is today much more self-directed.

Yet when manufacturers think about retail facilities, they haven’t absorbed the implications associated with the way consumers shop today. In fact, the last real start-from-the-ground-up rethink of the sales process and facilities is when Lexus and Infiniti launched. I am talking the late ‘80s.

What are consumer expectations around the sales process today? What does this mean in terms of facilities?  For dealership training?  And retail satisfaction surveys? 

I expect that there is agreement on the basics. Facilities should be well-located. They should be clean and look professional. 

Beyond this, there are plenty of areas for debate between manufacturers and dealers. Fuzziness around the real issues just slows progress. Manufacturers in other industries do just fine when represented by strong, well-capitalized, well-branded retailers.  It could work in our industry as well.