NADA Questions Need for Widespread Dealership Upgrade Plans

NADA Questions Need for Widespread Dealership Upgrade Plans

“The facility-image decision is often based on subjective factors, such as opinions, pressure and personalities, which is no way to guide such spending,” NADA Chairman Stephen Wade says.

DETROIT – A study is under way to determine if it makes sense for car dealers to remodel their stores to the extent that many auto makers are urging as part of extensive facility-image programs.

The National Automobile Dealers Assn. commissioned the analysis that began two months ago and is expected to be finished by late December, NADA Chairman Stephen Wade says here at a gathering of the Automotive Press Assn.

Even though study results are pending, he and fellow dealers clearly think auto makers are asking too much of them.

“For auto dealers who have been hit hard by the recession, there is a real need for less financial pressure, not more,” Wade says. “That’s what I hear all the time as I travel around the country to meetings of state and metro dealer associations.

“The one issue that comes up time and time again is concern over financial pressures from factory-mandated facility-image programs. This is true in all parts of the country and with all types of dealers, regardless of dealership size or brand. There is a widespread frustration.”

Dealers annually invest billions of dollars in facility upgrades, much of it manufacturer-mandated, he says. “These costs have a significant impact on dealer balance sheets, in many cases severely straining them and in some cases even persuading a dealer to leave the business, rather than commit such large sums.”

Yet, scant evidence exists on whether upgrade programs boost vehicle sales, enhance customer satisfaction or provide a return on investment either to participating dealers or auto makers, Wade says.

“The facility-image decision is often based on subjective factors, such as opinions, pressure and personalities, which is no way to guide such spending,” he says.

Auto analyst Glenn Mercer, who once worked for the CIA, oversees the study. Part of it consists of confidentially interviewing dealers, customers, factory representatives and dealership architects, as well as attorneys, accountants and economists specializing in auto-retailing matters.

“The goal is to move the facilities-investment decision onto a rational, informed and fact-driven footing,” Wade says. “The study’s findings will be of use to dealers and auto makers alike, by moving the debate away from opinion and assertion toward objective facts and data.”

In the meantime, he offers anecdotes about hassles dealers face from auto makers that insist on exacting details, right down to things such as the shade of blue for decorative tiles. “I guess if it is chartreuse or green tile, it doesn’t make it,” Wade says.

Many auto makers want dealers to build from blueprints intended to provide a consistent look, but which Wade calls “a cookie-cutter” approach to design.

He tells of a fellow Utah dealer who constructed a “beautiful” Chevrolet dealership with a hunting-lodge theme, complete with hewn logs. On that building, blue doors, as called for in Chevy’s common-theme dealership look, would clash with the store’s rustic appearance, Wade says.

Clearly, dealers must maintain high standards for their facilities, Wade says. “I don’t believe in selling Hondas out of a converted gas station.”

But, not only is it unfair to ask cash-strapped dealers to invest in major facility programs, buying trends indicate consumers prefer to do most of their car shopping online rather than at the dealerships themselves, says Dale Pollak, founder of vAuto, a provider of inventory-management software.

More and more consumers go to the dealership only to finalize the deal and take delivery of the purchased vehicle, he says in earlier comments.

“Why are we pushing dealers to build bigger and better ‘experiences’ when technology is making it more efficient to buy a vehicle without going to the dealership?” Pollak asks.

But auto makers contend some facility makeovers are long overdue.

General Motors recently outlined its dealership-remodeling plans, showing before-and-after photos of redone stores. Some of them in their original state had been “an embarrassment,” says Don Johnson, vice president-U.S. sales operations.

“The dealers are our everyday face to consumers,” he said at the time. “We need to create a warm and welcoming retail-shopping environment.”

About 460 GM stores in the U.S. will be remodeled by the end of this year, with thousands more scheduled for makeovers by the end of 2014.

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