“Build it and they will come.” Manufacturers love to say that when they launch new facility designs for their dealers, a common event in today's automotive environment.
Yet despite the promise of new sales, for dealers facility replacements and upgrades mean risks, significant investments and disruptions of business during construction work that can seem to last forever.
Such projects require a certain amount of faith in auto makers. That faith can be misplaced. To comply with a General Motors Corp. initiative in 2000, several Oldsmobile dealers invested in facility upgrades, only to learn later that GM was killing the brand.
Mitsubishi Motors North America Inc. convinced several of its dealers to upgrade and build new facilities in 2002 and 2003 to help usher in what was to be a new golden age for the Japanese import brand. When Mitsubishi suffered a subsequent financial and sales meltdown, many of those dealers lost money. Some went out of business.
But if dealers decide against moving forward on redesign plans, do they risk being blackballed by the manufacturer? Some dealers privately say so.
The horror stories notwithstanding, a strong business case often can be made for a dealer to invest in facility upgrades.
Since Nissan North America Inc. in 2001 introduced a retail redesign initiative, 40% of its dealers have adopted the redesign and reported an average increase in sales of 57%. Dealers not participating increased their sales 3%.
Nissan's luxury division, Infiniti, is now involved in a similar initiative for its 177 dealers. Infiniti's dealers were already requesting guidance from the division on how to expand and upgrade, says Mark Igo, Infiniti's vice president and general manager.
Auto makers also use facility upgrade initiatives to help them reposition their brands. For example, Hyundai Motor America is urging its dealers for exclusive and larger showrooms as it increases its sales, strengthens its image and expands its lineup.
Kia Motors America Inc. likewise hopes to continue building its image as a serious player with more dealer-exclusive showrooms.
Of course, repositioning is subject to an auto maker's whims and can change quickly. A few years ago, Ford Motor Co. introduced a retail concept for its five Premier Automotive Group (PAG) brands. Later, Lincoln Mercury was taken out of PAG.
GM now is prodding its nearly 500 stand-alone Pontiac, Buick and GMC franchises to start combining dealerships (See story on page 12). While not a facility upgrade per se, the dealer who ends up with all three brands will have to do some sort of redesign to accommodate the new setup.
Luxury brands are using redesigns to maintain customer satisfaction. Bob Carter, group vice president and general manager for Toyota Motor Sales U.S.A. Inc.'s Lexus Div., says its dealers have invested nearly $1 billion in their facilities over the last 24-30 months (See story on page 32).
“It has evolved over time,” Carter says. “There is not an initiative that, starting tomorrow, we're going to revamp our dealerships.”
For Lexus, facility improvement is a continuous process, and is focused on taking care of the customer, he says.
The customer of today is different than in the 1980s when ostentatious in-your-face luxury was the norm.
“The luxury buyer is more casual today,” says Ken Nisch, chairman of JGA Inc., a Southfield, MI, architectural design firm that designs dealerships. (Jaguar of Tampa and the Fred Lavery Land Rover and Infiniti dealerships in Michigan are two.)
Nisch believes some American brands miss the mark with their redesigns by creating dealerships that are too focused on style and not enough on “the experience.”
Just because the auto maker launches an eye-catching look, does not mean it is the right look, Nisch warns. Swoopy-roofs, stone marble floors and split-face block walls may look good.
But do they create an appropriate atmosphere for today's customer? “Or is it just a design trend today that may change tomorrow?” Nisch says.
He tells of a dealership that parks its cars on a marble showroom floor. “Whoever thought that was a good idea?” he asks. “Maybe if you're Donald Trump that might work.”
Igo agrees. “The ornate-for-ornate's-sake days are over,” he says. Infiniti visited several luxury retailers and hotels such as Nordstrom's and the Ritz Carlton to see what their customers want.
“We learned our customers want warm and inviting,” he says. “Not over-the-top luxury. “The customer today is looking for the experience.”
Nisch says auto makers should approach dealership design like they do auto show designs.
“They do a great job building that experience for the customer at the shows,” he says. “But they sometimes fail to do that with their dealerships. It can confuse their customers.”
Infiniti's new design includes a lounge area resembling the lobby of a luxury hotel. It's the first thing customers see. Products are arranged in a gallery area and showcased with artistic lighting. The environment creates a flowing, relaxing atmosphere.
“We want to give our customers time to shop,” Igo says.
— with Christie Schweinsberg
