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Shootout at OC Corral?

Is it a shootout at the OC Corral? In this city in California's Orange County, a new $75 million Lexus dealership now sits almost squarely across the street from Fletcher Jones Motorcars, the nation's top-selling Mercedes-Benz dealership. Some observers have characterized it as a battle of the luxury brands in an ultra-rich municipality, population 83,120, where the median household

NEWPORT BEACH, CA — Is it a shootout at the OC Corral?

In this city in California's Orange County, a new $75 million Lexus dealership now sits almost squarely across the street from Fletcher Jones Motorcars, the nation's top-selling Mercedes-Benz dealership.

Some observers have characterized it as a battle of the luxury brands in an ultra-rich municipality, population 83,120, where the median household income exceeds $83,400.

But the feeling among the players is there are more than enough premium car buyers to go around in this gilded part of the world.

Either way, it makes for awesome dealerships.

The new rich kid on the block is Newport Lexus, the most expensive dealership ever built.

It is part of the highly successful 15-store Wilson Automotive Group, founded by David Wilson, 58, a nice guy of humble beginnings. His father was a rodeo rider, his mother a Tupperware saleswoman, and his first home was an apartment above a John Deere dealership in Iowa.

Wilson found fortune in Southern California, and his new dealership is a 24-carat, 300,000-sq.-ft. reflection of his success.

It is an amazing place, resembling a 5-star hotel. Inside are an Italian cafe, a fireplace, leather sofas and chairs, a boutique, a grand piano that plays by itself and plasma-screen TVs located throughout, including in the rest rooms.

Outside are a fountain and a cluster of 150-year-old palm trees that cost a bundle to transplant. A visitor recalls telling Wilson that the palms looked primordial and stately. “He said, ‘They should, they cost $185,000.’”

The opulence is in keeping with the dealership's surroundings, says Craig Whetter, vice president of the Wilson group.

“Newport Beach is off the chart as far as a high-end luxury market,” he says. “Customers are like guests in our homes, and they live in homes that look like this. This is their environment. We built this here because people don't want to leave Newport Beach.”

The showroom attracts the most attention, but Whetter talks with particular enthusiasm about the service department.

There is a 7-lane service drive for speedy intake. “We can get you in and out in minutes,” says Whetter. Cars go up a ramp and to a facility with 77 bays and 103 lifts.

The bays are pre-stocked with parts for the 18 most common service orders, such as 15,000-mile and 30,000-mile maintenance inspections.

“If we can turn the serviced car around in 90 minutes and keep the customer comfortable here with all the things there are to do, that's one less loaner to send out,” says Whetter. “It's an environment you almost look forward to coming to, rather than feeling like, ‘Gosh, I've got to take my car in for service.’”

Adds Lexus Group Vice President Bob Carter, who co-owned a Toyota dealership in Massachusetts before joining the corporate side of the business, “Newport Lexus is a special place.”

Wilson started his automotive career in his native Iowa as an oil changer and luber at a Lincoln Mercury store. It was not a particularly auspicious entry into the dealership world.

He messed up a job, and when the oil leaked out of an engine, it was ruined. The dealer fired him but not before demanding that he pay for the fried engine. Wilson convinced the dealer to let him pay it off by selling cars. He discovered he was good at that. In two years, he was the dealership's sales manager. Dealership ownership was not far off.

His new dealership is projected to sell about 4,000 new vehicles a year vs. the 6,000 that Fletcher Jones Motorcars delivers. Whetter says there is no thought of doing serious battle with Fletcher Jones.

“They're not even in our sights,” he says. “Ted Jones (dealer principal Fletcher Jones II) is a great guy, a class guy and a friend of ours.”

Fletcher Jones, No.2 on the Ward's Dealer 500, is a stunning dealership complex in its own right. It draws an incredible amount of traffic, so much that it has its own traffic light with a green turn arrow off Jamboree Boulevard.

The store cost about $18 million to build in the early 1990s. But Fletcher Jones got a big break on the land, buying it for $1 from the city that was interested in seeing the parcel developed and taxed accordingly.

In contrast, “we paid $30 million for our land,” says Whetter.

Garth Blumenthal, general manager at Fletcher Jones, says Newport Lexus hasn't hurt sales.

“Since they opened, we've actually done better,” he says. “Maybe they are bringing in more traffic to the area, which is good for us and them. Our numbers continue to grow. If we stick to our business plan, we'll do well, as will they.”

Blumenthal says neither store can focus solely on Newport Beach as a customer base. “One-third of our clients come from outside Orange County. We have 1,300 vehicles on the ground and try to make our dealership a destination and an experience.”

The new dealership may signal an attempt by Lexus to crank up the competition, because it trails Mercedes and BMW in regional sales, Blumenthal says. “If there is a war, it's more a manufacturers' war, not one between the two dealerships.”

Also nearby is the nation's largest-volume BMW dealership, Crevier BMW.

It was founded by the late Bob Crevier, a one-time Volkswagen car salesman who dreamed about owning his own VW dealership, but couldn't afford it.

In 1970, a friend convinced Crevier to buy a less expensive franchise that, at the time, was low volume and appealed mainly to a small group of enthusiasts. That franchise was BMW. Last year, Crevier BMW sold 5,509 new and used BMWs, ranking No. 9 on the Ward's Dealer 500.

“There's room for every luxury brand in Newport Beach,” says auto analyst George Peterson, president of AutoPacific. “Nowhere in the U.S. will you find such a concentration of Lexus, Mercedes and BMW owners.”

U.S. premium car sales are strong overall, reaching 1.84 million units in 2005, double 1996 volumes, according to Ward's data. They are expected to hit 2.4 million units by 2012, according to industry forecasts. For dealers, luxury models offer higher profit margins — up to 18%.

Along the Pacific Coast Highway in Newport Beach, several former yacht dealerships have been converted into exotic car dealerships selling Lamborghinis, Ferraris and Porsches, notes Peterson.

Newport Lexus is a companion store to Tustin Lexus, about six miles away. Tustin had outgrown its facility.

“They were really capacity restrained, just gasping for room to breathe,” says Peterson. “Cars were so crammed there that, when my wife took her Lexus in for service, they lost it for 45 minutes.”

The first customer to buy a vehicle at Newport Lexus was Benjamin Franklin, a well-to-do local, not a founding father.

“We were holding the corporate grand opening, and he stopped in to see what all the commotion was about,” says Carter. “He pulled out his checkbook and, on an impulse buy, took delivery of an RX 300 for his wife.”

Sometimes, it's awfully easy to sell cars on easy street.

Meanwhile, on the Other Side of the Country

It's on the other side of the country, and it doesn't cost as much as the new $75 million Newport (CA) Lexus but mega dealer Herb Chambers is building a $30 million Lexus dealership.

It will be New England's most expensive dealership.

“We want to provide a dealership that makes a statement,” says Chambers, who was the 2003 Ward's Dealer of the Year.

He expects to open the 100,000-sq.-ft., 14-acre complex in May in Sharon, MA, less than two miles from his existing Lexus of Norwood store, which is a third of the size of the planned complex.

Its design includes a “Main Street” layout. A central pedestrian “avenue” will run past glassed-in mini showrooms.
By Steve Finlay

TAGS: Dealers Retail
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