Some dealers look past facility programs to sales, profits

[jpd80]

ORLANDO -- What a difference a year makes.

While facility programs continue to cause great concern -- and consternation --

among dealers, the intensity surrounding the issue has subsided since 2012's

National Automobile Dealers Association convention.

 

You could see it at the press conference here today at this year's convention

announcing the phase-two results of NADA's facility study. It was pretty typical,

with mostly journalists on hand. At last year's press conference, the dealers

and dealer advisers in the room easily outnumbered the journalists.

 

One reason interest in the issue has subsided?

It's too little, too late, many dealers suggest to me.

 

They've already made commitments to the latest rounds of manufacturer

image programs and spent their money. The worst of the pain is behind them,

and the study -- which reaffirmed that expansive new dealership buildings aren't

worth the millions of dollars invested in them -- won't change anything for them.

 

Improving vehicle sales also are a factor. Dealerships are generating strong profits

and their outlook is good. Dealers feel less strapped than they did a year ago.

 

NADA study author Glenn Mercer acknowledged right up front that facility issues

are less painful for dealers today. But he and NADA officials say the study will still

help dealers make tough decisions on investment requests. And, since image

programs come in cycles, the nearly two years of work Mercer and NADA put

into the study could influence the next wave of image programs.

Of course, that's if manufacturers listen.

Read more: http://www.autonews.com/article/20130210/BLOG06/130219975#ixzz2KaEezv00

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Yes, i was wondering about the latest Ford offers for helping dealerships, you would think that most dealerships

would have already spent all the money they can and must now dig in with sales to see a return on that investment.

Edited February 11, 2013 by jpd80

[jpd80]

Store redos still bring iffy returns

By Amy Wilson

 

With industry sales getting better, manufacturers' facility renovation programs aren't as painful for dealers

as they were a year ago. But expansive new dealership buildings still aren't worth the millions of dollars dealers

invest in them, a National Automobile Dealership Association study concludes.

 

Also, dealers and manufacturers need to be more mindful that the facilities created today be flexible enough to

support the requirements of the dealership of the future, study author Glenn Mercer said. Mercer was scheduled

to reveal study results at this past weekend's NADA convention in Orlando.

 

The finding on the payback for dealers who invest in facilities is an echo of phase one of the study, released at

the NADA convention in 2012.

 

"It proved very well that the buildings that some manufacturers are making you build from the ground up, that there

really isn't a return there," outgoing NADA Chairman Bill Underriner, a Montana dealer, told Automotive News.

The dealers association will continue to "keep the pressure on and try to get the manufacturers to slow down."

 

The stakes are high: $9 billion to $14 billion is spent annually on U.S. dealership renovations, Mercer estimates.

Though phase two affirmed last year's findings that the programs cost too much and yield uncertain results,

NADA fell short for the second straight year on quantifying the return on investment dealers get for facility spending.

 

Data not available

After phase one failed to produce concrete return-on-investment numbers, NADA decided to take another stab at

generating hard data on payback to help dealers make better decisions on their investments.

 

NADA in part turned to big dealer accounting firms looking for financial data representing several hundred dealers.

The aim was to compare dealerships that had completed facility renovations against those that did not take on renovations.

 

But while the accounting firms were helpful, the data were not available, said Mercer, a former McKinsey & Co. partner.

"To be honest, it was a little disappointing," he said. "We thought someone who had hundreds or more of dealer clients

might have tracked this closely."

 

So Mercer researched a collection of 27 dealership case studies -- most in the United States but some in Canada --

to draw up some guidelines. He sees no payback at all for stores in good shape being asked to conform to factory

image standards. But stores that were decrepit to begin with could recoup their investment times three within three

to five years. Dealers who expand their service capacity also can expect to get all their money back or more if the

local market is robust enough to fill the added bays.

 

Building a Borders?

Beyond the payback question, the study takes a stab at predicting what the dealership of 2025 might look like.

"The tomorrow question is: 'Looking beyond the next two years, am I putting money into a store that turns out to

be wrong in the long run?''' Mercer said. "'Am I building the next Borders store? Am I building a Blockbuster

store just as everyone turns to Netflix?'"

 

His conclusion: Despite the fears about the effect Internet shopping might have on automotive retailing, don't expect

today's dealership network to be decimated in the way that bookstores and the video rental business have been.

 

Instead, as much as half of the U.S. dealership network may not change much at all during the next 12 years, Mercer said.

But some things should evolve. He predicts that a third of dealerships will adopt one or more significant changes to their

physical facilities by 2025. Possibilities include opening satellite service centers, moving administrative functions off site

and adding small demonstrator outlets in high-traffic urban downtowns.

 

The factories need to play a role in encouraging more creativity and flexibility in dealership design, Underriner said.

Franchise agreements and state and local regulations often prohibit satellite service locations, for instance.

 

Manufacturer store designs should be flexible enough for the dealer to be able to reconfigure the dealership quickly and

at low cost to comply with changing image standards, Mercer said. Instead of having to jackhammer up that gray tile,

for example, a dealer could swap out digital displays or wall graphics.

 

Said Mercer: "There is real room to rethink and do better than just here's how a dealership works --

the sales are out front, and service is in the back."

Read more: http://www.autonews.com/article/20130211/RETAIL07/302119936#ixzz2KaHIDeU4

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Edited February 11, 2013 by jpd80