Last October, I gave the keynote presentation at the AICPA conference in Phoenix (going on today and tomorrow in Orlando). In it, I mentioned the OEMs' continued insistence on of "forcing" expensive facility upgrades on their dealers.
A luxury dealer mentioned after the presentation that his OEM was forcing another expensive and profit draining upgrade on him, yet he was still paying on the multi-million dollar expansion he had done eight years ago. A Hyundai dealer this year told me he's getting pressure to upgrade his signage, although, his dealership is a mere three years old and was considered state of the art when it was built. And that signage is expensive.
The ironic part is, there are studies (Pied Piper is one) that show facilities play little role in whether a customer buys from a specific dealership. And improving CSI? I've yet to see numbers that show facilities have much impact. Obviously, dealerships should be clean with having some level of a modern look and feel.
Unfortunately, much of what the OEMs want or require really are the latest flavor of the month. A new sales and marketing chief often means a refreshed look and new facility requirements for dealerships.
NADA is taking up the fight. Chariman Stephen Wade told the Automotive Press Association today in Detroit (Read NADA Chairman Stephen Wade's Speech) that "financial pressures from factory-mandated facility image programs" is "The one issue that comes up time and time again."
At the Automotive Leadership Roundtable Fall Series a few weeks ago, Vice Chairman Bill Underriner talked about a study NADA commissioned this year to help move the discussion of upgrades from one of personalities and opinions to one based on hard data and objective facts.
The study might show upgrades might indeed impact sales and CSI positively. But currently, that's pure speculation. And it may show otherwise.
Frankly, I believe it comes down to the operator at the store. The top selling Audi dealer for the last five years has been Brett David and Prestige Imports in Miami, FL. The facility is much smaller and not as nice as the Audi dealership a few miles north and the one south. Yet he continues to outsell both -- his facility isn't hurting his sales.
Paragon Honda and Acura in Queens, NY is in a similar situation. Paragon is landlocked and the layout presents many challenges. The delivery area is the cracked sidewalk in the front of the dealership. There is no covering to protect from the rain or snow or leather chairs with TVs for people in the delivery area. Furthermore, vehicles parked outside at the front of the store get towed daily.
Despite that, Paragon is one of the top dealerships in the country in both new and used sales.
I'd bet NADA's study, once it's done, will show that OEMs should support their dealers with programs that help them make more money rather than enforcing expensive facility upgrades that take money out of their pockets -- money that could be spent on initiatives that have real ROI.