In this latest edition of my series on modern retailing I’m taking on one of the biggest topics in our industry: the one-price store. This model has been around for nearly 20 years. Yet, few dealerships have adopted it even as this model is more relevant than ever before as Internet-savvy, smartphone-using customers increasingly hunt simple, fast, and transparent deals.
From a dealership standpoint, moving to a one-price sales model requires careful consideration and stamina to weather what will be a difficult transition. You will likely lose some salespeople, but as with any change there is plenty of reward. Here’s why you should take the leap:
It will improve the customer experience.
No price haggling, including financing and the sale of F&I products, is what customers have been wanting for decades. And they will reward dealerships that offer that experience. Consider Avondale Toyota outside of Phoenix which has been a one-price store for nearly two decades. Dealer Brian McCafferty reports that customer feedback is overwhelmingly positive and almost half of business comes from repeat and referral customers.
Beaverton Honda in Oregon is another dealership that has been one-price for years and years. The dealership’s website clearly states there is no haggling necessary; everyone pays the same fair price for the same car. Customers love it. In 2019, the dealership was named a CarGurus Top Rated Dealer, which honors the best-reviewed dealerships for providing exceptional customer service.
It will deliver consistent profit margins.
A one-price store requires dealers to price competitively for the market and implement non-traditional pay plans such as hourly or salary compensation structures. It’s a common misconception such strategies will erode gross. In fact, one-price can lead to consistent profit margins and a better balance in overall profitability since extreme discounting on the one end, and extreme mark-ups on the other, are no longer on the table.
It will reduce employee turnover.
The backstabbing and snarky behavior that follows when salespeople are 100 percent focused on front-ends sales disappears with a one-price model. This creates a more relaxed, team-environment that naturally reduces employee turnover.
One-price stores also offer the stability of hourly pay or a set salary that encourages employees not to jump ship. At Avondale, for example, the average compensation for a salesperson is about $480 per car with an opportunity to earn extra fees for selling F&I products.
Alleviating the stress of commission-only pay plans relaxes the buying process for employees and customers so everyone is happier and everyone benefits.
It will cut marketing costs.
We all know dealers don’t get rich selling new cars. Average front-end gross profit today is just over $1,000 per vehicle. Slim margins make reducing the cost of selling a unit more important than ever.
One-price helps to reduce costs by cutting out the cutthroat competition that often leads to big advertising bills. As an example, NADA reports the average cost to advertise a new vehicle exceeds $600. One-price dealers typically spend less than $250.
It will bring value back to F&I.
For too long F&I managers have been pushing products that are good for the them, not for the customer. No wonder customers hate the “box.” One-price stores typically offer a standard bonus for products sold so there’s no benefit to pushing high-priced packages just to get the pay-out. Instead, these stores are getting back to the “prove it” mentality and even using evidence manuals to make their cases for products.
I love evidence manuals because customers see in a real-world application what can happen with a vehicle four or five years down the road once service warranties expire. Customers are holding on to vehicles longer than ever before and evidence of what can happen encourages them to protect their investments without shady tactics or adding undue costs to a final payment.
A one-price sales model is a natural progression for dealers looking to adopt a modern retailing approach where technology and process come together to deliver the buying experience today’s customers demand. Yes, it will be a transition. And yes, you will likely lose some staff who are resistant to change. However, the reward is building trust and cultivating wildly enthusiastic fans.