A car salesman used to spend long days on his feet. Now he's becoming like everyone else—stuck most days in a chair in front of a computer screen. The Internet has changed the face of car sales in the last 15 years. But the change is now coming down hard on the people on the front lines. It is altering them from motivated sales people into compliant customer service people.
Customers are simply different today. They are more tech savvy. They typically search the web for the price of the vehicle and most like make a model decision long before showing up on a your dealership’s lot. The salesman simply doesn’t need to sell like they used too.
"The whole process of buying a car has been flipped from what it used to be," according to an article by Christina Rogers of the Wall Street Journal. "Today, customers find the car they want first, and then they shop for a dealership."
A good example is Mia Morris, of Nissan of Manhattan. The 30-year-old “product specialist” doesn't work on commission, like traditional sales people. Her job is to be an information source. “Everything is visible. My task is to provide needed information and make a smart choice.”
According to Auto Trader Group, the average car shopper spends more than 11 hours online doing their research and then 3½ hours offline, including trips to the dealership. Two years ago, the average time spent offline was twelve hours. And the economy is forcing some of the changes. Average gross profit on a new-car sale dropped to $1,283 last year from $1,531 in 2002, according to the National Automobile Dealers Association.
With decreasing margins, auto dealers are reevaluating their business models. John Iacono, president of Bram Auto Group, is an example of a dealer group who has changed their dealership’s business model. After experiencing the simplicity of Apple Inc.'s retail stores, he began contemplating change. "Why do we need to make it so complicated?” stated Mr. Iacono. "In the last 100 years, automobiles have gone from near-horse buggies to almost driving themselves. And yet, the way they are sold hasn't changed."
Since Iacono’s change, his store has increased new car sales, doubled its closing rate with customers and has cut the time it takes to complete a sale to under an hour. Now, he is working to overhaul the auto retail group's 20 other stores along the same lines. But, the transition hasn't been without its challenges.
When Mr. Iacono eliminated sales commissions, more than three-quarters of his sales staff left, he said. And when the store had to hire new people, they needed to go outside the car business to find new recruits. He found that car people where not open to change. Mr. Iacono has even hired people who are from food sales.
Another example is Toyota Sunnyvale, a dealership located in the heart of Silicon Valley. About half the store's sales staff is parked in front of computers and "do nothing but wait on customers digitally," said Adam Simms, chief operating officer of the store's owner, Price Simms Auto Group. "The heavy lifting is now done online and if you're not in that flow, you're not going to see the bulk of the business." But, as a dealer, you need to ask yourself if all this change is really in the best interest of your business. Like most businesses that do most of their business online, car sales are becoming commoditized. With commoditization comes less and less profit while your overhead continues to go up.
Consider the new strategy embraced by Tesla. Tesla has chosen to open “boutique” stores in strategically placed high end malls throughout the country. When you enter the store, you are approached by staff dressed fashionably. They look like they could sell fine jewelry rather than cars. In a store that resembles an Apple store more than a car dealership, they have two “floor models”. One is a fully assembled car, and one is a partially assembled car, like you would see in a mattress factory. You get to sit in the model, kick the tires, play with gadgets on the dash, but you never actually get to drive the car. You would need to make an appt with the store, and they would bring a “test drive” car to your home. No need for a large brick and mortar store, no floor plan cost, no dealing with slow moving units.
At the store you order your car similar to ordering any other commodity. It is all fixed pricing, with no negotiation. You want the sun roof, it is XX price, and the upgraded stereo is XX price. It is totally different from the car buying experience today.
So with the growing internet presence and the changing model of the car dealership in our in our future, how do we best use our auto sales talent? I think we need to redefine the roll of the salesperson, and consider alternative sourcing of sales people.
In most dealerships, the sales people are sitting around 80% of the time, and talking with prospects 20% of the time. And evidence suggests that younger generations are much more comfortable getting their information from an online source rather than a salesperson. They don’t want the face to face interaction. Younger people want to be educated and coached to make the correct buying decision, not sold. So I think it is safe to say this number is only going to increase.
So I would project that the dealership of the future will have many “Product Specialists” on salary and a few “Salespeople” on commission. But I think we have to reconsider the roll of the “Salesperson” along with their pay structure.
If you have more people on salary and less on commission, you can economically afford to pay those on commission more commission per unit. But, they need to function like the hunters they are, not the order takers they have become.
It is a true salesperson’s talent to provide information, persuade, and create and build sustainable relationships. The sales person’s job will be to proactively searching and bringing in key accounts and being responsible for account management. They have the talent to communicate the value of their product and differentiate the dealership. Full time salespeople need to be driving people to the dealership, not waiting for them to come to the dealership.
So what do you do when you run into the situation of too much inventory, or aged inventory? Outsource your sales talent. It makes much more sense to bring in a large team of professionals and drive a large number of people to your dealership at the same point in time. Why have people waiting around when you can bring in temporary salespeople people precisely when you need them.
Professional sales teams should become part of your store’s business plan. They are skilled, talented, and in the case of professionals, they are concerned with your overall business.
So, in this age of reducing margins and increased overhead, sales teams are an optimal choice for better business management.