I’m trying to learn as much as possible about blogging, vlogging, and other forms of social media. So I decided to create an Auto Law JD YouTube page. I’m going to use it as a testbed for several form of videos and content distribution. From there, you’ll find reviews of products that I’ve tried out and some videos of my hobbies. Right now, I’m learning about my new HD camcorder, the Canon Vixia HF M52. So I tested it out yesterday around my home town. Here are the videos:
A recent FTC investigation of several car dealerships sent ripples through the retail sector of the auto industry. A copy of the FTC’s press release is here. The FTC’s investigation of these particular dealerships reveals a shift in enforcement posture regarding “deceptive and unfair trade practices” in two major ways. First, the FTC now classifies a promise to pay off a consumer’s vehicle, “no matter how much [he or she] owes,” as a deceptive and unfair trade practice when the dealer applies the existing loan balance to the new purchase without appropriate disclosure. This is big for auto dealers because this advertising message is quite common in auto advertising. Second, and equally profound, is that the FTC referenced videos posted by some of the dealerships to YouTube in the enforcement action. This is one of the first, and if not, the most public, occasion that a FTC focused such attention on a dealership’s videos on YouTube.
What can you learn from this enforcement action? First, the FTC is willing to broaden the scope of what constitutes “deceptive and unfair trade practices.” Moreover, state and local administrative agencies that have similar mandates as the FTC often follow the FTC’s guidance when interpreting their own state and local laws and ordinances against deceptive and unfair trade practices. So, when examining your advertisements, keep in mind the regulatory climate and that eager state attorney generals may wish to adopt the FTC’s ruling to enforce similar actions in your market. Also and ask yourself whether the language in your advertisement can be reasonably construed as deceptive and unfair. Don’t wait for an administrative agency to rule against you if you have advertisements that are in a “grey area” of interpretation.
Another lesson you can learn is that your social media content is not immune from investigation. Use equal diligence when reviewing a video loaded on YouTube, status update on Facebook, or tweet on Twitter, that you would with an advertisement in your local newspaper. If your content is problematic, remove it immediately.
Finally, if something like this happens to your dealership, you have many options to combat the negative publicity. One example is to take your message to your consumers directly, like Frank Myers, owner of Auto Maxx (one of the dealers under investigation by the FTC), recently did. I applaud Mr. Myers for taking the initiative to air his side of the story and showing the importance of sharing your perspective on matters that directly impact your business. Here is the first video he posted soon after the FTC released its statement:
And here is the next video:
Many auto manufacturers are currently promoting new facility designs to their dealers. The reasons seem pretty obvious. The manufacturers believe that a consistent retail experience from dealership to dealership will enhance the consumers’ shopping experiences and lead to additional sales and share. Some use the time-tested “carrot and stick” method to encourage renovations. This can take the form of incentives paid to certain dealers for compliance and withholding funds from other dealers who do not comply. However, because of the nature of the relationship between the auto manufacturers and their dealers, mandating a uniform approach is unfeasible, rife with conflict, and, in many states, illegal.
The franchise model for auto dealerships is quite unique. The franchisee (in this case, the dealer) typically signs an agreement with the franchisor (the auto manufacturer) to sell and service the brand’s vehicles within a set geographic area. The dealer is an independent entity, that typically carries the liability for inventory, the facility, personnel and so forth. The dealer pays for the vehicle when it is built, often by financing the purchase. The auto manufacturer gets positive cash flow and shifts the risk of the vehicle not selling to the dealer. The dealer is also required to purchase special tools, parts, and training from the manufacturer. This creates a bilateral monopoly, that benefits the manufacturer greatly while severely restricting the options of the dealer to mitigate costs associated with acquiring inventory, tools, training and so on.
The auto manufacturer ends up getting a pretty good deal out of the relationship. It can expand into markets across the country with no exposure to local real estate or having the headaches of staffing a particular store, providing operating capital for it, and storing inventory. If a particular dealership closes, the manufacturer has very limited exposure and can assign the territory to another dealer.
Since the dealer shoulders the burden and costs of selling and servicing vehicles and acquiring and maintaining the physical retail location, the auto manufacturers have no real incentive to craft a consistent retail branding experience in a cost-effective manner. Moreover, instead of creating a product driven retail showroom and facility, many instead focus on having the largest and grandest dealerships in the market. This inherent conflict has manifested itself in a multitude of legal actions brought by dealers against manufacturers regarding pressure exerted to upgrade to current facility guidelines. See “Facilities Fight Goes Federal,” Automotive News.
Instead of focusing on the nuances of using genuine limestone or simulated limestone as fixtures in a showroom and other initiatives that cause conflict because of perceived unrelated costs and benefits, auto manufacturers should look to Apple when encouraging dealers to adopt facility standards. Granted, Apple has products that are well received by the public. However, I believe Apple’s success is not because of product alone. Apple has created a consistent retail environment that is present in every place from mobile phone stores that carry Apple’s iPhone to “big box” retailers like Target and Best Buy. The configuration of the Apple’s own retail stores is one of the best executions at retail I have seen. These stores are set up in a cost-effective manner, which makes sense because Apple is the one paying for the store.
Customers immediately notice a consistent branding feature outside the Apple Store, and from the outside, they can see a clean, open, and simple layout. Apple’s core products (iPods, iPads, Macs, etc) are displayed prominently in the front of the store, on simple wooden tables that invite consumers to tinker with the devices while Apple Store employees explain their features and benefits. Other areas are designated for technical support and training, while shelves in the rear of the store display software and accessories. This is brilliant. For example, if I need a case for my iPad, I cannot help by walk by Apple’s other products on my way to look at cases. It doesn’t appear that Apple spent untold sums of money on furniture and fixtures. Yet what is in the store complements the open design and doesn’t look ‘cheap.’ What is clear about Apple Stores is that the product is the focus of the presentation to the consumers, and this focus isn’t diluted by gimmicky reliance on the environment of the store itself. Everything has a purpose, and if something doesn’t, it isn’t in the Apple Store.
Auto manufacturers should make the product, not the facility, the showcase. In partnership with its dealers, the parties should develop compelling point of sale displays that easily demonstrate the product’s key features in a cost-effective manner. The displays themselves should be tools in the sales process. While many consumers can gain information about vehicles on the internet, nothing replaces actual hands-on interaction with a product. As I used to explain to my sales people, a consumer reading a website or watching a video on YouTube about MyFord and Sync and actually using it in a vehicle are totally different experiences. Our job, as retailers, was to show the consumer the benefits of our product and ask for the sale after earning the consumer’s trust.
When creating a new retail branding experience, the auto manufacturers should look to Apple, and tailor a model, with imput from its dealers, as they would were they the ones paying 100% for the project. The objective should be to create compelling and cost-effective solutions that promote the product itself and encourage opportunities for interaction between consumers and sales associates. Its time to retire the opposite approach of mandating very restrictive facility designs that focus on the “brick and mortar” instead of the product and browbeating dealerships for noncompliance.
My former employer acquired a Fiat franchise over a year ago. My old coworkers let me take a preproduction Fiat 500 model for a spin and I was really impressed with how nice the car really is. I think Fiat made a good decision to bring the car here to the US, and to sell it through existing Chrysler dealers who committed to build a Fiat “Studio,” a showroom designed by Fiat that is more similar to a clothing boutique than a traditional car dealership showroom.
So far, the 500 has done pretty well, considering it launched with little marketing support and with many of its dealers still readying their stores to open. There’s no question that for Fiat to grow in the US, they will need to add additional product to flesh out the lineup.
Right now, Fiat offers a three-door and convertible 500, and the 500 Abarth (a high performance variant) will launch soon. While the Abarth will serve Fiat well as a ‘halo car,’ the real volume will come from the 500L, shown for the first time at the Geneva Auto Show this year. You can see by the video above, this is a much larger vehicle than the 500. It is similar in proportions and size to MINI’s Countryman but should be priced considerably less, if Fiat holds true to keeping its vehicles priced lower than similar MINI vehicles.
With gas prices heading well north of $4 a gallon in most parts of the country now, and $5 gas a strong possibility in the spring, cars like the 500L can’t come soon enough.
It goes without saying that people in the retail side of the automotive industry have developed a bad reputation. Think Kirk Douglas in the movie Used Cars. Recently, Becky Quick, Co-Host of CNBC’s Squawk Box took to Fortune Magazine to share her recent experience with purchasing a minivan. You can read it here.
So, is Becky Quick right, saying that “Car Salesmen” are “Still Sexist, Still Stupid?” Sure, there are some sexist, stupid, or sexist and stupid sales people out there. But has the industry not made up much ground since the days of Kirk Douglas’s Rudy Russo? And if so, why does the public paint people who work in our industry with such a broad brush? Are there not any sexist, stupid, or sexist and stupid salespeople selling real estate, TVs, cell phones, clothes or anything else? If not, what’s their secret?
Accounts such as Becky Quick’s always make me cringe, as I know that a bad apple or two (or in her case many bad apples) make our entire industry look awful. It also reminds me that no matter how far we have come, we still have a long way to go.