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.