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Comment by Roger Sowers on June 26, 2013 at 11:26am

Bill By the time they are willing it is already too late. Cash is gone. Good will is gone. Reputation is gone. Employee moral is hopeless.

Change in any established organization is more difficult than expected, more expensive than expected and much more time consuming than expected. It is hard to define what change is needed and harder yet to communicate that change to those who will be changing.

We keep looking for the blue ocean just beyond the breakers while ignoring that the water all around us is red with our blood.

Change must be incremental, measurable and precisely focused if it is to succeed. If the industry does not change of it's own accord then external forces will compel it to change.

There are plenty of drums beating and voices crying but who has ears to hear? Where is the voice of reason in all the chaos? 

Comment by Bill Cosgrove on June 26, 2013 at 10:26am

Roger- You could be right but We must keep pounding the podium with hopes to reach the ones who are not satisfied with where they are or want to achieve more and be a model to follow.

Or those of us who know it could be much better could overthrow a dealership, take it over and show how much better it could be.  That would get the drums beating and what a discussion that would make!

Comment by Roger Sowers on June 26, 2013 at 9:49am

Face the facts. The industry is not going to change. There is no real motivation to change. Talk about change you bet. Effect change no way. As long as there is positive cash flow at the end of the day there will be no change. Oh sure there is the desire for greater profits but no willingness to risk what we have to make those greater and more sustainable profits. The benchmarks are set too low. We look at the future as something we want to get to and hope that the future will improve itself. Tough times today will be better in the future. Really? All we must do is be a little better than our neighbor. I shudder to think what would happen if even one dealership were to change.

The technology is there and the willingness to use the technology is there the shopping done on the internet will evolve to internet buying in the no too distant future. Why? Because the buying public is weary of fighting the people they encounter at the dealership.

Want to have some real fun? Go shop for a car as a consumer. Most dealership management is completely disconnected from the car buying public. I recently went car buying with my daughter. I was infuriated and nauseated by the experience. Well back to lurk mode. 

Comment by Steve Richards on June 25, 2013 at 8:39pm

@David – Thank you for reading my post and taking the time to respond. No, I don't have a problem with the franchise laws; I don't have problems with things I can't change nor do I tilt at wind mills (anymore). I merely stated a fact. As far as the information flow becoming more balanced; yes, it is. That is a major change. Any other business or industry would change the sales process to adapt to the changing environment; maybe make the sales process more consumer and sales consultant friendly. Why hasn’t the retail auto business done so? As Bill says, "it's bad management". I merely provided four reasons that such management proliferates.

$3K profit a deal to cover costs and create a decent ROI? That may be true for a dealership that doesn't have a parts or service department. But I don't know of many franchised stores that fit that profile. Or maybe I've misunderstood your point.

I spend twenty days a month inside a dealership and many nights socializing with dealers and their management teams. Automobile dealers have been my friends and clients for thirty five years. I appreciate and respect the financial risks they take. However, I don't ignore the fact that two hundred million Americans (give or take fifty million) are actively seeking revenge for the way they and their ancestors have been treated over the last fifty years by dealership personnel. It still sucks to buy a car, not according to me, according to the buying public. Car sales people are ranked dead LAST (again) in the latest poll that measured the trust Americans had for 25 different professions. http://www.slate.com/blogs/the_slatest/2012/12/03/gallup_trustworth...  Sadly, the problem isn’t the sales consultants, it the process that they labor within. The same process that worked just fine in the ‘50’s, ‘60’s, ‘& ‘70’s.

David, is your position that everything is fine, no change necessary, because the way we’ve always done it is just fine? Do you really believe it’s the consumers that are causing the problems? Maybe someone should start holding seminars around the country to straighten out those pesky consumers? Just asking…

Thank you again for reading and responding to my post, thank you Bill Cosgrove for your “spot on” observations.

 

Comment by David Ruggles on June 25, 2013 at 1:53am

@ Steve - RE: "By law, franchise laws in every state, a new vehicle can only be purchased from a franchised dealer."

You have a problem with this?  Do you want consumers to be able to buy direct from the factory like a Dell computer?  Just asking.  Franchise laws were enacted to protect dealers from their suppliers.

RE: "Good” makes most owners, GM’s, and upper management rich."

By most standards one has to already be "rich" to become a car dealer.  But then you have to sign personally for floor plan and capital loans, not to mention a lease or mortgage.  That means the lenders come to you first when things go sour.  And after taking the risk and making the investment, your customers demand "transparency."  So let's divulge our triple net costs and negotiate the margin?  I think not.

RE: "The retail culture incubates mediocrity and as gross profits continue their downward spiral good luck attracting quality sales personnel. Can you name another product that sells for $30K and pays a $100 commission?"

Gross profits continue their downward spiral because because the previous asymmetry in information has become more balanced, creating a more efficient market.  While that might sound good to consumers, an efficient market leads to disintermediaton.  For those not familiar with this term of economics, it means cutting out the middle man while the product becomes a commodity.  Can you name us another product that sells for $30K, where consumers expect to know our base costs, and 10% is considered to be an obscene profit by industry outsiders and many "insiders?" 

In our business a dealer needs an average of $3K per vehicle transaction to cover costs and achieve any ROI.  It makes no difference if that is front, back, or a combination.  If someone gets a $2K deal, someone has to pay $4K to make up for it.  Maybe Consumers would be more pleased if everyone paid the same profit?  In the meantime, if they don't like the dealer's style of advertising or negotiation, they can leave and shop until they are satisfied.

Comment by Bill Cosgrove on June 24, 2013 at 10:44pm

Doug your absolutely right. Anyone in management who says that the truly talented are problematic should not be in management. No matter what anyone says commissioned salespeople are one step away from being independent contractors. They are the ones who butter theirs and the companies they work for bread.

The location is just a place for real talent to perform. I know I was in the trenches for many years and was left alone to do my thing by people who knew when to let someone perform. Being a talented commissioned salesperson is an art and all artists sometimes are in their own world and one must understand that.

When I managed I would give anything to have as many talented salespeople like this as I could get and just sit back and watch them ply their art. It is a beautiful thing to watch. Unfortunately Steve is right in saying that most of the talent is performing elsewhere now because of dealers who have become a "penny wise and a pound foolish."

These Managers that think they can train anyone to sell have no idea what they are talking about and should go to Big Box Retail where they can sell price and not value. People buy people period and word of mouth is king even more so now than ever.

All we can hope for is that there are some Dealer Principals out there like talented salespeople and management where good enough is not in their vocabulary. Not looking over the horizon for the next summit I assume is present in very few people but for me would make for a boring existence.

Comment by Doug Davis on June 24, 2013 at 10:11pm

Bill, another great thread.  I am in agreement with everyone on this tread.

In the car business, you have sub-par dealerships, average dealerships and market leaders.  The market leaders are the smallest group.  The market leaders have a culture of success and better people.  

Right now,  we have more people out of work than any time in American history but I keep hearing that "we can't find people".   I'm really seeing this from the big groups. Dealerships are having a hard time finding people at what they want to pay. Car sales is only a good job when it pays.  If it doesn't pay, I would rather work in the trades. 

I have an old friend that sold and delivered 10 cars on a Saturday.  I was amazed at this accomplishment and discussed it on another forum.  My friend is a retail used car salesperson.  He expects to sell 450 cars this year.  He doesn't catch ups and is not on the internet team.  All of his business is from repeat and referrals. In response to my thread, people said they didn't want salespeople like this.  They were too hard to manage and didn't fit well within the group.  They would rather have three people that sold 10 each.  Honestly, with this attitude being in the majority, I'm glad to be at retirement age.  

Anyone can manage green peas.  

Comment by Steve Richards on June 24, 2013 at 9:09pm

"Good is the mortal enemy of great." And "good" in the retail automobile business is attained by putting up a building and franchise sign that doesn't have Daewoo, Mitsubishi, or Suzuki on that sign. Most retail "middle management" is made up of "desk" managers (maybe the most appropriate job designation in US business history) who seldom offer any value to the consumer, aren’t trained well enough to provide value to their sales team, and are very expensive for the dealer principal (or publicly held company). (Desk managers, in the eyes of the consumer, provide the “best deal/lowest price”; so in essence they are paid to lower the gross profit?). Only the retail auto business could survive without changing the sales process perceptibly while the ENTIRE world changed around them. But the explanation is simple. Very little money is spent developing retail sales managers, nor is it needed. Even poorly run stores make money except during the direst economic times. Why? Four reasons;

1. The automobile is arguably the most popular product in the history of mankind. Almost everyone needs one and most people want one.
2. There is little discernible difference between dealers in any given market and almost all dealers use a sales process that is little changed from the ’50′s. Consequently, consumers have a choice as to “where” to buy, but not “how” to buy. Because…
3. By law, franchise laws in every state, a new vehicle can only be purchased from a franchised dealer.
4. “Good” makes most owners, GM’s, and upper management rich.

Ergo, there is little incentive to change, go from “good” to “great”, or create a better and more profitable experience for all involved. It’s been that way for as long as I’ve been in the business, but I don't see how the OEM's can be faulted. The retail culture incubates mediocrity and as gross profits continue their downward spiral good luck attracting quality sales personnel. Can you name another product that sells for $30K and pays a $100 commission?

 

Comment by Bill Cosgrove on June 24, 2013 at 8:59pm

First of all I hope that you read Part 1 of my discussion “A Business Model That’s Just Plain Bad For Business” which I will post here at Dealerelite after this comment.

If I had enough fingers I would point them. I have been at over 45 Stores in the past two years and in many cases one hand doesn't know what the other is doing. This is a fact not speculation.

This all starts at the top and filters down. But you need your best people on the front lines in the trenches because they are your business. These are the people that make the business but need the organization and management to support them. If you don't pay for performance the talent won't show up for the party. If you don't have competent management they won't stay long even if you do pay well. The walls will have to start coming down sooner rather than later. You need to spend money to make money. You need to take some of the burden you put on everyone over the years so that they can do their job and leave the remedial time consuming work to others. The competition is fierce and Dealerships will have to start running their stores like businesses or they will not survive. As David stated this has been a problem for years but the tide has turned you can see it-you can feel it.

Just look what happened during the reorganizations in the past few years. All of the Domestics had to shed Dealers to consolidate and the worst performers are now littering the landscape as many companies in many industries have done in the past. There are plenty more to come. Not only from the Manufacturers but from the Mega Dealers who are commoditizing the Industry and need more and more market area to execute their business models.

I fail to understand the mentality. Any competent consultant could walk into a large percentage of Small and Medium Dealerships and increase business by 25% (conservatively) and I know much more within 6-12 months without much effort if only the powers that be would sanction it. I am a student of Finance and economics and spent twenty years owning and operating businesses outside the Car Industry. People who have been in the same Industry their whole career in a lot of cases get tunnel vision and cannot think outside the box.

 The bottom line is a lot of Dealers need to start running the business like a business or put out the sign because if you don’t start thinking outside the box you will be on the outside looking in.

Comment by Wendi Nelson on June 24, 2013 at 4:05pm

I think that it is time to address the white elephant in our rooms- showrooms. I appreciate your not finger pointing but I believe its time. The car business is one of the last to "get it". We are notoriously a weak industry in the areas of management selection (yes, we tend to think if they can sell they can manage), sales recruiting (pulse check as a selection tool), training and development of the people that keep the business running (product videos and bad habit wielding veterans to shadow).

Main reasons this stuff still exists? Margin and profit. If it is margin is maintained and profit is made then there is a level of complacency/tolerance we operate within. There is no industry quite like the car business  good bad and ugly. Until we get it, and it starts from the top and flows down, unfortunately nothing will really change. Who will pay at the end of the day? The people who are talented and could make a huge difference in the culture (potential employees) and the customer.

I coined a phrase during the writing of my book and used it at workshops:

Three Body Rule- of hiring

Hire anyBODY

Treat them like noBODY

Effect everyBODY

If this is followed it is guaranteed 100% of the time you will 

1) have high turnover

2) have non existent repeat and referral business

3) have subpar CSI and SSI scores

4) have a featured page on DealerRater and YELP

5) have to spend more in advertising 

Just to name a few

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