||No-Dicker Stickers Win Backers in Internet Era
Saves Time, Cuts Costs, Eases Showroom Tension
In an era when consumers have unprecedented Internet access to vehicle prices, some dealers are turning to an old retail concept: no-dicker selling.
"Your customers already really know about the car's price," says Alison Spitzer, the 32-year-old vice president of operations for her family's 108-year-old Cleveland auto retail group, Spitzer Management. "Why put a price on the Web that you're just going to have to spend an hour and a half negotiating down from?"
Spitzer is part of a new wave of dealers taking the plunge into no-haggle retailing, a concept that burst upon the American auto market in 1990 with the rollout of General Motors' Saturn brand.
Back then, dealers were trying it to differentiate themselves, as part of Saturn's pitch as "a different kind of car company." Today they are doing it because the Internet has changed the nature of vehicle selling -- and in an effort to create a new working environment.
Spitzer rallied her family elders at the company around a plan to convert all 15 of their stores to one-price. The first four switched in August. The next four or five will change over next month and the others will follow in 2013.
"We want to embrace the Internet as our friend," says the young executive, who joined the company five years ago. "What's valuable to consumers now is their time and how they feel like they were treated."
It is unclear how many dealers are on the one-price retailing path. The National Automobile Dealers Association says it does not track one-price selling among its members. Mark Rikess, a retail consultant who promotes no-haggle retailing around the country, estimates that 150 to 200 new-vehicle dealerships have or are pursuing one-price plans.
That's a tiny percentage of the more than 17,000 new-car dealerships in the nation. Clearly, more retailers are committed to traditional sales practices than to changing them. But even among dealers who are skeptical of one-price, there is some sense that consumer pricing expectations are evolving.
"I don't see a lot of people going to a true one-price model," says Mike Maroone, president of the country's biggest retail group, AutoNation Inc. "We've spent the past 40 years educating consumers that our prices are negotiable."
But Maroone adds that AutoNation is experimenting with new pricing strategies, including one called market pricing.
"It's a move to a fair price, but with a little margin left in for just a little negotiating," Maroone says. "We're still in test mode on it."
Asbury expands test
If one-price is gaining a new look, it is due mainly to the Internet.
Internet shopping was not even around in 1990 when Saturn arrived. It is now ubiquitous in vehicle shopping. Advertising used cars with no-dicker stickers has become common for many dealerships. And online vehicle pricing services offer consumers shopping assistance based on prices calculated from real dealer transaction data.
Asbury Automotive Group, the industry's seventh-largest retailer with 77 stores, said last month that its year-old experiment with one-price selling at three stores in Richmond, Va., has been a success. This year it expanded the concept to a BMW store in Decatur, Ga., and intends to bring other stores into the practice.
Dealers who have adopted no-dicker stickering say it has broad benefits. It can bring down store operating costs and increase unit sales despite lower per-vehicle grosses, they say. Others say that removing haggling allows a dealership to attract a different kind of sales staff, including younger people and more women. More important, they say, in an age when consumers blab about everything they like and don't like on Facebook and Yelp, no-haggle prices can make customers happier.
"We're doing it because it's what our customers want us to do," says one Ford dealer in the Southeast who just converted his fourth store to haggle-free selling in November. He asked not to be named because the organization is so new to the sales approach that he wants his managers to become more practiced at the craft before falling under public scrutiny. He has not even mentioned the practice in his advertising.
"But I can tell you this -- it's working for us," he offers. "Sales at the first two haggle-free stores we converted last year are up by double-digit increases. And our first-time closing rates are up considerably."
Big in Minnesota
In the St. Paul-Minneapolis market, it is common for new-car shoppers to buy at no-haggle dealerships. All of Walser Automotive's 14 area franchises are one-price. So are all of Morrie Automotive Group's 10 rooftops there -- except for its Bentley franchise.
"We probably have the greatest concentration of one-price dealerships in the nation here," Morrie group President Morrie Wagener calculates. "Walser really pioneered it here. We followed Walser, and others have followed us. Customers here like it.
"We made the decision to go this route in 2009, just as the economy was crashing," he recalls. "My attitude was we might as well try something new. Some of our people didn't like the idea at first. They told me, 'I've got to keep negotiating so I can make money.' And I thought, what does that say about how we view our customers?"
Rikess says three larger factors are fueling the trend: the Internet, the quest for young buyers and the growing desire to make car dealerships better places to work.
"People are used to the kind of shopping experience you get in an Apple store, where staffers are knowledgeable about the product and they aren't trying to pressure you," Rikess says.
Creating a new sort of workplace was the key reason Harr Motor Group in Worcester, Mass., converted its Toyota and Dodge group to one-price last year, says Mike Gross, the general manager.
"Young people just don't want to work in a traditional negotiation dealership," Gross says. "And frankly, I was tired of always running help-wanted ads and getting the same old applicants who had the same old price-negotiation skills."
Today, he says, the store has a better-educated sales force and better gender balance.
Before his one-price conversion, Gross was lucky to have two female salespeople on his Toyota store's sales staff of 18 -- a critical issue for dealerships that want to attract female shoppers. He now has seven.
"You can probably sum all this up in two words," he adds: "'Gen Y.' The young buyers today find the whole traditional retailing process sort of distasteful."
It is also a matter of facing up to reality, says Larry Dominique, president of ALG, TrueCar Inc.'s vehicle residuals unit. Internet data have ripped away most of the old secrecy involved in determining what a new vehicle really costs.
"Whether you're shopping for a stereo or a camera or a car, the reality today is that people know what's reasonable for a price," Dominique says. "So why not use the transparency to your advantage?"
ALG surveys show that consumers are happier with their experience if they walk into the showroom already satisfied with the price, he says.
This isn't the first time the retail industry has started down this road.
More than 20 years ago, the concept gained ground with Saturn's arrival. Saturn dealers -- many of them among the nation's most prosperous retailers -- embraced the idea of assuring shoppers that there would be no further negotiating on the sticker price.
Ford Motor Co. took a swing at one-price when it tried to consolidate store ownership in some major markets in the 1990s. Ford's hope was to get away from price-undercutting among fellow Ford dealers. But for a variety of reasons, the consolidation plan, including the one-price portion of it, failed.
Toyota's Scion brand was launched in 2003 with a version of one-price that it calls pure pricing -- and is in some ways the surviving standard-bearer for the approach. Scion launched with pure pricing as a way of appealing to young, first-time buyers, says Owen Peacock, Scion's national marketing and communications manager. There are nuances to the practice, but it is written into the Scion franchise covenant.
Despite the early sizzle, the practice mostly went cold in the 2000s. Those big-volume years put pressure on retailers to move metal to help manufacturers clear oversized factory inventories. It was a decade of deal-cutting and price slashing.
But some independent retailers didn't let go of the idea.
Saturn retailer Joe Serra of Grand Blanc, Mich., for example, found Saturn's philosophy attractive as "the way everybody should be doing business." In the 1990s, he took the daring step of spreading no-haggle selling to his family's high-volume Chevrolet store. Many of the store's sales personnel responded by giving notice.
Serra has stuck with the concept for two decades, and now operates all eight of his Grand Blanc import and domestic franchises as one-price -- including his Cadillac store. This year he acquired local Chrysler, Dodge, Jeep and Ram franchises, moved them into his Serra Auto Plaza and converted them to one-price selling. Some sales personnel stayed with Serra, but most left.
"You're always going to lose some people over this," Serra says of the shift to one-price. "They won't even give you time to prove that they can still do very well under one-price. But you have to tell them -- you can't expect to make your paychecks off of negotiating inflated prices."
But even Serra doesn't force the issue. His retail group also owns 13 dealerships outside Michigan, and Serra leaves it up to local managers to embrace or reject no-haggle.
Not one of the 13 has embraced the practice, Serra reports.
"And that's fine," he concedes. "You have to believe in one-price for it to work. If the local manager doesn't really believe it will work for him, then it will never work."
Faster sales process
There are pros and cons, dealers say. Chief among the cons: Some customers simply leave when a salesman refuses to dicker.
"You do lose some deals," says Minnesota dealer Wagener, but "I also lost deals when we were negotiating prices."
Offsetting that is a faster sales process, enabling the store to conclude more deals per day. The Southeastern Ford dealer who requested anonymity cites the example of one of his veteran salesmen who reluctantly agreed to stick around and give one-price a shot.
"In the negotiation system, he was an 8-to-10 cars-a-month sales guy. He's now doing 30 a month," the dealer reports.
Harr's Gross adds that if negotiation is removed from the deal, a new salesperson can routinely close 14 to 15 sales a month.
"Even a new employee can get you in and out of here in two hours," Gross says.
The cost of sales comes down as a result, says Doug Sprinthall, director of new- and used-car operations at Walser Automotive. Salespeople are on salary, or paid on the number of closings, and perhaps given incentives for customer satisfaction -- and are not paid commissions based on transaction grosses.
"In a negotiating store, it's normal to have salespeople making commission salaries in the low $100s," Sprinthall says. "When it's one-price, the salary range is going to be in the $40,000-$50,000 range." But the sales process moves faster, meaning that sales staffers can close more deals and potentially earn additional performance incentives -- not through inflated transaction prices but by meeting store sales targets.
Some one-price operations also have salespeople handle their own finance and insurance sales, offering them additional compensation if they hit targets on service plans, insurance options and other products.
"You're still going to have a few salespeople who will make $100,000 through bonuses and high customer-satisfaction results," Sprinthall says. "But it's not because they're getting high gross on transactions. Those days are gone."
(Source: Automotive News, 12/17/12)
||Sales of Alternative Fuel Vehicles on the Rise
Sales of alternative fuel vehicles are up 73%, with nearly 440,000 hybrid, plug-in hybrid, and electrics sold so far this year, according to the latest research from Chicago-based Mintel.
The rapid sales growth in hybrid and electric vehicles makes the segment the fastest growing in the United States for 2012, supplanting the still fast-growing compact car vehicle segment.
The number of plug-in and electric models available to the public has nearly quadrupled over the year -- from three models in 2011 to 11 available today.
And hybrids and electrics will make even more headwind in the U.S. market over the coming years, Mintel predicts.
Over the past nine years, the share of hybrid and electric cars has grown from virtually zero (0.5%) in 2004 to 3.3% in 2012 of all vehicles sold. Mintel forecasts sales of hybrid and electric cars to exceed 535,000 units by the end of 2013, or a 14% increase in sales over 2012 estimates.
Furthermore, Mintel forecasts that by 2017, sales of hybrid and electric vehicles will reach 850,000 units as newer models gain traction with consumers. It expects the market to account for 5% of the total U.S. car market by 2017.
"New midsize hybrid models, such as the Toyota Prius v and Chevrolet Malibu Eco, have proven popular with consumers, in particular families, who want to buy green without sacrificing other features that fit their lifestyles," Colin Bird, automotive analyst at Mintel, said.
"The segment will grow even further in 2013, with the launch of several new models, including the complete Ford Fusion Hybrid series, and the Honda Accord Hybrid, which will fulfill a wider variety of needs than conventional compact hybrids. Midsize plug-in hybrids will also enter the mainstream in 2013, with the introduction of the Ford Fusion Energi and the Honda Accord Plug-in, which will further improve mainstream acceptance of this, still, fairly novel powertrain segment."
Consumer concern for the high cost of fuel may drive the development of the market even further, said Mintel. More than one-third (34%) of younger consumers aged 25 to 34 think that "it is easy to make back the extra money spent on a hybrid car in savings at the pump."
There are still some factors preventing consumers from buying a plug-in hybrid or electric car, however. Battery issues are a top concern among consumers, with 87% worrying about the length of time the battery will run for, 86% are concerned about not being able to find somewhere to recharge their vehicle while on a trip, and the same number (86%) are concerned about availability of places to charge outside the home or their area of living.
Another source of apprehension for 85% of U.S. consumers is the recharge time of plug-ins and electric vehicles.
Price remains the biggest hurdle for plug-in hybrids and electric cars as they enter the market. Mintel's consumer survey showed that the average consumer was willing to spend about $2,000 more to upgrade from a conventional car to an electric-only version of the same car; however, today's plug-in hybrids and electric cars cost between $10,000 and $20,000 more than their conventional counterparts.
"The 'live for today' mentality that prompted the rise of SUVs has disappeared. Consumers today demand products that promise protection and durability. There is a new mentality that emphasizes preparing for and protecting against potential future disasters such as another oil shock or even just steadily rising prices at the pump. Hybrid and electric cars might be positioned to help consumers weather the storm of future spikes at the pump and they might be marketed as long-term investments that can help consumers protect against likely increases in gas prices. Messaging might be similar to advertisements for financial products, with the long-term savings on gasoline measured as 'returns'," Colin said.
(Source: CSP Daily News, 12/18/12)