Wednesday, February 13, 2013 | Edited by Daniel Moores
||'AutoNation' Now a Brand; Who's Next?
New Retail Model Could Trigger Trend
AutoNation Inc.'s move to put its corporate name on most of its stores signals the next wave for a dealership business model that has moved from exclusively mom-and-pop stores in a short period of time.
Some other large dealership groups -- Sonic Automotive Inc., for one -- are mulling their own branding efforts, and industry watchers envision a day when the country's biggest retailers unify their stores under corporate brand names.
But it won't be an overnight revolution. It took AutoNation, the country's largest dealership group, more than 13 years to transform its customer experience and dealership facilities to the point where executives felt branding made sense.
"We're ready to name the baby," AutoNation CEO Mike Jackson told Automotive News.
To make such a move, a dealership group must make sure it can deliver on a brand promise consistently at all of its stores. Some groups say they remain too small and regional to make branding worthwhile.
And manufacturer hurdles could be a challenge. Though AutoNation got approval from 11 manufacturers of mass-market vehicle brands, its luxury-brand stores are not included in the plan. Luxury manufacturers are much stricter about dealership names, typically preferring the name to reference only the vehicle brand and a geographic location.
Ultimately, 160 of the company's 221 dealerships, representing all of the company's mass-market brand stores and 82 percent of its retail volume, will convert to the AutoNation name. The luxury-brand stores will keep their current names.
Some manufacturers said AutoNation is the only large dealership group that has requested approval of such a plan. They say they will consider future retailer bids for corporate branding approvals on a case-by-case basis.
Millions in savings
Manufacturers blessed the AutoNation plan after a round of meetings that began last spring with visits to Toyota and Honda. To gain approval, AutoNation had to meet standards for customer satisfaction, sales efficiency and facility image programs. In some cases, the bar was set higher than the existing requirements in the framework agreements between AutoNation and the manufacturers.
By October, the retailer had formal approvals in place and began getting the necessary permits to erect the new AutoNation signs at its stores.
The transformation began Feb. 1 when AutoNation shed the Maroone name from 22 stores in South Florida. The Maroone name had been on dealerships for 58 years. AutoNation's predecessor, Republic Industries, acquired the name after buying current COO Michael Maroone's family company in 1997.
After the Maroone conversion, AutoNation will roll across the country, eliminating another 14 local market brands -- such as Power in Los Angeles and Champion in Texas -- by June. An $18 million marketing campaign will announce the change and will include TV, radio, print, direct mail and online advertising, plus store-level promotional materials.
Jackson is betting the move will win over customers and create significant savings. The company isn't giving savings estimates other than saying it will be in the millions of dollars.
Laying the foundation
Jackson and Maroone have nurtured the idea since Jackson arrived at the company in 1999. At that time, the young company was planning a national brand rollout, even making plans to show a commercial during the 2000 Super Bowl.
Jackson scrapped the effort, saying the then-struggling retailer needed to get its house in order. He questioned the benefit of a national brand for auto dealerships.
Even now, Jackson says the new branding campaign is not national in scope. With stores in 15 of the 50 states, AutoNation doesn't have a national footprint and doesn't intend to build one, he said.
To pull the trigger on a single brand, AutoNation first needed to lay the foundation in large part by improving its customer experience and improving stores. After investing $3.7 billion in those properties in recent years and consolidating store accounting functions to a center in Dallas, executives were ready to revisit the idea.
In a meeting last May in Jackson's 16th floor conference room in Fort Lauderdale, Fla., the pair declared the company ready while munching chicken-salad and turkey sandwiches.
The catalyst was a $50 million bet AutoNation is making during the next three years on digital efforts. The investment includes new dealership Web sites and a so-called digital storefront through which customers, theoretically, will save time on transactions and have more control of their shopping experience.
"When we looked at that bet and analyzed it, we came to the conclusion that the payoff on the bet would be exponentially stronger if we did it with one brand name rather than 15," Jackson said.
AutoNation's move creates a "high probability" that other major dealership groups will rebrand, said Larry Dominique, executive vice president of TrueCar.
"AutoNation will be the test ground for it," Dominique said. "If you see this working for AutoNation -- and I suspect you will see it working quite well -- I will expect you will see the other large groups considering doing this."
Scott Smith, president of Sonic Automotive Inc., the nation's third-largest retailer, said he's not focused on creating a national brand for Sonic's stores right now. But there's a "strong possibility" that it will happen in the future, Smith told Automotive News.
"In today's age, where there is so much information out there, the only thing that really differentiates you is your customer experience," Smith said. "Having your name up there on all those facilities really raises the bar on the level of service and being predictable, repeatable and sustainable at every location."
He praised AutoNation's move, saying branding promotes transparency. "It's a good thing for the industry, it's a good thing for consumers, it's a good thing for the manufacturers, too," Smith said.
The nation's second-largest retailer, Penske Automotive Group Inc., won't consider a similar move, Tony Pordon, Penske executive vice president of investor relations and corporate development, wrote in an e-mail.
"Since a vast majority of the business remains very much local, we believe there is great value in branding dealerships with the name of the location/city of operations and cross-promoting the local dealerships as part of a national presence," Pordon said.
Pordon also noted that Penske's business mix is 70 percent luxury. Sonic also has a large percentage of luxury stores, particularly BMW. For both, any kind of branding initiative could be challenged by potential resistance from luxury manufacturers.
Jackson declined to speculate on how AutoNation's move would influence the rest of the industry. But he did say last week that no one else is in a position to challenge AutoNation on this strategy.
"The hardest thing to do in business is to open up a sustainable competitive advantage," Jackson said. "I'm declaring today that we've done that."
AutoNation will drop these 15 regional brands by June:
AppleWay in Washington state
AutoWay in Tampa, Fla.
AutoWest in San Francisco Bay area
BankstonM in Dallas
Champion in Houston, Austin and Corpus Christi, Texas
Courtesy in Orlando
Desert in Las Vegas
Dobbs in Memphis
Fox in Baltimore
GO in Denver
Maroone in South Florida
Mike Shad in Jacksonville, Fla.
Mullinax in Cleveland
Power in Los Angeles and Phoenix
Team in Atlanta
(Source: Automotive News, 02/04/13)
||After Selling to Public Groups, These Dealers Have Returned to Retail
After 40 years of hawking cars, sewing machines and vacuums, and then cars again, Ira Rosenberg couldn't stop selling -- even after signing off on the largest deal of his life.
When Rosenberg and his son sold their five-store Massachusetts dealership group to Group 1 Automotive Inc. for a multimillion price in 2000, Rosenberg retired to Florida to take care of his ailing wife. But he continued to dabble in business, as an unsuccessful distributor of videoconference telephones and a restaurateur.
"After about 4 1/2 years of being retired, I couldn't stand it," Rosenberg, now 76, said. "I said to my wife: 'I can't handle it anymore. Let me go back to work or give me a lobotomy.'"
So in 2004 he bought a Toyota dealership in Maine and returned to the dealership floor, where he had wanted to be all along.
Rosenberg isn't the only dealer who sold to a public group and then staged a comeback.
Dozens of retailers who sold out, particularly during the early years of consolidation, have gotten back into the game, sometimes right away. Some worked for the public companies that acquired their stores or tried retirement or other business ventures first. But they all found it hard to stay away from the entrepreneurial world of auto retailing.
The reasons are many. Some regretted selling and wanted to run their own businesses again. Some wanted to set up dealerships for the next generation to operate. Many sold when they were in their 40s and 50s and found they didn't like working for someone else.
Dealer consultant Alan Haig has seen many of those dealers come full circle. Haig, a former AutoNation Inc. executive, worked with them when they sold their stores. And in his current role handling dealership transactions for Presidio Group of San Francisco, he has helped some buy new stores.
"They've spent decades developing their ability in auto retail, and they have a lot of energy left," Haig said.
It can be hard to let go of the lifestyle of a dealer.
"His name is on the door, he wins trips, he's written about in the newspaper -- he's a big cheese in his community," Haig said. "When he sells his company to a big publicly traded firm, he is no longer the big cheese."
It's also lonely outside the dealer fraternity. "It's supportive, it's fun and it massages their ego," said Loyd Rawls, an Orlando consultant who advises dealers on succession planning.
Perhaps most important, few other industries provide the return on investment and cash flow of auto retailing. And with more than 17,000 dealerships out there, former dealers can re-enter the business relatively easily.
"They understand the automobile business, they understand the risk and rewards, and they have developed a level of resilience to the frustration," Rawls said. "When they take that money they get from selling and invest it in the markets, most are dealing with something they know nothing about. They're a small fish in a very big ocean. So they gravitate back to the auto business."
Entrepreneurial drive explains Mitch Pierce's comeback. After selling his Tempe, Ariz., stores to Republic Industries, AutoNation's forebear, for $48 million in stock in 1997, Pierce ran the public company's Arizona and Nevada markets for six years.
"At the end of the day, I just missed having my own company and taking the risk and building the team and the relationships," said Pierce, who owns his current stores mainly with ex-football great John Elway. "We're in the people business and the relationship business."
Elway is one of the industry's best-known comeback stories. He also sold his Denver-based group to Republic in 1997. Elway and Pierce first teamed up in 2004 on a California Toyota store.
Other well-known dealers who have gotten back in the game include Arkansas dealers Steve Landers and Mack McLarty, who sold to major public groups. They later joined forces to create what is now known as RLJ McLarty Landers Automotive Holdings, the nation's 19th-largest dealership group.
"We competed against each other for years and ended up becoming partners," Landers said. He stepped down as president of RLJ McLarty Landers on Jan. 1 but continues to own stores with his son.
For many dealers, selling to the publics meant millions of dollars in the bank and the ability to take care of their families for generations.
Tom Hessert was looking for that assurance when he sold nearly all of his New Jersey dealerships to UnitedAuto Group in 1998.
"I elected to take the money off the table for the security of my family forever," said Hessert, who eventually bought back some of his stores. "I figured I would be able to go back and purchase dealerships later on."
But setting up the next generation is also a reason to return.
Jim Nalley of Atlanta sold his Atlanta-based dealership group to Asbury Automotive Group in 1997, when his three sons were in their 20s. Nalley continued to run the stores for the public company, and his sons worked at Asbury. But by 2006 they were itching to run their own stores. Nalley stepped in with financing and some advice.
"I'm sure it was a shock to them," Nalley said of the sale of the dealership group, which had been in the family for nearly 80 years. "But I think it's working out for them."
(Source: Automotive News, 02/11/13)
||Toyota, Ford, Honda Rank Highest in Consumer Reports Survey
Toyota, Ford and Honda ranked highest in a consumer survey of brand perception by Consumer Reports, and Tesla -- the California-based maker of electric cars -- made the Top 10.
The best brands list largely mirrors the survey from last year, in which the top six brands finished in the same order, according to the product-testing organization and consumer magazine.
Scoring worst in the survey were Mitsubishi and Toyota's Scion brand -- tying for last place -- and Ram trucks, scoring third worst.
The rankings are based on a random nationally representative sample of consumers who answered questions about automakers in seven categories: quality, safety, value, performance, design/style, technology/innovation, and environmentally-friendly/green. Results were combined into an overall perception score. They do not reflect actual quality or product testing by Consumer Reports.
The perception results differed significantly from the magazine's reliability rankings, last released in October.
Ford, for instance, scored second in consumer perception while scoring second-to-last in the reliability rankings, a precipitous drop over Ford's reliability scores in recent years, stemming largely from problems with its MyFord Touch infotainment system.
Toyota's Scion brand had the opposite dynamic -- scoring first among 28 brands in reliability but dead last in consumer perception in a tie with Mitsubishi. (Toyota and its Lexus luxury division rounded out the top three in reliability, giving the automaker a clean sweep.)
Tesla, the maker of electric cars, place 10th in the perception ranking for the second year in a row -- even though it currently sells just one model, in low volumes, at prices topping $80,000.
"It is clear that it takes more than a single ad campaign or new product for most brands to connect with consumers and earn their favor," Consumer Reports said in a release. "The rare exception is Tesla, a small, electric-car builder that has garnered awards for its new Model S sedan and made a notable splash in this latest survey."
In general terms, automakers are competing fiercely to earn the notice and trust of today's consumers, the magazine said.
"This past year brought stability and increased sales to much of the automotive industry. Yet, the brand awareness scores for some like BMW, Buick and Hyundai have declined," said Jeff Bartlett, deputy auto editor online at Consumer Reports. "The data shows that it has become harder for companies to compete for share of mind. Consumers are not seeing as much differentiation between brands."
Quality and safety remain the top two car buying factors for consumers, followed closely by value and performance, according to the survey. Consumers also have a genuine interest in environmentally-friendly cars, but for many consumers, the magazine said, "the green in the wallet drives more purchasing decisions."
Here are the lists of the best and worst brands in overall consumer perception, along with their scores on the survey.
1. Toyota, 133
2. Ford, 118
3. Honda, 114
4. Chevrolet, 94
5. Mercedes-Benz, 77
6. Volvo, 77
7. Cadillac, 66
8. BMW, 66
9. Dodge, 56
10. Tesla, 55
1. Scion, 6
1. Mitsubishi, 6
3. Ram, 7
4. Fiat, 8
5. Mini, 10
6. Land Rover, 11
7. Jaguar, 15
8. Mazda, 16
9. Jeep, 16
10. Porsche, 21
(Source: Los Angeles Times, 02/01/13)
Daily Sales Tip: Remember Who You're Talking To
When meeting with a prospective customer, make your conversational tone one of respect. Suppose we carelessly utter to the prospect, "Do you know what I mean?" He or she just heard from us: "How could you possibly disagree?" A more respectful offering is, "I want to be sure I express this properly; so may I clarify?"
How about when the buyer poses the same question to us? Seize the opportunity to clarify the exchange of ideas by responding this way: Look into the buyer's eyes and state inquisitively, "No, I do not quite understand. Could you tell me more?" This may also persuade the customer to state his/her position in a way that might reveal critical motivations.
Source: Sales consultant/trainer Robert Menard