Savvy buyers force dealer upgrades
"In the old days, many dealers didn't realize you have to build a solid customer base for a sustained business," says Lubo Li, director of business and market development for J.D. Power Asia Pacific. "Today, unless you have the combination of service and sales, you are not going to be successful."
Automakers in China devote considerable time and money to dealership staff training. Consumers spend a higher proportion of disposable income on vehicles than those in other big auto markets. For such a major purchase, they want all the facts.
So they ask lots of questions about a car's technology, use and warranty. They expect dealership employees to have the answers. The increasing sophistication of Chinese buyers has pushed automakers to make big changes in their dealership systems.
PSA/Pegueot-Citroen SA began standardizing its Chinese dealerships and training 5,000 salespeople in 2000. Before that, most of the company's dealerships were repair shops for Dongfeng trucks, says Gilles Debonnet, director general for the Citroen brand in China. Dongfeng Corp. is PSA's Chinese joint-venture partner.
'Train, train, train'
"We had 5,000 salespeople with different techniques," Debonnet says. "It was quite difficult. We have to train, train, train." PSA has opened a permanent sales and technician training school in Beijing.
One of the things sales employees learn is patience. Chinese buyers typically take two hours to a week to decide whether to buy a car, says Dale Sullivan, who was Chevrolet brand manager for General Motors China from 2003 to June 2006. "In the U.S., they like to get that done in 45 minutes," he says.
Salespeople also must be ready to explain negative comments about specific vehicles that China's Internet-savvy consumers may have read in online chat rooms. Some come to dealerships clutching printouts of what they've read.
"Customers read a lot of material online and in print, but they don't always believe it," says 30-year-old Zhang Song, sales manager at the Beijing Dashixing Chevrolet dealership. "They want us to confirm."
Adding salespeople - and dealerships - fast enough to keep pace with the growth of China's car market is tough. Last year, annual car sales in China grew by 26.8 percent to 3.1 million vehicles, says Automotive Resources Asia, a consulting firm in Shanghai. This year, sales are expected to grow by at least 15 percent.
"One dealer a week was recruited and appointed last year," says David Thomas, vice president of China distribution operations for Ford Motor (China) Ltd. "It will be the same this year."
That means training new staff each week as well, Thomas says.
Ford has 155 sales points in China. Thomas visits each of the four sales regions in China every two months. He holds three-hour question-and-answer sessions with dealers to understand their concerns.
Thomas is traveling to China's inland provinces more these days, as demand spreads from China's wealthy east coast cities. But inland provinces are not the only places where dealerships are popping up. "We aren't just starting east and moving west," he says. "We are also appointing more dealers in Shanghai, Beijing and other coastal cities."
After the sale
After-sale service training also is in demand. Dealers in China are starting to realize that service operations can make money. That wasn't always so.
"Dealers started to understand that profitability comes from aftersales about three years ago," Debonnet says. "Before that they thought it all came from sales."
Some Chevrolet dealers in China are doubling or tripling their parts revenues each month, Sullivan says. ACDelco, GM's aftermarket parts division, started doing business in China last year.
Still, persuading Chinese customers to return to the dealership for service after the initial warranty expires is a challenge, says Sun Jian, a vice president with the A.T. Kearney consulting firm in Shanghai. "The obstacle is that the dealer usually charges more for the spare parts" than China's many independent repair shops, he says.
Unlike their U.S. counterparts, Chinese dealerships generally don't keep lots of vehicles in stock. Buyers must wait a few days to a few months for delivery, depending on the model.
Dealerships earn customer loyalty with on-time delivery of a vehicle. Owners want the dealer's representative to be able to answer technical questions, says J.D. Power's Li. "That has a huge impact on how customers feel about a dealership," he says.
David Riemenschneider, managing director of the Asia Pacific region for Clifford Thames Ltd., says Chinese dealers don't do all they can to attract repeat business. Clifford Thames, of Chelmsford, England, provides aftermarket data management services such as parts catalogs and wholesale pricing information.
Riemenschneider says that dealers don't send service reminders or otherwise contact customers enough after the sale. "It is really important to stay in touch with the customer, to bring them in after three months," he says. "It doesn't appear anybody is doing this in China."
One problem is the rudimentary state of dealer management systems in China. Most automakers say they use the same systems as in their home countries. But the China versions often have fewer functions.
For example, Ford's dealer management system in China doesn't provide for a detailed exchange of customer in formation between dealers and regional managers. In the early days of Ford's franchise system in China, says Ford's Thomas, complex systems often were not a good investment for dealers.
"The speed of growth has prevented us from having" a sophisticated dealer management system in China, Thomas says. "It is an area of shortcoming. We are working on that now."
Management of spare parts by dealerships is complicated by China's fragmented parts market, says Citroen's Debonnet.
A March 2006 study by Clifford Thames concluded that 30 percent of customers who took their vehicles to dealerships for repairs were told that the store did not have the proper part. Many Chinese dealerships are as much as a two-hour drive from residential areas.
In other respects, service levels are improving. For example, a 2001 survey by J.D. Power and Associates found that only 29 percent of Chinese dealerships vacuumed and washed a car after repairing it. By 2005, 88 percent of dealerships returned a clean car to customers.
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