How dealers coped with a challenging year
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Jon Lancaster Toyota in Madison, Wis., started 2011 with the goal of bolstering its quick-service operation. Today the four-lane shop is pulling in more than $200,000 a month in sales, up from $125,000 at the beginning of the year.
General Manager Joe St. Marie credits the gain to a relentless focus on improving the customer experience.
Hours have been expanded with no appointment necessary, and jobs are completed faster. An oil change and tire rotation can be done in 15 minutes, St. Marie said. Each customer gets a free car wash.
Purchases over $25 -- an oil change is $29.95 -- are accompanied by a year of roadside assistance. Routine inspections are generating tire replacement and other service jobs. Work on non-Toyota vehicles is on the rise as employees emphasize the dealership's ability to work on other makes.
Toyota's October 2010 decision to include two years of scheduled maintenance in a vehicle's purchase price also has boosted revenue. And in an experiment that ran through June, the dealership offered one year of free maintenance to buyers of used vehicles.
"This is the test period," St. Marie said. "The hope is, we've created such a great positive experience that they like it and they'll come back, but now it will be on their nickel."
The improvement at Jon Lancaster Toyota is just one example of the innovative approaches dealers took in 2011 to increase business in a year when the industry was challenged by an earthquake, economic uncertainty, tight vehicle supplies and soaring used-vehicle prices.
Vehicle shortages were a problem for many of the 146 dealers who responded to an unscientific Automotive News survey last week. Almost three-fourths of respondents said they tried something new this year to boost used-vehicle supply.
"The inventory situation was a great excuse for us to refocus on what we should have been doing all along but had gotten a little slack on," said one dealer.
Nearly a quarter of dealers said they paid more for trade-ins. More than a quarter said they contacted existing customers and asked to buy vehicles. Two out of 10 said they took vehicles that were older and in need of more reconditioning than they would have considered in the past. Others said they used online auctions more and turned to buying from rental car companies.
A quarter said they worked with manufacturers to get more allocation of new vehicles.
Frank Allocca, who owns Honda and Mercedes stores in Newton, N.J., benefited more than usual from his practice of building inventory each winter for the spring selling season.
On Jan. 1, his Honda store, one of the top 25 Honda stores by volume in the country, had 870 new cars, roughly a 100-day supply. Allocca built his stock by taking allocation turned down by other dealers, and it proved to be a good call when the earthquake struck Japan in March.
"We were much better off," he said. "In June, we actually sold some cars to other dealers to get future '12s."
Referring to later flooding that crippled parts production in Thailand, he added: "If we'd known about the floods, we'd have kept them."
The Honda store's supply is back down to about 30 days. Through November, the dealership averaged sales of 236 new Hondas per month, down from 303 a month last year.
On the other hand, the supply constraints helped dealers make more money on the vehicles they did have to sell. One-fifth of survey respondents said they were able to use the supply shortages to increase margins.
"It was very simple this year," a dealer said. "With lower inventory, you had to make your sales team focus on the gross and getting the customer delivered."
Said another dealer: "We quit selling price."
It paid off for Allocca's New Jersey Honda dealership. Customers knew supplies were tight and were prepared to pay more. His gross profit per car went from $940 in 2010 to $1,480 in 2011.
"That's significant," he said. "It drops right to the bottom line."
You can reach Amy Wilson at awilson@crain.com.
