Old sales force is history at LAcarGUY
Printed in Automotive News May 30, 2011
California megadealer Mike Sullivan started phasing out the conventional sales force nearly seven years ago. Gone are the familiar price haggling, the aggressive closers, the commission on gross profit.
The sales staffers at Sullivan Automotive Group's 11 new-vehicle stores, also known as the LAcarGUY Family of Dealerships, are called "brand specialists." They provide information on vehicle features and inventory. The sales managers, introduced early in the process, handle all price negotiations in a nonconfrontational way. The manager outlines choices for the customer. There is no pressure to buy today.
The new process, a response to shrinking profit margins and lower light-vehicle sales, has paid off in higher profits and low sales force turnover.
The company refused to disclose specifics on profits. Sullivan has Toyota, Scion, Audi, Porsche, Volks-wagen, Lexus, Subaru and Fisker franchises. "I'm holding more margin than I did five years ago," Sullivan says.
The LAcarGUY dealerships turn over 25 to 33 percent of the sales force in a year, depending on the store. The overall industry average has run closer to 50 percent, National Automobile Dealers Association data show.
Sullivan's sales force also is more productive. Several years ago the average sales productivity was eight cars a month; now his brand specialists average 12 units a month.
Internet shopping and automakers' pricing policies have eroded new-vehicle profit margins industrywide. When the recession hit, it cemented Sullivan's decision to change the sales culture.
"Gross went to nothing," he says. "In the old days a strong negotiator was paid a bunch of money making a commission on gross. Today, they'd get paid nothing."
Some of Sullivan's manufacturers have cut the dealer discount -- the difference between what a dealer pays for a vehicle and its sticker price -- and require dealers to earn back the profit by improving their dealership properties and meeting operating standards.
For example, Sullivan says where he used to gross $2,000 on a new vehicle, he makes $800 with the opportunity to earn $1,200 more for meeting the factory's requirements.
As grosses have declined, dealers have resorted to paying minimum commissions.
"You can't pay a superstar who sells 20 cars a month $100 per car," says Sean Homayoun, general manager of Volkswagen Santa Monica, part of the LAcarGUY group. "That would be just $2,000." Homayoun's store has 17 brand specialists, six of them specializing in Internet leads.
At Sullivan's stores, about half a brand specialist's pay is salary. The rest is bonuses tied to factors such as vehicle deliveries, appointments and customer-satisfaction scores. Homayoun says it's not uncommon for brand specialists to make more than $100,000 a year.
Sullivan also offers better hours than typical dealerships. Brand specialists usually work from 40 to 55 hours a week, compared with 60-plus hours at many other dealerships. They get one weekend off a month.
For the new culture to stick, it requires constant training. Industry veterans need to be retrained, and new hires must learn the industry.
"The process has to be consistent," Sullivan says. "That's why we spend hours every week training people on what to do, what to say and when to say that."
Managers train brand specialists every week. One week of every month, the company has an outside trainer provide several hours of training for the entire staff.
Brand specialists shoot for a 10 percent close ratio on fresh prospects and try to get the rest to return to the store. These "be-backs" are much more likely to make a purchase.
"A salesperson can't live on that fresh traffic," says trainer Danny Alkassmi of Rising Beyond Inc. "You must bring the nonbuyer back. Out of 10 customers you close one, and you bring five of those nine back. If you bring five back, three are going to buy."�c