Move will create marketing efficiencies
The bold move to rebrand most of the No. 1 dealership group's stores as AutoNation facilities could increase marketing efficiency and brand awareness, marketing professionals say.
"If you are not a brand, the only other thing you can be is a commodity and you are only about the lowest price -- even if you win, you lose," said Cheril Hendry, CEO of Brandtailers, an Irvine, Calif., advertising agency.
"It is challenging for dealers to understand that they have to be their own brand."
AutoNation's rebranding is likely to "lead to more people shopping them," Hendry said. But that will happen only if "they put a good brand message out there" and "represent themselves in the marketplace in such a way that they build trust," Hendry said.
"The issue is going to be can they really pull off a better retail experience" than a smaller local dealership, said Charlie Hughes of Brandrule LLC in Snowmass Village, Colo. "The key is developing a retail experience that is better. The issue for many is manufacturers tell dealers how to run their stores."
AutoNation doesn't have that problem, Hughes said. "They own and they run the stores -- and they run them very efficiently."
Building a coast-to-coast brand creates a unified message that may have a payoff in a population that is increasingly mobile, he said. "They have the efficiency of advertising one brand, which is huge. The American public is mobile, and if I'm in Colorado and if I move to Florida three years later, they have a leg up."
Matthew Nemer, managing director for equity research at Wells Fargo Securities LLC, said the biggest advantage is that AutoNation will be able to do national advertising. "It is more efficient than regional advertising -- once you get to a certain amount of markets, you get the U.S. for free."
Whether branding will bring AutoNation real financial benefits isn't clear, said James Albertine, an analyst with Stifel Nicolaus & Co. in Baltimore. "I do not know, aside from helping AutoNation's search engine hit, what the true impact to the financial model is at this point."
Larry Dominique, executive vice president of TrueCar, said the consistency of a national brand will make AutoNation more visible to a national audience: "We will see a consistent execution of the brand, everything from the signage to procedure and pricing."
Inventory management, ordering and pricing already are centralized, so the rebranding won't have a huge effect on the day-to-day operations, he said. But AutoNation will save on marketing, "and branding will offer them economies."
Albertine said there's a chance AutoNation's move may not bode well with buyers who are loyal to dealers in their area. 'You are taking the local out of the auto dealer model to some extent."
"AutoNation management said it would be naive to assume no disruption as you take down those local brands that have developed and replace them with a coast-to-coast brand," he said.
"There is enough of a critical demand to drive this model coast to coast. I don't know if 2013 is that inflection point and we will have to wait and see."
Hendry of Brandtailers said that the future of such coast-to-coast branding by public groups could depend to some extent on how well AutoNation executes its plan: "If they don't do it right, they could turn the whole industry off from following in their footsteps."