Rethinking auto dealership renovations
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A year ago, the issue of facility improvements reached a critical point in the relationship between auto manufacturers and their franchised dealers.
Today, the tone is decidedly different.
The manufacturers' retail network is more profitable today than in the dark days of the Great Recession. Sales are improving. Brand portfolios are expanding with entries in hot, new segments. And quality has improved.
The industry is healthy.
There's no question: An improving industry has collectively dulled the pain of the cash-intensive renovations.
But there are still issues for the auto executives, dealers and others who were scheduled to learn the results of a second National Automobile Dealers Association study on the subject when they gathered at the NADA convention in Orlando over the weekend.
First, manufacturers need to be flexible in their approach to dealership facility requirements; now is not the time for manufacturers to make unreasonable demands.
Second, as Glenn Mercer, the study's author, told Automotive News: Dealers and manufacturers need to be more mindful that the facilities created today be flexible enough to support the requirements of the dealership of the future.
For the second year in a row, the Mercer study has concluded that expensive new dealership facilities don't return the revenue to justify the heavy investment. The return, in some cases, just isn't there, especially for stores already in good shape that require investment to conform to factory image standards.
As the new report indicates, dealers with decrepit stores could recoup their investment -- in certain cases, times three within three to five years. Dealers who expand their service capacity also can expect to get all their money back or more if the local market is robust enough to fill the added bays.
It is not unreasonable for automakers to demand such investments.
NADA is correct in asserting that factories need to play a role in encouraging creativity and flexibility in dealership design.
As Mercer said, manufacturer store designs should be flexible enough for a dealer to reconfigure a dealership quickly and at a reasonable cost to comply with changing image standards.
There is no question that technology and the consumer experience will continue to change. Perhaps that creates the opportunity for a middle ground between dealers and manufacturers. Dealers can use technology to their advantage.
We agree with Mercer that there is room to rethink matters.
In these better times, "cooperation" must be the key word.
