A look at the dealership of 2025
Future stores must be easily modified
 | Mercer: Dealers struggle to meet factory demands. |
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ORLANDO -- What will the ideal new-car dealership of 2025 look like and how will it operate?
Much different from the dealership of today, according to the National Automobile Dealers Association's phase two facility study. The report says the ideal store of the future will:
• Sell more vehicles from the same-sized showroom -- a generic box that can be adapted at minimal expense to changing manufacturer standards.
• Maintain a satellite service center and downtown demonstrator outlet to give customers more choice in how to shop for and repair their vehicles.
• Move support functions off-site to lower-cost property.
Study author Glenn Mercer and NADA leaders say the change is necessary. Dealerships built today cost more than they're worth and can't be easily modified when automakers dictate new designs. Dealers and manufacturers must be more creative and flexible with their approach to facility projects, particularly as the cost of acquiring land and construction soars.
"We need a cheaper way to alter the brand imaging of the store to reflect consumer needs without having to tear it down and rebuild it occasionally," said Mercer, a former McKinsey & Co. partner.
Despite Mercer's vision for 2025, he acknowledges that half of all U.S. dealerships may change little by then. But a third are likely to adopt one or more significant change to their physical facilities by 2025.
Dealerships have opportunities in service, Mercer said. Offering vehicle pickup and drop-off or mobile repair units that can make minor fixes in a driveway can help set a retailer apart from competitors.
"We think there is a lot of room for the dealership of the future to really innovate on service -- the answer is not a bigger and bigger service department," Mercer said.
Outgoing NADA Chairman Bill Underriner, a Buick, Honda, Hyundai and Volvo dealer in Billings, Mont., is taking that lesson to heart as he plans a new dealership. Service will be the focal point, moving to the front of the building.
But Underriner worries about what will happen if one of his manufacturers sets new standards in five or 10 years and declares his relatively new building out of compliance.
"Rigid manufacturer standards stifle innovation," Underriner said. "And why would a manufacturer stifle innovation?"
 | Los Angeles area dealer Mike Sullivan: “When you’re in a metro area like this, you have to be aggressive in unconventional ways.” |
Manufacturer strides?
NADA leaders and several dealers last week praised Ford Motor Co.'s program announced at the convention as a good start on the road to more flexibility.
New Mexico Ford dealer Don Chalmers said Ford is letting dealers use local vendors to buy materials such as furniture and tiles as long as those materials meet Ford's standards.
"It takes into account each dealer's locale and local culture," Chalmers said.
Two Toyota representatives who attended Mercer's convention presentation said Toyota is always trying to figure out the wave of the future for its facility program.
"We try to listen," said Preston Dyer, national market representation manager for Toyota Motor Sales U.S.A. "Our whole image program is to be flexible."
Toyota permits some dealers with expensive urban locations to have off-site service, Dyer said.
Mike Sullivan, who owns nine dealerships in metro Los Angeles, is one example. Sullivan recently spent $11.5 million for a one-acre site in Santa Monica. Eventually, he plans to build a Toyota showroom there for an estimated $24 million. Service will remain at his current Toyota store about seven blocks away.
Though it's not his first choice, Sullivan has also split sales and service at his Santa Monica Lexus store. He keeps much of his vehicle inventory off-site and stores used vehicles in a separate location.
"When you're in a metro area like this, you have to be aggressive in unconventional ways," Sullivan said.
Scott Smith, president of Sonic Automotive Inc., the nation's third-largest auto dealership group, said Sonic is implementing new service options such as mobile repair units. It also goes vertical in some bigger markets. In Houston, for instance, Sonic has a $25 million, seven-story Audi dealership under construction.
Manufacturers do make some accommodations in those pricey markets. Sonic has off-site service capacity that is not customer facing, for instance. But looking to the future, the bigger issue is changing design standards.
"It's frustrating when the paint isn't even dry on a facility and you're getting a new request for five years out," said Smith, who questions whether today's huge sales facilities will be needed as consumers shop more online.
Back to the future
NADA leaders say they will continue to pressure manufacturers on the issue.
If automakers don't change, one result is that dealers could be running company stores in all but name by 2025, Mercer said. Stores would be funded by dealer capital but operate entirely by the manufacturer's rule book, much like a fast-food franchise.
In some ways, the dealership that Mercer envisions for the future is like the dealership of the 1950s and 1960s -- generic boxes with logos and signs identifying the brand.
Automakers should figure out less costly ways to make tomorrow's facilities brand-specific without dictating angled walls and specialty tiles, Mercer said. Digital displays and removable wall graphics are one option, he said.
"Is there some way we can design the physical facility so dealers can upgrade the physical look without having to dynamite it?" Mercer said.
He points to Apple's retail network, cited by some automakers as one of their aspirations. But everything brand-specific in an Apple store is movable, Mercer said, showing nine pictures of Apple stores around the globe. "If you can see standardization beyond logos and lot of glass, let me know."
Dealers spending millions of dollars on their store improvements echo Mercer's point.
Said Sullivan: "The real flexibility is if you design a building that could be used for something else."
Bradford Wernle contributed to this report
You can reach Amy Wilson at awilson@crain.com.
