FORT LAUDERDALE, Fla. - Republic Industries Inc. plans to use national 'branding' and the Internet to dominate auto retailing in a new phase of the retail revolution.
The plan has the potential to further erode traditional dealer territories and move retailing closer to 'virtual dealerships.'
Republic, by far the leading dealership consolidator, has grand ambitions. At the company's annual meeting last Wednesday, May 20, Chairman and Co-CEO H. Wayne Huizenga predicted it will be up to a $60 billion enterprise within five years.
Sales in 1997 were $10.3 billion, including $3.0 billion from the rental business and $1.1 billion from the solid-waste business, which is being spun off.
Republic is moving quickly to establish a national brand umbrella that would encompass new cars, used cars, finance and insurance, and parts and service.
The first step will come this year, when Republic plans to begin test marketing a 'sub-brand' at its new-car dealerships, using its AutoNation USA logo below the dealership name, said Steven Berrard, Republic president and co-CEO, at the company's annual meeting.
The second step will come when Republic executives can get dealership salespeople to cross-sell vehicle brands by referring customers to other Republic dealerships when necessary.
The third step in the plan is an attempt to dominate the Internet. The company announced it has signed or is in the process of signing agreements with most of the major automotive Internet buyer referral Web sites. The move is a prelude to launching a Republic-AutoNation USA Web site this year.
Using the Internet as a tool, Republic executives want to establish a 'virtual dealership' that could make traditional dealership territories obsolete.
Scott Barrett, Republic senior vice president of information technology, told Automotive News: 'Ultimately, the consumer will deal with a sales force that could be anywhere. There is nothing to prohibit them from dealing with a sales force centrally located in Omaha.'
The virtual sales force could complement the direct sales force at the dealership level, he said, and 'have access to the entire virtual inventory.'
'If you combine all those things, you've extended the reach of dealerships to a far greater area than they have now.'
Michael Maroone, president of Republic's Automotive Retail Division, announced at the company's annual meeting that Republic has signed or is in the final stages of signing agreements with Internet buying services AutoWeb, AutoConnect, Microsoft CarPoint, DealerNet, AutoVantage and Auto-By-Internet.
In addition, Republic has special agreements with Auto-By-Tel and Stoneage, he said. Some Republic dealers already have signed exclusive dealer agreements with Auto-By-Tel and Stoneage.
'We believe we will be the dominant player before the end of the year in the Internet,' Maroone said.
Barrett told Automotive News that Republic is hooking up with the Web sites as a way to generate sales leads for its dealers. Republic will monitor the quality of sales leads from each of the services, he said. If the quality of the leads is not good, Republic could renegotiate the agreement, he said.
'Our intent is to place as much prominence as we can with each of these national providers,' said Barrett. That means placing a Republic or AutoNation USA icon as few clicks as possible from the home page of a Web browser, such as Yahoo!, so customers can find it rapidly.
On the branding front, Republic showed shareholders a sample of what a sign might look like: 'Dobbs Ford, An AutoNation USA dealership.'
The 'sub-branding' would be the beginning of a long-awaited plan to establish AutoNation USA as a national retail name in its own right. The name already is used on Republic's 26 AutoNation USA used-car stores.
Since the company has announced plans to spin off its Solid Waste Division, all revenue would come from its two remaining businesses: auto retail and auto rental.
Republic officers last week gave shareholders an inkling of the scale of their automotive retail plans:
Maroone said Republic is discussing ways the company's dealerships might use incentives to motivate sales personnel to cross-sell brands to customers who might not find what they want at a given dealership.
For example, a salesperson at an AutoNation USA used-car store could refer a minivan customer to a Ford dealership owned by Republic if the used-car store does not have the vehicle the customer wants.
Between its auto dealerships and auto rental businesses, Republic plans to be big in the collision-repair industry. The company already operates 72 shops with revenue of $100 million.
Republic's AutoNation USA Financial Services will begin to make its presence felt this year. Maroone said he believes there is enough business so that Republic's auto finance company will not step on the toes of the manufacturers' captive finance companies.
At the annual meeting, Republic officers kept hammering at the issue of improving profit margins at new-car dealerships. Republic dealers recorded a profit margin of 2.6 percent in 1997 and are on target to improve that to 3.4 percent this year, Maroone said. The goal for 1999 is 4 percent, and Maroone wants to reach 5 percent by 2000. Some analysts have said Republic dealers could hit 6 percent.
Starting in late 1996, Republic went on an acquisition spree and now has acquired 59 dealer groups with nearly 300 franchises and pro forma revenue of about $7.5 billion last year. Dealership consolidation was one part of the early retail revolution, which included publicly owned dealerships, Internet selling, Saturn-style low-haggle selling and large inventories.