'AutoNation' now a brand; who's next?

AutoNation Inc.'s move to put its corporate name on most of its stores signals the next wave for a dealership business model that has moved from exclusively mom-and-pop stores in a short period of time.

Some other large dealership groups -- Sonic Automotive Inc., for one -- are mulling their own branding efforts, and industry watchers envision a day when the country's biggest retailers unify their stores under corporate brand names.

But it won't be an overnight revolution. It took AutoNation, the country's largest dealership group, more than 13 years to transform its customer experience and dealership facilities to the point where executives felt branding made sense.

"We're ready to name the baby," AutoNation CEO Mike Jackson told Automotive News.

To make such a move, a dealership group must make sure it can deliver on a brand promise consistently at all of its stores. Some groups say they remain too small and regional to make branding worthwhile.

And manufacturer hurdles could be a challenge. Though AutoNation got approval from 11 manufacturers of mass-market vehicle brands, its luxury-brand stores are not included in the plan. Luxury manufacturers are much stricter about dealership names, typically preferring the name to reference only the vehicle brand and a geographic location.

Ultimately, 160 of the company's 221 dealerships, representing all of the company's mass-market brand stores and 82 percent of its retail volume, will convert to the AutoNation name. The luxury-brand stores will keep their current names.

Some manufacturers said AutoNation is the only large dealership group that has requested approval of such a plan. They say they will consider future retailer bids for corporate branding approvals on a case-by-case basis.

Jackson and Maroone have nurtured the idea since Jackson arrived at the company in 1999. At that time, the young company was planning a national brand rollout, even making plans to show a commercial during the 2000 Super Bowl.

Jackson scrapped the effort, saying the then-struggling retailer needed to get its house in order. He questioned the benefit of a national brand for auto dealerships.

Even now, Jackson says the new branding campaign is not national in scope. With stores in 15 of the 50 states, AutoNation doesn't have a national footprint and doesn't intend to build one, he said.

To pull the trigger on a single brand, AutoNation first needed to lay the foundation in large part by improving its customer experience and improving stores. After investing $3.7 billion in those properties in recent years and consolidating store accounting functions to a center in Dallas, executives were ready to revisit the idea.

In a meeting last May in Jackson's 16th floor conference room in Fort Lauderdale, Fla., the pair declared the company ready while munching chicken-salad and turkey sandwiches.

The catalyst was a $50 million bet AutoNation is making during the next three years on digital efforts. The investment includes new dealership Web sites and a so-called digital storefront through which customers, theoretically, will save time on transactions and have more control of their shopping experience.

"When we looked at that bet and analyzed it, we came to the conclusion that the payoff on the bet would be exponentially stronger if we did it with one brand name rather than 15," Jackson said.

AutoNation's move creates a "high probability" that other major dealership groups will rebrand, said Larry Dominique, executive vice president of TrueCar.

"AutoNation will be the test ground for it," Dominique said. "If you see this working for AutoNation -- and I suspect you will see it working quite well -- I will expect you will see the other large groups considering doing this."

Scott Smith, president of Sonic Automotive Inc., the nation's third-largest retailer, said he's not focused on creating a national brand for Sonic's stores right now. But there's a "strong possibility" that it will happen in the future, Smith told Automotive News.

"In today's age, where there is so much information out there, the only thing that really differentiates you is your customer experience," Smith said. "Having your name up there on all those facilities really raises the bar on the level of service and being predictable, repeatable and sustainable at every location."

He praised AutoNation's move, saying branding promotes transparency. "It's a good thing for the industry, it's a good thing for consumers, it's a good thing for the manufacturers, too," Smith said.

The nation's second-largest retailer, Penske Automotive Group Inc., won't consider a similar move, Tony Pordon, Penske executive vice president of investor relations and corporate development, wrote in an e-mail.

"Since a vast majority of the business remains very much local, we believe there is great value in branding dealerships with the name of the location/city of operations and cross-promoting the local dealerships as part of a national presence," Pordon said.

Pordon also noted that Penske's business mix is 70 percent luxury. Sonic also has a large percentage of luxury stores, particularly BMW. For both, any kind of branding initiative could be challenged by potential resistance from luxury manufacturers.

Jackson declined to speculate on how AutoNation's move would influence the rest of the industry. But he did say last week that no one else is in a position to challenge AutoNation on this strategy.

"The hardest thing to do in business is to open up a sustainable competitive advantage," Jackson said. "I'm declaring today that we've done that."

Diana T. Kurylko, Jamie LaReau and Arlena Sawyers contributed to this report