VW, Audi see Manhattan stores as service trendsetters

NEW YORK -- There is no parking lot outside the Volkswagen and Audi stores that opened side by side last year in Manhattan's main dealership district.

Parking on the street, for those lucky enough to find a spot, means popping $3.50 an hour into a parking meter. So Open Road Auto Group, the dealership group that leases the building from Volkswagen Group and operates both stores, offers free valet parking and shuttle service to all visitors, cramming cars into a shared seven-story service shop behind the separate VW and Audi showrooms.

A customer once dropped off a car at the dealership and left for a weeklong cruise. Dealership employees carried the customer's suitcases across the West Side Highway to a cruise ship terminal on the Hudson River, said Michael Morais, Chief Operations Officer of Open Road.

Dealership employees must put up with the occasional abuse of the valet service, Morais said. That is part of living up to the expectations of VW and Audi, which invested $135 million in the stores and see them as test beds for new retail ideas.

"We have to go above and beyond the expectations of the customer," Morais said. "That's really what it all boils down to. That's our role in this project."

Volkswagen and Audi will not start requiring free valet parking in every suburban auto mall, executives said. Still, it is just the type of service that car companies, especially luxury brands, are pushing their dealers to embrace to win over car buyers.

Volkswagen Group bought the site of the two stores in 2009, paying $85 million for an 11th Avenue property owned by the Potamkin family, which had sold Cadillacs, Buicks and Hummers at the location.

Four years and $50 million in renovations later, the VW and Audi stores opened in February and September of 2012. It patched a major hole in Volkswagen Group of America's retail network.

Several years ago there was nowhere to buy or service a VW vehicle in Manhattan. VW and Audi were absent from the 11th Avenue strip, which had become the fashionable place for car companies to set up flagship stores.

That was unacceptable to Volkswagen Group, with its goal of selling 800,000 VW vehicles and 200,000 Audi vehicles a year in the United States.

"It's one of the key markets in the United States in terms of setting trends," Bob Kim, general manager of network operations for the VW brand, said of Manhattan. "You have to be there on 11th Avenue if you want to be in the automotive game."

Indeed, VW and Audi are flanked on the dealership strip by some of their biggest rivals. BMW's factory-owned flagship store is on one side. On the other is a massive factory-owned Mercedes-Benz store that cost $220 million.

Space is at a premium in the 265,000-square-foot building that houses the VW and Audi stores. But Audi insisted on setting aside space for a delivery room.

When a customer walks into one of the finance and insurance offices in the Audi store, the car has been driven into a room next door. Audi's signature LED running lights let the customer see the car's dim silhouette through a glass wall.

Once the deal is done, the door is opened. Inside the room, the lights are bright and the walls are a spotless white, Morais says.

It was a crucial feature to include in the Manhattan dealership, said Jeff Tolerico, director of Audi of America's eastern region, which includes New York.

"That's not exactly standard operating procedure across the industry, but it's something that we intend to continue to develop," Tolerico said.

In the Volkswagen showroom, customers can buy VW-branded merchandise such as T-shirts and hats.

The Audi store gets 60 service visits and 25 sales visits per day, while the VW store gets 25 service visits and 10 sales visits, Morais said. The Audi store sells about 150 new cars per month, while the Volkswagen store sells about 80 new cars.

These stores have about 170 employees -- about 20 percent more than would be needed at an average dealership because of the extensive car shuttling that's required, Morais said. Employees are paid more in Manhattan, too, so the only way to make the business model viable is with high sales and service volume.

Open Road Auto Group, which is based in Bridgewater, N.J., was the 36th-largest dealership group in the United States in 2012 with 16,912 new cars retailed, according to the latest rankings by Automotive News.

The group has 16 stores in New York and New Jersey that sell the Acura, Audi, BMW, Honda, Mazda, Mercedes-Benz, Mini, Smart and Volkswagen brands.

Its ultimate goal is to sell 3,000 new cars a year at both the VW and Audi stores.

"Our thrust here is volume," said CEO W. Rodman Ryan. "We know that if we're doing 80 Volkswagens a month now, that's not enough. We have to double that, triple that."

To do that, the store needs its 100,000-square-foot warehouse about four miles away in New Jersey, Morais said. The warehouse has room for more than 1,000 vehicles, enough to store a 90-day supply.

And cars are crammed into the on-site service lot. Many are parked in rows two or three deep. Others are stashed behind concrete pillars.

Morais said it used to take as long as six minutes for a valet to return a car from the rooftop of the building. But the company focused on that problem, and now it takes no more than three minutes.

"The customers can't know that we're bursting at the seams," Morais said. "They don't need to see that."