High salesperson turnover getting worse, study finds

Showrooms across the nation have a hard time keeping salespeople.

In 2013, the average dealership had a 66 percent turnover rate among sales consultants, up 4 percentage points from the previous year and well above the national average for the private sector of 42 percent, the National Automobile Dealers Association's 2014 Dealership Workforce Study found.

Sales consultant turnover is a complicated issue. For example, in about a quarter of the cases, dealers count multiple efforts to fill the same vacated slot. There are wide gaps in turnover at luxury brands vs. mass-market brands. Still, turnover is disruptive and costly for dealerships.

"Poor employee retention is a big money-wasting opportunity when you consider the retention and training costs and lost productivity issues, and the link to poor customer satisfaction and customer retention," said Ted Kraybill, president of ESI Trends. The Largo, Fla., firm compiled the third annual study for NADA, after reviewing 240,000 payroll records from 2,016 dealerships.

The gap in the turnover rate between luxury and nonluxury dealership sales staff is stark. In 2013, the average turnover rate for sales consultants in luxury-brand dealerships was 41 percent, unchanged from 2012. But similar turnover in the nonluxury dealerships was 74 percent, up 5 percent.

"The entry level for inexperienced sales consultants is in those nonluxury brands," Kraybill said.

Many of those entry-level sales consultants often want to leave because they can't earn enough, Kraybill said, or once they gain experience, they seek greener pastures selling luxury brands that pay higher commissions. Salespeople at luxury-brand dealerships make an average of 42 percent more than their nonluxury counterparts, he said.

At Motor City Auto Center in Bakersfield, Calif., the turnover rate at its Lexus store is about 18 percent, while the rate at its Buick-GMC store is about 25 to 30 percent, said John Pitre, the group's general manager.

Pitre regularly transfers salespeople among the three brands to stave off turnover by giving them a variety of experiences and chances to grow. The group sells about 3,500 new and used cars a year, with 11 sales consultants at the Lexus store and 40 at the Buick-GMC store.

"The luxury-store salespeople do tend to stay put longer," Pitre said.

He credits that to higher pay, a nice environment and customers who have a higher rate of loyalty than nonluxury brand customers. Pitre said it is unlikely a luxury-brand customer will follow a salesperson to another dealership, especially one selling a different brand. And if a staffer wanted to jump ship but stick with Lexus, the closest Lexus store to Motor City is 80 miles away, "So an employee would have to relocate," Pitre said.

Pitre said he is careful when filling open positions to avoid continual turnover and re-hiring. "We prescribe to the 'Hire slow, fire fast' formula," Pitre said. "It might take us two months to hire someone. If someone's not doing the job, we'll let them go."

Pitre's search includes background checks, an aptitude test and a minimum of three interviews.

"We just don't make bad hires," Pitre said. "That's the trick. If you're hiring for desperation because you have to fill a spot, then you make bad hires."

Bad hires do account for much of the turnover that most dealerships experience, Kraybill said. Of the 66 percent turnover in sales consultants, about 40 percent are people who last fewer than 90 days, he said.

In nonluxury brands, 60 percent of sales consultants stay at least a year. That means four out of 10 salespeople leave. The reason the overall turnover rate is 74 percent, Kraybill said, is because "You might fill that position two times before you find a person who sticks."

Similarly, in luxury brands about 67 percent of salespeople stay a full year, meaning about a third of those sales jobs open up each year, Kraybill said.

The retention problem in sales is much worse than that elsewhere in dealerships, the study found. For example, the average one-year retention rate for service technicians across all brands is 81 percent.

Kraybill said moving the sales process away from negotiation toward one price might improve sales consultant retention, along with providing a more structured career path.

Sales staff turnover is "alarming enough that the OEMs are taking action," Kraybill said. He is "working directly with OEMs on what do we need to address to attract and retain employees.

"Retention," he added, "hurts profits."