'Apple way' inspires Seattle dealer

Brad Miller, who owns Honda and Toyota stores in booming downtown Seattle, knows the traditional way of selling cars. And he knows he doesn't like it.

So last year, the 60-year-old dealer, along with COO Babak Mohammadi, decided to do everything differently. They decoupled sales commissions from the profitability of a sale, eliminated the handoff to the F&I office, and adopted no-haggle pricing and no-haggle financing to help build trust and speed customers out the door.

The new mantra at Miller's stores is "One Buyer, One Price, One Hour."

A quick and easy makeover? Hardly.

In fact, it has been a long, painful slog. When the traditional sales commissions went away last year, so did nearly all of the salespeople. The F&I managers were quick to follow. Sales at Honda of Seattle fell from 100 vehicles a month to 70. The store was losing money in the U.S. light-vehicle market's best year since the recession.

Business has rebounded, but it's still early in Miller's retail experiment. He's betting that the effects will really begin to show once the stores settle into their new home, a state-of-the-art building near the Seattle Mariners' and Seahawks' stadiums, with rare side-by-side Toyota and Honda showrooms.

"I'm sure everyone thought that I was absolutely out of my mind," Miller said in an interview. "Maybe I was, but this is the right thing to do. Sooner or later, everybody will have to sell cars this way."

By "this way," Miller means more like the Apple way. Apple Inc. doesn't sell cars (not yet, anyway), but to Miller, the maker of the iPhone and retailing giant is as much of a rival as the dealership down the road.

"We think we compete with the Apple Store" for customers' time, Miller said.

Miller's project has been driven by a quest to offer an Apple-like retail experience to his tech-savvy customers, many of whom are coming into the showroom after a day working at the nearby headquarters of Amazon.com.

At an Apple Store, for example, customers often do an entire transaction with a single salesperson, who answers questions and rings up customers on the spot when they're ready to buy.

Same goes for Miller's stores. When customers walk into the new showrooms at Honda of Seattle and Toyota of Seattle, they'll be greeted with a touch screen bearing the names and pictures of all the salespeople. Rather than being snared by a salesperson in pursuit of a sale, the customer will get to choose the one he or she will do business with.

What's more, the dealerships have no F&I managers. Salespeople handle the loans. Learning to do that isn't easy, so Miller and Mohammadi have hired contractors to do some paperwork and walk the salespeople through the process.

Prices are fixed, and so are interest rates. Customers who need financing can refer to a chart on the wall, tracing their finger from their credit score to the amount of the loan.

This provides transparency, Miller said, and it avoids any hint of discrimination in lending, a target of scrutiny by the U.S. Consumer Financial Protection Bureau.

"It just completely takes it off the table," Miller said. "There can't be any discrimination. There's the rate."

With a new set of employees and better training in place, sales have nearly returned to previous levels.

Mohammadi said morale is improving. Pay for salespeople had suffered over the past few decades because of shrinking new-vehicle profit margins, creating tension with better-paid F&I managers. With their new structure, Mohammadi and Miller hope that by giving salespeople more responsibility, they can pay larger salaries, boost retention and get their people focused on customers instead of commissions.

"We ask people to work rain or shine 50 or 60 hours a week and some of them make minimum wage," Mohammadi said, referring to practices at some other dealerships. "It's appalling. These people work their hearts out, and at the end of the month we don't even say thank you. No wonder they're leaving us."

The new location near the stadium district, which opened last week, is both showcase and test lab for the new way of doing business. Each store is crammed with technology that Miller couldn't fit into his cramped downtown showrooms, one of which was built in 1928 as a livery stable and still has the original wood plank floors.

They are the first to use "quick tread" machines from Hunter Engineering Co. in St. Louis. As a customer drives over metal plates that emerge 3.5 inches from the ground in the service lane, sensors read the tire tread depth, allowing a service adviser to tell whether the tires need replacement. Though the machines cost more than $40,000 per service lane, Miller expects to prosper in the long run by telling his consumers when something is right -- not just when something is wrong.

Time will tell whether Miller and Mohammadi have found a workable, lucrative business model that leaves customers satisfied, or merely gone out on a creaky limb.

For now, they've decided to open their doors to any dealer who is interested in learning their strategies, just as Toyota once opened the doors of its factories to teach rivals the ways of lean manufacturing.

"Consumers don't trust us, and I hate that," Mohammadi said. "We've got to change the industry. We've got to show there's a better way."