Cadillac's De Nysschen pitches virtual stores

Luxury automakers have been experimenting with virtual showrooms, where customers can use touch screens or even virtual reality technology to digitally kick the tires. Now Cadillac wants to usher in the virtual-retailing era in a big way -- with its smallest dealerships.

Cadillac is encouraging more than 400 of its lowest-volume U.S. dealerships -- mostly dual Chevrolet or Buick-GMC stores that sell 50 or fewer new Cadillacs a year -- to voluntarily adopt "virtual showrooms." Those dealerships would not stock Cadillac vehicles on their lots. Instead, sold orders would be expedited from regional inventory centers, Cadillac President Johan de Nysschen said.

The stores would use a concierge-style approach to selling Cadillacs: Salespeople would routinely visit prospective buyers at their homes or workplaces, armed with slick touch-screen vehicle configurators or virtual-reality units supplied by Cadillac.

"We want to work with those small dealers to give Cadillac a competitive advantage in terms of reach into their local communities," de Nysschen said in an interview last week, "but do so in a way that's more closely aligned with what we think the Cadillac luxury brand experience should be."

De Nysschen presented the concept to hundreds of dealers last week during national brand meetings at a resort in Southern California. He also introduced a new architectural design theme for Cadillac dealerships to adopt in coming years -- committing $500 million to that effort -- as well as a dealer-incentive program that could boost the bonus money dealers can earn. (See story above.)

The proposals were worked out over the past year in conjunction with Cadillac's dealer council. Together, they represent de Nysschen's first comprehensive retail strategy for Cadillac's dealership network, a crucial piece of his broader turnaround plan.

In the 18 months since he took the top job, de Nysschen has acknowledged the difficulty of overlaying his brand-building strategy on a sprawling retail network that looks nothing like those of the German luxury brands he sees as Cadillac's competition. At 925 stores, Cadillac's network is roughly triple the size of BMW's or Mercedes' but does about half the volume. (Cadillac sold 175,267 vehicles in 2015.)

De Nysschen has expressed concern that dealers who earn their living by selling Chevy Silverados or GMC Yukons won't be motivated to invest the resources and attention to detail needed to elevate Cadillac's brand. He told Automotive News last year that he'll have trouble tolerating dealers "selling Cadillac out the back door of a Chevy store."

But he also has said repeatedly that he sees a competitive advantage in having a sales and service footprint that covers America's smaller towns, where its luxury rivals are mostly absent. He believes the virtual-showroom concept can allow Cadillac to retain that edge while imbuing its small dealerships with a cool factor that doesn't require big investments in exterior facades and furniture. It also would relieve dealers of the hassle and cost of keeping a few dozen Cadillacs on the lot for the trickle of customers who come in to see one.

It's a way to "immerse customers in a virtual brand experience, so that our dealers need not concern themselves with investing in showrooms and brand-element requirements, which clearly are cumbersome if you're such a small dealer," de Nysschen said.

He believes consumers will appreciate the personal and high-tech treatment, too, and that the relatively low volumes would make it manageable for dealers.

But the idea could be a tough sell for owners of small dealerships, many of whom survived GM's effort to cut them loose around the time of its 2009 bankruptcy. Some worry that the virtual-showroom plan would effectively turn them into Cadillac service centers that might sell an occasional new car.

"How does having fewer Cadillacs on display at dealerships in all of these communities help sales?" asked Byron Hansen, whose Hansen Motor Co. in Brigham City, Utah sold about 30 Cadillacs last year, along with a few hundred Chevys, Buicks and GMCs. "It makes you wonder what they're trying to accomplish."

Jim Stutzman, owner of a self-named Chevy-Cadillac dealership in Winchester, Va., left the meeting last week upbeat about the facility plan and dealer-bonus program but unsure he'll participate in either. At 50 to 100 Cadillac sales a year, his store is "on the bubble," Stutzman said. He could spring for an eventual store overhaul, continue the status quo or go the virtual route. But he's leery of being left with no inventory and the prospect of having to tell his highest-end customers that they'll have to wait.

"In this day and age, with customers' propensity to want immediate gratification," Stutzman said, "I don't know how you can compete if you don't have product available."