Virtual store plan a big deal to small Cadillac dealers

Cadillac's ambitious plan to convert its smallest stores into virtual dealerships reverses the brand's emphasis on helping low-volume dealers maintain adequate inventories.

Cadillac President Johan de Nysschen sees a future in which more than 400 small Cadillac dealerships in the U.S. would not stock vehicles on their lots. Instead, salespeople at those outlets would reach out to potential customers in their homes or offices using touch-screen vehicle configurators or virtual-reality units supplied by the factory.

Specific details of how it would work for individual stores still are being explained to affected dealers, but Cadillac at least deserves credit for addressing an urgent problem rather than letting it fester.

It's another look at the existential question of what the brand is. Cadillac was the runaway U.S. luxury leader for decades. But it hasn't been the best-selling U.S. luxury brand since 1997 and last year dropped below Audi and Acura into sixth place.

Every luxury automaker struggles to balance critical mass for dealers against maintaining an adequate service area in a market as vast as the U.S.

But more than a third of Cadillac's 925 dealers, mostly dualed with Chevrolet or Buick-GMC franchises, sell 50 or fewer Cadillacs a year. These dealers have been in a strategic squeeze for years, raising concerns for both the brand and themselves about long-term sustainability.

Cadillac's new plan clearly favors enhancing the customer experience over continuing to financially help dealers maintain vehicle stocks. Executives must recognize that what they are asking of smaller dealers is difficult, and they will no doubt have more explaining to do.

The cautious reaction from dealers thus far suggests they are giving the proposal a thorough vetting. Dealers know Cadillac is addressing the very real issue of balancing low sales rates while carrying large inventories. The retailers must assess their situations and make tough decisions about the kind of business they will have to run.