Rejuvenated Lincoln seeks a place of its own

DETROIT — Lincoln is asking its dealers in the 30 top U.S. luxury markets to build stand-alone stores, reversing an effort to consolidate with the Ford brand, after a product revival has given Lincoln confidence that it can challenge top-tier makes.

Lincoln executives say stand-alone stores regularly outsell dualed dealerships and are responsible for most of Lincoln's sales gains in recent years. They cite internal and external surveys concluding that luxury customers prefer buying in a dedicated space.

Lincoln has roughly 150 dealers in the 30 markets that it says account for 70 percent of the industry's luxury sales. Nearly half of those dealers have built or started construction on exclusive stores independently. That, executives say, is evidence of the strength of Lincoln's revival.

The company wants its 78 remaining dualed dealerships in those markets to commit by next July to building stand-alone stores that will be completed by July 2021. Service departments and parts of the business that don't interact with customers can continue to share buildings with the Ford brand.

"Customers expect the environment to be equal to the product," Robert Parker, Lincoln's director of marketing, sales and service, told Automotive News. "They want to buy a luxury product in a luxury environment."

Lincoln will help dealers find land and will give them more money for each vehicle they sell after their new stores open. In addition, starting in the second quarter next year, Lincoln will allow only stand-alone dealerships to sell its more profitable, high-end Black Label vehicles if they don't stock them already.

Executives revealed the plan to dealers last week via webcast and intend to discuss it with them next month at Lincoln's annual fall dealer meeting.

Dealers can forgo the investment and larger bonuses, but brand officials said they expect most will make the switch. They declined to give details on the expected cost or amount of incentives to be offered, saying each case will be different.

The move comes as Lincoln tries to build on the sales momentum that started in 2012 with several upcoming products. It's launching a freshened version of the MKX crossover that will be renamed the Nautilus this fall and plans to introduce a three-row crossover called the Aviator next year.

"The next phase of the transformation is critical," Parker said. "This is probably the biggest two years in Lincoln's history."

Lincoln is asking its dealers to invest in brick and mortar about a decade after a push by management to combine Lincoln-Mercury dealerships with Ford stores. Going back to more stand-alone outlets underscores how far the brand has come, said Greg Wood, Lincoln's sales and service manager.

"That was a critical time; it was about survival," Wood said. "Now, we're in this next chapter. This is the time for us to leverage this opportunity with the world-class products and continue to evolve and step up our client experience."

Lincoln refers to its new showroom design as Vitrine, a French word for a glass display case. The exterior of each store is defined by floor-to-ceiling glass windows that illuminate the vehicles inside at night.

"It just lights up like a jewel box," Wood said. "We want an open environment; we're not hiding anything."

The modern design borrows heavily from the showrooms Lincoln has opened in China since entering that market in 2014, as well as its boutiquelike Lincoln Experience Centers in California and Texas.

The footprint is between 6,000 and 8,000 square feet, smaller than most dealerships. Dealers have the option for a one- or two-story building with space in the showroom for two, four or six vehicles.

The vehicles sit on what's known as a runway, a design borrowed from the China stores, with lights on the ground to better highlight the product. Customers can speak to sales representatives in "pavilions," intimate rooms with couches and TVs that replace desks and chairs.

"We're not looking to build grandiose 40,000-square-foot facilities," Wood said. "It's about being small and nimble. It's more about the experience than the transaction."

Lincoln says the sales at its 72 stand-alone large-market stores speak for themselves.

Retail sales at those dealerships rose 48 percent from 2014 through 2017, compared with 18 percent for the brand overall.

Three stores already have adopted the new design. West End Lincoln near Minneapolis transitioned to an exclusive store from a dualed outlet in January, and its retail sales jumped 60 percent this year through July. Retail sales doubled in July at Lincoln South Coast in California, which opened a new store in June.

"Transaction prices are going up. Their margins are going up," Parker said. "They're not being forced to discount like maybe they have been. They're getting their money back."

While some of Lincoln's 845 stores may elect to drop the brand, Wood said he doesn't expect the size of the network to drastically change, as more dealers potentially come aboard.

"This is not about reducing our network," he said. "It's all about listening to luxury clients. It's an opportunity to raise the water level for everyone."

In Alpharetta, Ga., a wealthy suburb north of Atlanta, Angela Krause Lincoln opened a stand-alone store and has had a noticeable sales boost. The 8,000-square-foot store was built on land next to the formerly dualed operation. The dealership is working to completely separate its Lincoln business from the Ford brand, even ordering new business cards, nametags and signage.

Dealer principal Vernon Krause said the switch was necessary to compete with rivals. The store sits on a luxury row of sorts, across the street from a Volvo showroom and a short distance from Porsche, Lexus and Jaguar-Land Rover dealerships.

"When you're Ford-Lincoln, it's sort of like you're an afterthought," he said of Lincoln, which in the U.S. sells about one vehicle for every 24 sold by the Ford brand. "When you have your own facility, it shows everybody's committed to building the brand."

Zack Krause, the sales manager, said the dualed store was selling about 12 Lincolns a month. Since the Lincoln-only operation opened, sales have more than doubled.

"Customers have pulled up and said, 'This is how it should be,' " he said. "I think people like to be here, which is saying a lot for a dealership."