KALAMAZOO, Mich. — When Aaron Zeigler took over in 2002 as president of the dealership group his father founded, the company was a collection of small-town stores mostly scattered around southwestern Michigan. And Zeigler was just 28.
Under his leadership, Zeigler Auto Group has grown into a major Midwestern auto retailer by making a big push into the Chicago area, which is a few hours' drive around the southern tip of Lake Michigan from the group's headquarters here.
"There are smaller cities in Michigan, and there's a lot of family-owned stores and not a lot of turnover in dealerships," Zeigler said. "So, there wasn't a lot of opportunity in west Michigan to grow. We are still growing in west Michigan if we can, but Chicago represented a new opportunity for us. And we thought if we took small-town, Midwest values to the big city, the way that we treat our employees and the culture that we have and the way that we treat our customers, that we could be pretty successful in Chicago."
He described the transformation as "like going to the major leagues" from the minors. Zeigler Auto Group now has 13 dealerships in the Chicago area and 25 total, with enough volume to rank No. 58 on Automotive News' list of the top 150 dealership groups based in the U.S.
Zeigler, 46, spoke with Automotive News TV Producer Tom Worobec this month at his office in Kalamazoo. Here are edited excerpts.
Q: Why has it been important to get bigger in a relatively short period?
A: As I looked at the market, I thought it was going to be very tough for single-point dealerships to compete going forward, and a lot of that is because of the technology out there. And in order to be able to afford the technologies that we need to service our customers, we have to leverage that across a lot of locations.
The other piece of that is the Internet became very prevalent. A lot of times, who sells a car is who has the car. And if we have 10,000 cars on our website at any one point, we are going to sell substantially more than a single-point dealership that might have 200 or 300 cars on their website. And it allows our customers to shop on our website and never leave our website and find about anything they want.
What is Zeigler Auto Group looking for in an acquisition and in new markets?
One is the right franchise, so we are looking for major franchises and I am looking out five and 10 years of where that franchise is going. And then I am looking at being in the right location. So we are looking at cities that are very established, that are newer cities, that have new construction and stuff like that, or cities that are going to grow and that are going to grow for the next 15 or 20 years and know that we can grow with those. Cities that are more run-down and tougher areas and stuff, we try to stay away from that.
What is the dealership group's employee turnover rate?
It is about 7 percent and most of those are in the seasonal positions or sales positions. When you get into the management ranks it is extremely, extremely low.
Why is the turnover rate so low?
I think there are a number of factors. One is, it is still a family-owned business and we treat our employees as family. Every one of our employees has my cell number, my email. If there is an issue, we are going to take care of it. We focus really hard on our culture.
What is Zeigler Auto Group's approach to online retailing?
We realized long ago that what we sell is a commodity. So you can pretty much get the same price, same vehicle, across the street, next town over.
So the value that we add as an organization is the experience. And if we can give that customer that wow experience or exceed their expectations, that is when we are going to be able to win from a sales standpoint. And we focus really, really hard on experience.
A lot of that experience is making business easy. So as technology has changed out there, we really embrace it. And we are always looking for what is that next piece of technology that can allow us to make it easier for customers to buy cars, service cars, communicate better, all of those types of things.
Is Zeigler Auto Group experimenting with new business lines such as autonomous or ride-hailing fleet servicing?
It is certainly something we have thought about. And the market is still pretty fragmented and it is a pretty small piece of the business. But as you go out 10 or 15 years, that could become certainly more pertinent going forward and I think with having a lot of locations out there, we are positioned well to be able to capitalize on that going forward.
What is your take on vehicle subscription services?
I don't think the subscription services are going to be successful. A lot of different manufacturers have tried to do it a number of different ways. When you really look at a subscription service, what you are really doing is renting a car. So instead of renting a car day-by-day from Enterprise, you are renting it over a two-month or three-month or six-month period.
And it kind of sounds cool up front where you can switch cars and have a convertible in the summer and a truck or an SUV in the winter, but when you look at the cost of that, you could almost buy two or three cars for what you are paying for the subscription service. So nobody has figured out a way to make that really work.
What is Zeigler Auto Group doing in used, F&I and fixed operations to counter the new-vehicle margin squeeze?
We do a big-volume business. So, when you do a lot of volume, even if margins are light, that still works out pretty well. On the F&I side of things, though, F&I has been growing year after year after year, not only for us, but as an industry. And the No. 1 product is warranties. The cars are very expensive to fix today. They've got a lot of technology in them and it really makes sense to buy warranties, and we are seeing more and more customers do that.
Zeigler Auto Group is renovating its new Buick-GMC dealership and building a standalone Cadillac store. How do you feel about manufacturer image standards?
If it doesn't make sense, I guess you would push back a little bit. But most of the time it has made sense to do that. And I've been a big believer in having really nice facilities. And that is why we have been nonstop under construction.
We've got two of them going right now. And all of the stores that we've got, other than the new acquisitions, have new, nice facilities. So, we are doing the two right now that we bought last year. And that really goes back to the image of the organization of reinvesting in the company, reinvesting in the facilities for the long haul.
And I own all of the buildings that we have, so we don't rent buildings. When we buy a dealership we buy the property and building along with it and that allows us to be able to control it, so when we do redo a building then we get the benefit of that for the long haul.
Do you see an advantage to having brick-and-mortar stores in the coming decades?
I really do. If you went back to 1990, there were some articles about what the car business would look like in 25 years, so it would be in 2015. And they said car dealerships won't need facilities anymore. You will just a be a service center, because you will order cars online and they will be there the next day. And it used to take six to eight weeks to order a car.
It still takes six to eight weeks, you still have inventory, people still want to come to the dealerships and touch and feel the vehicles.
As much stuff as you can do online, it is really hard for a customer to hit a button to buy a $20,000, $30,000, $40,000 product without coming in and touching it and feeling it and talking face-to-face with somebody.
So that final piece of the transaction historically happens at the dealership. We are set up that if they want to do it online, they can, but we are seeing a very small percentage right now that want to do 100 percent online.
What is your take on stair-step incentive programs?
My philosophy is the manufacturers make the rules. Whatever rules they make, we are going to play by. Sometimes we like them. Sometimes we don't. But we are going to play by their rules and we're going to work with whatever the parameters are that they have. We have been very successful on the stair-step programs, because we tend to be larger volume and we hit the numbers.