How's inventory? Do you have enough of what you need or too much of what you don't need?
We have products to launch typical of Porsche's usual supply and demand equilibrium; they're pretty true to form. There will be robust inventory. There are 192 dealers. I think we will have a good balance of inventory; Porsche is masterful at that.
You said a year ago you would recondition your certified pre-owned department. Did that happen?
Not only did we completely recondition the CPO building, which is a standalone facility, we're building a whole new standalone facility for new cars. We'll have a campus here.
You said in the past that there was a lot of pent-up demand for the Taycan. Did customers stay on the waiting list?
We're bumping up against 200 pre-sold Taycans, and yes, people stayed on the list. Philadelphia, the zone where we are, is a market unto itself. We're selling more top-end Taycans than any other zone. For the people here, the highest take-rate car, for the highest percentage of people, is the fastest car, the meanest car.
Did customers have to put down a deposit to get on the list?
Yes, they put a deposit on the line for $1,000. These aren't spec cars. That is, the early ones will be specced out to Porsche's specifications. Customers won't be able to custom-order. We will have people for every car. They absolutely will be sold to our most elite customers.
How is the Porsche captive finance company?
If there is an Achilles' heel to Porsche, it is the captive. It has nothing to do with the people, but everything to do with regard to getting Porsche AG to allocate more funding to Porsche Financial.
Does the captive help fund facilities the manufacturer wants dealers to build?
We would love for them to, like[Mercedes-Benz] Financial does for M-B dealers, but the answer is no. That is tough for the dealer. It requires much more capital. You're going through a lot of capital and cash flow.
How about floorplanning?
No, no floorplan. They provide retail incentives and leasing but don't do any floor funding. I use a bank, myself.
Has Porsche put in place any standards on data security and privacy for the dealership network, and is that new?
It is not new. We rely largely on the software system of whatever customer relations management tools we use. Effective [in January], in the state of California, as you know, if a customer asks to be removed from your system, you have to be able to do that. We're looking to do that systemwide, not just in California. Most of the CRM tools that are aligned with the manufacturers have the capability of doing that.
I just spoke with a dealer with stores in multiple states, and we're all of the same mind: If we're going to be prepared to do this at one store, we will have that capability at all stores, regardless of what state it's in.
Is that a Porsche Cars North America policy?
I'm sure that will be a topic at NADA and at Board of Regents meetings. As we onboard any new CRM system, this becomes a requirement, for any new system whatsoever.
How is Porsche directing dealers on digital retailing? Is that something Porsche Cars North America monitors? Does that figure into how you get rated?
PCNA does have a digital marketing strategy, and they do have it as part of their objectives, whether it's to qualify as a [top 25] Premier Dealer or as part of your sales targets; you have to check these boxes.
What does your digital sales department look like?
I'm working on building my third one. The first two didn't keep up with the times. It comes down to, what are we trying to glean out of the social media department? I'm looking at it being more of a content provider and to explain to people what we're doing with our product as it relates to rally days, track days, a launch party or a charity we're involved with. We're using it very differently than we did 10 years ago.
How was it 10 years ago?
As we all do in business, we overreact, whether it's over how many people will want electric cars or how many people will want this new car we're going to introduce, we overreact. Every manufacturer overreacted when they decided they need a business development center and later realized people will still need a retail experience, to have a full complement of retail opportunities. So we converted our BDCs into the social media department.
What's the distinction, other than emphasizing social media instead of telephones?
At first, the social media department was little more than keeping up the website and to answer the phone when somebody responds. Today, we're creating content. We're documenting great experiences and the events that we have. We also have stories about our customers — for instance, books they have written. The content is about the essence of cool.
How is the co-op advertising program?
That's a dangerous subject. Porsche pulled the plug on co-op advertising. That is now something of the past. Effective Jan. 1, there's no more co-op with Porsche, and I think Porsche had an outstanding co-op program.
Was it a typical setup for Tier 3, really retail-oriented ads where the factory matches the dealer spend?
Yeah. Dealers were given a template, and if you wanted to do co-op advertising, and you stuck to the template and inserted where you advertise your store, Porsche would reimburse you for half. It didn't even have to be an ad. If you could document it, it could be a function or an event, and they would reimburse you 50 percent. That has gone away, and we are lamenting it.
What's the rationale for pulling it?
[They're launching the Taycan] with a Super Bowl ad, and the funds that were going to be used for co-op advertising are going to be used for that instead.
Is it just for the first quarter? Or could it kill co-op advertising for the whole year?
Until further notice. And yes, it is the majority of the budget.
Many people are skeptical of the cost benefit of Super Bowl advertising, unless you've got to raise awareness for a new brand or you're aiming at the mass market and want the maximum number of eyeballs. What do you think?
You really have to be an Apple, introducing something that the world really wants, or maybe New Coke, or Cherry Coke, or maybe Budweiser or something mass market, certainly not cars.
How important are online reviews to dealers? Do you have requirements to meet for the manufacturer?
We do not have a requirement at this time. Quite frankly, the consumer is using this as a tool of extortion: "If we want this car and it is sold out and we can't get it, we will tell people how mean and rotten you are." Or because something is held up while we get government approval — something we have absolutely no control over — you write a review and say, "I ordered this car, and they are holding it at bay from me." These are things we have to deal with.
Does something like that have a serious effect?
It is a real problem. We get unwarranted reviews. In California, we get kids who want to come in the store and jump in and out of the cars, and when after a while you give them a poster and tell them to be on their way, they go home and complain to their parents, and they write about how we're mean and rotten, and they give us a terrible Yelp review.
Does Porsche Cars North America have a new-vehicle subscription program, and do you participate?
They do. [The customer deals] directly with them. It's in pilot areas only. They do have a subscription set up in Atlanta.
How are dealers managing new-vehicle affordability concerns? Has it affected performance in the finance and insurance office?
I've represented many brands over my 36-year career. But the Porsche customer represents among the most robust consumers, the healthiest borrowers. We do have people who decide what they want and buy it. For some passenger cars, though, like Cayenne, like Panamera, in those we have to be very mindful of the monthly payment. If Porsche and Porsche Financial Services respond to the market intelligently, systematically, they will respond with a lease payment that addresses the situation.
If they don't, there are other banks in the marketplace who are happy to deal with the Porsche car, which holds its value, and with the Porsche customer.
When sales are up, factory demands tend to go up, too. How is Porsche on facility upgrades?
It's continually evolving. Porsche is very good about evolving the look. For instance, I will be building a Gen 4 store because at the time the plans were made, Gen 5 had not yet been released. Fortunately, Porsche allowed us to choose whether to move to Gen 5 or stick with Gen 4. They are both a 21st century look at how we expect the new-car process to evolve.
What do you like so much about the previous-generation design?
Gen 4 has evolved at such an efficient level; I find it to be the most efficient store I've ever seen.
What do you mean by "efficient"?
It's easy to get cars in and out. The best use of space is a perfect rectangle, right? There's a lot of utility because there's open, showroom space. You can put which cars you want where you want, if you want to promote one model. It's much more conducive to when you have an event.
Some newer designs give service and parts more prominence. Is that the case for Porsche?
If the purpose is to sell cars, Gen 4, to me, is the best evolution of the traditional space. The shop is directly behind the showroom. The entry level we have for storage, for new-car delivery. There's an underground storage area. The third floor is executive offices, the social media department, the kitchen — and a gym. I put the gym in. This place is sort of home away from home for a lot of people.
What distinguishes Gen 5?
Gen 5 creates more of a mall environment, so each area is like you see other retail environments. There are sections that are compartmentalized. Each car is in its own environment. There's a diagonal thoroughfare that connects everything. Off to each side would be different environments for you to experience the different models. Conceptually, it's a beautiful plan.
