There’s no better fool’s game than reminiscing about the past, remembering how things were simpler, and so much better than today. It’s foolish because we tend to remember how little things cost, but conveniently forget how little money we earned at the time. Or that technology has forever altered how we do our jobs and make our purchases.
Neither supposition is entirely true.
Aside from today’s corporate world’s financialization, maybe some things aren’t as different from the past as one might think.
Better, Simpler Times (for Dealers)
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In 1975 America was dealing with runaway inflation at retail. Frightening stuff, particularly when it came to the house you might buy or your next automobile. After all, the 1974 Oldsmobile Cutlass Supreme listed for $5,178 and the very next year that car, identically equipped, was over $5,600. And, while that increase may sound quaint today, it’s equivalent to the average price of a new car in America going up by $2,970 this year.
If you were a finance director at a dealership, the national standard was that you were to create $100 additional income for every new or used car the dealership sold. The used car department was expected to sell just one used car for every two new cars sold. And if you wanted to build a new dealership and do it up right, you might have spent somewhere around $3 – 5 million to do so. But you could get by on much less: The 10-acre Pontiac dealership on the North Dallas Parkway had a total cost of only $1 million. I know, because the dealer I worked for financed the Pontiac dealer’s store; and every month I’d have to go pick up his rent check — a whopping $10,000.
There was no such thing as a Customer Satisfaction Survey, and manufacturers had little to say about what your dealership looked like or where you put it. As late as the mid-e80s many major markets still had downtown dealerships, although the manufacturers were already trying to force those dealers out to suburban locations. Oh, and the really great dealers in the best locations with the higher volumes hoped they might earn $1 million per year.
To-Go-Box Store Attitude
There were still a few dealerships with goofy names — e.g., Wild Bill’s Chrysler Plymouth — although much more subtlety was already being seen. Today some manufacturers won’t let the dealer put his or her name on the building at all, instead making the franchise use the name of the city in which it operates. Their reasoning is trying to make the public believe that all dealerships are created equal. They aren’t. Some dealers’ names and reputations have a great deal more value than the franchise brand.
Today, many car companies want all of their dealerships to look alike. More than once I’ve heard auto executives use the McDonald’s rationale: “You know a McDonald’s by simply seeing the building, and you expect the exact same quality every time.” Spoken like someone who has never set foot inside a McDonald’s in his life. Not to mention that cars, engineering, technology, and styling change all the time, but the Quarter Pounder™ is the same one we bought in 1974.
Today it is not uncommon to hear of someone’s putting $40 million-plus into a dealership, although that’s far more than most spend. And it’s certainly nothing to hear of dealerships being bought by large corporate interests for $50 – 60 million. Frankly, using standard dealer accounting practices, I have no idea how one can pay that much money for a mainline, high-volume franchise and make money in it; yet two of my friends got that kind of cash for their dealerships just in the past year.
Who’s Store Is It?
What may be the worst change to the industry is how the manufacturers want to dictate every last thing to their dealers. Forget the overall look of the store; in many cases they tell you where you’ll buy the furniture or appliances for it, what tile to lay on the floor, what exact color to paint your walls, even the design for your service department’s coffee station. One friend, whose service department has extremely high morning volume, took his manufacturer’s coffee station design, mirrored it and doubled its size. He was told to rip it out: The approved smaller design was the only one he could use.
Finally, the issue I’ve long voiced here is how the manufacturers control the size of the monthly rebates. Keep in mind that there was about the same amount of dealer mark-up in a $17,000 1985 Oldsmobile 98 as there is today in a $60,000 Tahoe.
Yet the public loves to get deals and feel like they’re being treated fairly when they buy their vehicles, and rightfully so. They just don’t realize it’s not necessarily the local sales manager giving you that exceptional deal; he’s counting on the manufacturer’s rebate to get the deal you’re really hoping for. The issue is that a rebate can fluctuate by thousands every month. Sometimes rebates change that much during the course of the month. – I forgot, car companies don’t want us to use the term rebate anymore. Now it’s an incentive.
But one thing has never changed in the auto industry: It’s still a people business. People don’t buy cars from buildings, or a photo on the Internet, regardless how pretty, they still buy from the people inside the building. And succeeding still requires someone who’s truly passionate about the vehicles he or she sells – one who is willing to spend time with customers and show them everything great about the ride, engineering, technology, or style of the car, building value along the way.
As I regularly tell young kids new to the business, there’s hundreds of millions of dollars invested in every new vehicle you sell, just getting it to market. Only through the magic of mass production is the window sticker price $25,000. The best in the industry know that you sell your client on the hundreds of millions it took to create Job One of the vehicle they are interested in; it makes them appreciate the mass production price even more. As I’ve said frequently, if the only thing people cared about in a new car was the price, there would 240 million Hyundai Accents on the road and nothing else. Customers want something special in their vehicle for the money, and they don’t care about the color of the tile on the showroom floor.
Times Change, Business Doesn’t
I always get tickled when these experts all come along and say how much the car business has changed in our lifetime. True, the cars cost more, but the average price of a new car against the average income in America is remarkably the same as it was in 1974. And true, the dealerships are bigger and much more expensive; and new car dealers sell many more used cars today than they did in the past.
And yes, these days everybody looks car stuff up online; but that only replaced looking through old invoice books and NADA used car guides or buying a subscription to Car & Driver for their reviews. Still, though, inevitably you still have to go drive the vehicle you are most interested in and make sure it’s what you were hoping it was. Further, most people buy from the individuals who are the best at what they do and who seem to care the most about their customers. Reputation still matters, even if the car companies don’t want you to believe that’s true.
Then again, I’m happy I’m not trying to run a dealership someone just bought for $60 million. It was hard enough to make a profit in the $5 million dealerships 30 years ago.