On Sunday, The New York Times published an article about efforts by organizers of the Electric Zoo Festival, a three-day electronic dance music (EDM) event in New York, to curtail drug use among attendees.

A year ago, the event shuttered a day early electric zoo A Parallel Between Electronic Dance Music and Retailing New/Used Vehiclesafter two people died from apparent drug overdoses. In more recent weeks, six drug-related deaths occurred at EDM festivals in Canada, Maryland and Nevada.

I was drawn to the article both as a parent of a teenage son who listens to EDM, and as a curious fan of music of all types.

The article includes a quote from Robert F. X. Sillerman, a media mogul whose SFX Entertainment now holds a significant financial stake in the Electric Zoo Festival:

“Electronic music is the soundtrack for this generation. In my day, music was a series of short stories, with a beginning, middle and end. But what’s fascinating about Electric Zoo is that what you see are 10,000 kids dancing in unison, without a narrative, and not all hearing the same thing. The paradigm has changed. The Internet has created a collective mind-set of individuals. The audience is now in charge.”

I wasn’t expecting the article to offer any insights about retailing new/used vehicles, but there it was—today’s vehicle buyers are definitely in charge, and dealers who embrace this new reality will fare better than those who resist it.

 

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One-Price Dealers’ Time Has Come

by dpollak on 08/15/2014 · 2 comments

Below is a comment and my response to a recent blog posting, questioning the success of one-price dealerships. (if you’ve read the initial conversation, there’s more below.  Scroll down to “Additional Thoughts”)

Good afternoon Dale

I had the pleasure of reading one of your articles today. I found it interesting. However, it would be also interesting to go back through the history of this one price concept and see how many dealers have either gone completely out of business or had to abandon this noble concept.

Over the past 24 years I have witnessed many dealers try this, some have succeeded of course, but many, many more have failed or at least from my memory. 1980 lambo One Price Dealers Time Has ComeIt sounds great and there are a few of the used car outlets that have claimed to have success with this, but I can only name a couple that have lasted and each one of those had a gimmick that helped the process of one pricing. The one price model was not the sole basis of why people purchased from these dealers.

But, thank you for putting out an article that was easy to read and was not a direct attack on the rest of us. Have a great afternoon

Reply:

It is true that one-price automotive retailing as we know it today has been around since the 1980s. To be clear, however, the selling environment has changed considerably over this period. I believe initially those dealers that tried one-price selling in the 1980s had the right idea, but they were too early. For that reason and others, most failed. It should be noted, however, that a handful succeeded and today continue to thrive as a result of it. Examples include Edmark Superstore in Boise, Idaho and the Marsh Auto Group in Traverse City, Michigan. These retailers had a notion that there was a better way to buy and sell cars and they had the operational and executional discipline to prove the case. No doubt their road was difficult, and many others failed along the way.

Today, however, the selling environment is very different and continues to change. One major characteristic of this change is the emergence of Gen Y that are now just entering their car buying years. Every bit of research on Gen Y buyers indicates that, unlike their parents and grandparents, they are not intent on getting “the best deal” but rather a fair deal with the least amount of effort and time. For this reason, I believe firmly that the justification for one-price selling is very strong, or put another way, its time has come.

Having stated this conclusion, I must note that even though the time has come for one-price selling, it remains extremely difficult for most dealers. This is because true one-price selling is not just about eliminating negotiation but rather instilling the culture throughout the dealership around an experience that meets the needs of consumers who desire fairness, speed and ease. Visits to the aforementioned dealerships are very valuable and enlightening because, unless you see it and experience it in action, it is hard to grasp. It comes only through a religious-like dedication to a particular way of doing business.

Finally, I think it also needs to be noted that every dealership is on their way to one-price selling. Specifically, every dealer is on a journey of enlightenment to the understanding that unless they price vehicles competitively, they will not see enough shoppers, to make enough sales, to justify their investment. Some dealers, like one-price dealers, are already there, others on their way, and still others kicking and screaming and/or in denial, but all are truly on their way. Simply stated, if a dealer does not ultimately arrive at this conclusion, they will not remain in business. Once a dealer reaches this point of enlightenment, they also must come to the realization that they cannot discount or discount as much as in the past. So if you haven’t noticed, the spread between asking and transaction prices in the industry are narrowing and will continue to do so over time. Given this unstoppable phenomenon, I would strongly recommend to you and others that you learn the discipline of rational pricing and selling with little or no discount. I can personally attest to the fact that when it’s done right, the financial and personal rewards for the dealership, customers and employees are enormous. To state it simply, the question is not if, but only when…now or later.

Additional thoughts:

Good evening Dale,

Thank you for taking the time to write back to me. I see that you are very dedicated to the cause of One Price Selling. You do have valid points, but I do have to ask a question about Generation Y. Since studies seem to prove that Gen Y are not really interested in vehicles and currently the majority of the buyers are over 45, why should we move to sell a product to a generation that will not be buying the product that much?

But as for One price selling, I am all for it. Then it would come down to who provides the best customer buying experience and who has the best trained staff. But I think that there are/will be laws violated when this process becomes as popular as you believe it will be. I know in the past dealers have been slapped on the hand by the feds for trying to use one price pricing on new vehicles as a locked in process.

But Thank you again for writing back. Best of success to you.

Reply,

I really appreciate all of your thoughts. I would, however, like to make a few points regarding some of your assumptions. First, I almost never recommend to dealers that they convert to one-price. For the reasons that I stated, I believe that it is the most efficient selling model, and ultimately where our entire industry will end up. Even with these beliefs, I recognize that very few dealers actually understand or are prepared to do it properly, and for that reason, I do not prescribe it.

Also, you state that when the one-price environment becomes the norm, it comes down to who has the best customer experience and trained staff, and I completely agree. I also believe that there is yet one more very important differentiator, and that is, who has the most efficient operation. Since one-price selling necessarily entails thin margins, expense control and operational efficiency (i.e. processes throughout the dealership) will be yet another key differentiator.

It should also be noted that one-price selling is not illegal unless the various one-price sellers collude in setting their single price. This is not something that I would ever advocate or anticipate occurring.

Finally, I need to correct your statement that most Gen Y buyers are not interested in buying vehicles. Fortunately or unfortunately, vehicles are a necessity for most people whether they have a high or low degree of interest. I’ll acknowledge that previous generations of America had a love affair with the automobile, and the Gen Y population seems to be much less infatuated, but the fact remains that at least for the time being, car ownership represents the most viable form of transportation for most Americans.

Again, I just want to thank you for the quality of your thoughts and commend you on your curiosity. Asking the right questions is the first essential step to understanding the environment.

 

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My travels this week took me to East Tennessee to visit two dealers, Daniel Johnson, GM of Johnson City Toyota and Dustin Walters, GM of Friendship Hyundai.

twobrightstars10 300x219 Two Bright Stars Shine In East TennesseeThe visits were part of a larger Cox Automotive program that aims to help dealers earn financial rewards from their investments in AutoTrader.com, Manheim and software companies like vAuto.

Both Johnson and Walters are part of an up-and-coming generation of dealers who are making quite a mark in their local markets and beyond.

As the GM of the Toyota store, Johnson is leading a fast transformation of the business. In just 45 days, he and his team have added 50 additional new/used vehicle sales, a 30 percent improvement from the store’s average under prior ownership.

The success isn’t all that surprising when you consider Johnson’s own quick rise from service advisor to NADA Dealer Academy graduate to GM/owner—all before he’s 40. Johnson is a progressive thinker who also appreciates the history of our business (as evidenced by a general ledger and ribbon writer from the previous owner displayed in the showroom).

Just down the highway, Walters is a second-generation dealer whose family-owned twobrightstars3 Two Bright Stars Shine In East Tennesseegroup earned the honor of Automotive News’ Best Dealership To Work For award last year for its Chrysler-Jeep-Dodge-Ram in nearby Bristol. This dealership, and Walters’ Hyundai store in Johnson City, are also on the list of contenders for the 2014 Best Dealerships award.

In our meeting, Walters and his team were hungry for insights on how technology will give dealers more analytics and tools to make car-buying more efficient and satisfying for consumers than it is today. They also wanted to know how Cox Automotive would help them push their business forward—the mark of sharp minds that understand innovation by dealers and their vendor partners is essential for success today and tomorrow.

As I headed to the airport for home, my time with these dealers made me think that the car business, for all its past faults and indiscretions, has an incredibly bright future.

 

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Dealers As Hunter-Gatherers Or Farmers—Where Do You Stand?

08.06.2014

Here’s a question that’s had me thinking: Has the evolution of the automotive retail business reached a point where dealers need to stop hunting and start farming? The question came to mind during a conversation with an industry analyst. He offered an anthropologist-type view of the industry—some dealers are hunter-gatherers, while others appear to have [...]

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A Closer Look At The Evolution Of Used Vehicle Inventory Age Benchmarks

08.04.2014

It wasn’t too long ago that dealers routinely kept used vehicles for 90 days as retail units. More recently, dealers have adjusted this retail timeline to account for rising price competition and transparency spurred by the Internet, as well as the always-increasing costs of keeping cars in retail-ready condition on your lot. It’s now common [...]

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Dealer Discovery: Why “Total Gross” Matters Most In Used Vehicles

08.01.2014

I had an e-mail exchange with a Chicago-area Honda dealer the other day that I think is relevant for all dealers, especially those who have adopted the Velocity Method of Management. The dealer asked two important questions—What’s the optimal percentage of used vehicle inventory that should be maintained under 30 days of age?, and, What’s [...]

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vAuto Dealers Shine On AutoRemarketing Top 100 List

07.29.2014

It made me happy the other day to peruse AutoRemarketing’s Top 100 (Franchised) Used Car Dealers for 2014. As I was going down the list, I kept seeing familiar names—stores where vAuto has played a role in helping dealers take their used vehicle operations to the next level. All told, we counted 43 vAuto customers [...]

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Forecast Alert

07.22.2014

Numerous reports are filtering in from across the country citing geese delivering root beer. Sightings have confirmed that these are not drones, but in fact real geese. Consultation with forecast analysts confirms the fact that there is a 100% chance of root beer delivery from coast to coast. Experts advise all affected populations to immediately [...]

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Are You Asking The Wrong Question About Used Vehicle Reconditioning?

07.17.2014

I received a note from a Velocity dealer asking for guidance to trim $100 to $200 from his reconditioning costs, part of a broader effort to increase used vehicle profitability. It should be stated that this dealer is a smart operator who’s already wrung significant costs out of his reconditioning processes. He’s reduced mark-ups on [...]

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Achievement, Ambition and Blind Faith with Brian Benstock of Paragon Honda

07.16.2014

Last Friday I had the privilege of conducting a mid-year review with the management team of Paragon Honda, Paragon Acura and Honda of White Plains, New York. All three of these dealerships are under the management and control of Brian Benstock. My experience with Brian and his management team on both Friday and Saturday were [...]

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