Five Star Hotels, Spas and Car Dealerships

Car shopping takes on a whole new meaning as luxury car dealerships are implementing multi-million dollar makeovers.  A recent Wall Street Journal article by Neal Boudette, “Luxury-Car Sellers Put on the Ritz,” caught my eye:   one, because I like luxury cars, and two, because I love to be pampered. (Really now, who doesn’t?)  And the reason for these makeovers?  Well, “the goal is to create the look and feel of five-star hotels for customers, increase the dealerships’ car allocations and even make it less likely that rival dealerships will pop up nearby.”  Large retail chains like AutoNation Inc., Wilson Automotive Group, Fletcher Jones Management Group, and Herb Chambers Companies are all jumping the gun to actualize these lavish changes in their dealerships.    

Lattes, Golf and the Spa…

Who would’ve thought you could walk into a dealership to get your car serviced and get a “day at the spa” all at the same time?  I love the idea as much as I hate walking into a dealership service department (which is the raison d’être, I think).  Luxury dealerships, like Lexus, are remodeling their venues with amenities like European coffee bars and cafes (think Starbucks), vibrating massage chairs, test tracks, putting greens, flat-panel TV’s, and offering free services like shoeshines, manicures, and shuttles to the airport.  The interior decor has transitioned to an upscale environment, creating a luxurious “5-star” ambience to include polished stone bathroom counters, fireplaces, and skylights over the showroom floor.    

 

Why They Do It – Part 1:  Standing out from the Crowd

The reason for this increase in upscale-style dealerships is a result of several factors.  First off,  it reflects the growing population of the wealthy, and what they require in “raising the bar” for luxury service.  And of course, as more car dealerships are stepping up in the ranks, competition increases, making those super-luxury dealerships that were once considered the few and rare, now a norm.  As, Vince Liuzzi, general manager of Herb Chambers Lexus says that “you’ve got to do a lot more to wow people now.”  Once upon a time Lexus was the only brand that offered loaner cars to their customers who brought their vehicles in for service.  However, now this has come become expected at most dealerships, and an alternate differentiating point becomes necessary.          

Why they Do It – Part II:  To Get More Allocation, to Make More Money, Today…

Don’t be fooled guys, there is a more exigent, immediate reason why these dealers spend so much to give you so much.  It turns out that it’s not only good for customer relations and ambiance, but the manufacturers specifically incentivize this type of spend by giving those dealers who build these mini palaces more allocations for in-demand, hard to get product.  Every extra car a dealer can get each month in a luxury brand that the public is craving translates into extra, immediate profit, enough to make the amortization payment on lots of creature comfort amenities with some bucks to spare.  As is mentioned in the article, “For dealers that sell the three top luxury brands — Lexus, BMW and Mercedes — building palace-like showrooms is also just about the only way to grow. The three companies that make those cars keep supplies of the vehicles tight. Many dealers could sell more cars, but they can’t get additional vehicles from the manufacturers.”…and, “The big three luxury brands also limit the number of dealerships. And building a bigger facility means Lexus won’t put another store in the area.”

If you do the math on the recent AutoNation’s Palm Beach Lexus store’s $35 million dollar upgrade, it’s pointed out in the article that the investment made sense (and cents) from day one.  Lexus has a deal that they will allocate more cars to dealers who upgrade facilities.  For the $35 million investment, the Lexus store in Palm Beach can order 2,000 more cars on top of its normal allocation over the next 18 months or so.  Last year the store sold 2,710 new cars, so by quick CarsDiva math they increased their likely sell through by roughly 1/3 or an additional potential sales of another 111 a month, on top of their 225 or so monthly sales.  Who knows exactly what is made per sale, but, chances are with that kind of growth in the “top line” number the upgrades were a wise financial expenditure – and they protect their exclusive market sales area in the process, in their demographic of growing population and affluence.  Not a bad deal at all.. 

So It’s All Fair, but Don’t Be Confused As To Who Is Really Paying for All of This Pampering…

As an educated consumer though, the facts above dictate that I am really paying for these upgrades in preserved profit margins for the dealer though, right?  They get a third more cars instead of a competing franchise in their territory, and I was always taught that competition fosters price competitiveness.   So without it,  there is naturally a lot less discounting and the preservation of the profit margin of the dealer with no competition, right?  Not to mention the fact that, as the only local Lexus dealer in a large market territory, the service pricing, that is, what’s not covered under warranty, can probably include a very hefty price margin as well.  That’s a basic law of supply and demand.  That’s probably fair though, as a wealthy consumer (hypothetically speaking), I’m demanding this type of catering (remember I’m the one that expects the “bar raised”), so I should pay for it.

It’s clear lots of consumers are loving it as Barry Speak, a 2005 Lexus LS 4300 owner and customer of Palm Beach Lexus is quoted in the article,  “My wife and I are going to be fighting over who gets to take the car in now.”   

And ladies, well I don’t know about you, but I would love to  go car shopping, get my nails done, AND drink my latte all at the same time.  It would certainly take the “trauma” out car buying–  at least until it came down to the price proposal…                                     

 What do you think???

  

“The Dealership Treatment” – Women Vs. Men

 

 

 

Looking at American society today, women are definitely in the driver’s seat, purchasing over half the cars sold and influencing the purchase of over 80%.  With such a critical impact on automotive decision making, you’re probably wondering then, why is this industry so behind in placing more focus on them and their needs?  Well, perhaps it’s because men still hold the majority of high-ranking positions in the automotive world.  Although women are (very slowly) breaking through the barriers, it’s still controlled by men!

 

Women need to be satisfied

According to surveys conducted by CARMAX and Capital One Auto Finance, women continue to be unsatisfied with their car buying experience.  Studies continue to illustrate that women are increasingly purchasing more and more vehicles, yet their visit to the dealership has not improved.  In fact, it’s often referred to as “traumatic.”

Men drive the sales

Men don’t only dominate the high-ranking positions in the auto industry, they drive the sales.  In fact, women only make up about 8% of car salespeople.  Women are just viewed upon as being less aggressive.  Although both men and women give the car buying experience a negative connotation, women often take men along with them because they anticipate being treated badly.  I’m sure you’ve all been in that spot before- whether you were the man accompanying your wife or girlfriend, or the woman pleading your father or brother to come with you. 

The disparity often lies in the lines of communication between the salesman and the buyer.  Women like to take their time and “shop around”, and they’re not afraid to let the salesguy know that they’re “just shopping.”  Redflag!  Two things could happen at this point.  The salesperson ignores the lady and moves on to help the next GUY that just walked in.  Women take this as discrimination; they get frustrated and pissed off when they realize the person that was supposed to be helping them disappeared and they can’t get their questions answered.  (I don’t blame you- that’s why I’m here to help with that.)  OR, the salesguy, with all his tactics, will somehow find a way to con the shopper into buying a car she really didn’t intend on purchasing that day.  And again, the women leaves feeling aggravated, manipulated or pissed off that she allowed herself to be put in that position.  You’re supposed to be thrilled, feel excited– like a little kid getting a new toy when you buy a new car, right????

 

 

 

Interestingly enough a study completed by Princeton University and Edmunds.com concluded the following:

• 2.5 times more women than men said they feel “a great deal of apprehension” about negotiating.
• Men initiate negotiations about four times more often than women.
• When asked to pick metaphors for negotiations, men picked “winning a ballgame” and a “wrestling match,” while women picked “going to the dentist.”
• Women will pay as much as $1,353 to avoid negotiating the price of a car.
• Women are more pessimistic about the rewards available, and so come away with less when they do negotiate-on average, 30 percent less than men.
• 20 percent of women (22 million people) say they never negotiate at all, even though they recognize negotiation as appropriate and even necessary.
• Approximately 80 percent of women feel pressure when browsing for cars in showrooms — and yet women play a critical role in nearly 60 percent of new   vehicle purchases, according to Edmunds.

Take control! …or say goodbye

I don’t know if I’d compare negotiating for my next car with going to the dentist (at least not if you have as many cavities as I do), but well, you can see the point being made.  The important thing to remember for both men and women is that you are in control of the situation– don’t allow yourself to lose that confidence.  You can always walk out if you’re not getting the treatment that you deserve by the wise-guy in plaid pants, (there are a ton of car dealers out there.)  Now on that token, in order to remain in control, you need to walk into the dealership prepared!  Don’t expect to come out ahead or strike a great deal if you don’t know what you’re talking about.  A recent survey showed that women are more likely than men to visit a dealership without doing any prior research.

Preparation before Purchase

Research and lingo is key- I mean come on ladies, you wouldn’t go browsing for your next Louis Vuitton bag without doing your research beforehand, would you?  You know how the sales rep will look at and/or treat you if you don’t know what you’re talking about.  I was just reading an article from the Wall Street Journal about shopping in a luxury district (Taking an Emotional Audit of Rodeo Drive by Christina Binkley), and it reminded me of car shopping, as the emotions that accompanied the shoppers frequently included “delight, shame, disappointment” and “self-indulgence.”  Luxury boutiques often profile their potential customers, and send signals that are unwelcoming, reflecting exclusivity.  Sound familiar?  Well the same applies for the car biz.  Forget about it, you might as well stay home.  You won’t be taken seriously.  Be prepared before stepping out or yes, you’ll fall into the pool of those with the “traumatic” experience.

 

The number one thing to do is to research vehicle prices- not only the price of the car that you’re looking to buy/lease, but if you’ve got a trade-in, know the value of that car!  There are a lot of tools out there, whether you’re relying on a traditional source like newspapers, or you’re surfing the Web.  You can find what you need (and should do so) before you walk into a dealership.  It’s a lot easier to negotiate and remain in control when you can justify your argument.

Another point that consumers often forget (or don’t realize) is that there is a huge range of financing options out there—banks, credit unions, online financial sources.  Do some investigating.  The dealer is not the only one who can provide you with the financial assistance you require, AND he or she may not offer the best rates.  And if you have any specific questions on auto loans, feel free to ask me.  You know I’ll be honest with you…

“Say what???  Show it to me…”

Know your budget, and also know what you’re looking for in a car- from the drive train, to the horsepower, to the 5-disc player.  You’ll be amazed at how much more seriously you’ll be taken if you know some of the car “lingo.”  And finally, don’t be afraid to be demanding!   Take your time when you’re looking through the sales contract, and read all the fine print.  If you have questions, ask.   If you need an explanation, demand it.  You’ll appreciate taking these extra steps later on when your monthly payments aren’t sky high, but what you estimated them to be, and you’ll feel a sense of accomplishment and satisfaction as you cruise off the lot.