Adorned with a 20-foot-high spinning Mercedes-Benz logo and containing a spa, café, movie theatre and virtual driving range, Ken Szekely’s 65,000-square-foot dealership spits in the eye of today’s more austere times.
The luxury cars it houses are almost an afterthought next to the 30-foot-high all-glass façade that runs 1,000 feet along Highway 403, the freeway that many commuters in the affluent community of Burlington, Ont., use to start their journey to high-end jobs in nearby Toronto.
Heated porcelain floors, soft jazz and a concierge – who takes your coat and brings you a cappuccino made from Italian espresso beans – greet guests inside Mercedes-Benz Burlington.
“We want people to be treated like they’re at a five-star hotel,” says Szekely, the son of Hungarian immigrants, who made his fortune as the founder of Engineered Plastics Inc., an Oakville, Ont.-based manufacturing company that services the auto industry.
This opus to opulence comes on the heels of a decade of dwindling profit margins that has forced dealers to slash prices and offer endless promotions in an attempt to get cost-conscious consumers through the doors. The Internet has made car buyers smarter and less gullible. Dealers who have traditionally made their money pushing options and extended service programs, have seen margins narrow considerably.
Official manufacturer sites include the full price for every addition – from air conditioning to sunroofs – further tilting negotiations in favour of the buyer. Consumers can also arm themselves with free factory invoice reports through online services such as Unhaggle and CarCostCanada.
“Incentives have been getting heavier and heavier year after year,” says J.P. Kovac, the second-generation owner of Gyro Mazda, Toronto’s oldest Mazda dealership. “It actually costs less to buy a new car now than it did 10 years ago.” And the average return on every car sold in Canada in 2012 was a meagre 2.25 per cent, according to a recent study by DesRosiers Automotive Consultants. Manufacturers such as BMW and Daimler AG – the parent company of Mercedes – have started selling straight to the consumer via the Internet, bypassing dealerships altogether.
Retail expert Doug Stephens says the market is breaking down into two key categories: consumer-friendly online services and luxury. On one end are the ZipCars and AutoTraders that are making it incredibly easy for people to rent and buy vehicles. On the other side sit dealerships like Mercedes-Benz Burlington, which “are delivering a super-high fidelity experience, that is so jaw dropping it puts them beyond comparison,” Stephens says.
As middle-class incomes stagnate, dealerships have been forced to enhance their service offerings to lure and maintain customers in an ultra-competitive industry. “The inflatable gorilla on the roof isn’t quite doing the trick,” says J.D. Nay, an automotive industry expert for J.D. Power Canada, who adds that in the last 25 years the gap between brands has narrowed to the point where there is little perceived difference in quality. “Service is fast becoming the last differentiator in terms of overall ownership satisfaction.”
Nay cautions that if car dealers think adding a spa will compensate for shoddy service, it won’t. “Facility is the least important by quite a margin,” he says of the extensive customer surveys J.D. Power conducts. “The worst case scenario would be investing all this money into a facility-based program that your service advisors think is going to take the onus off them.”
The biggest benefit of a nicer building is that it motivates your staff, says Kovac, who is in the middle of building a new 20,000-square-foot building across the street from his Mazda dealership.
“It’s important for your staff to feel good about the place that they’re working at, because if your staff aren’t happy how are they going to please your customers?”
Kovac spent about 15 per cent more than the manufacturer’s requirements by adding porcelain floor tiles instead of carpet, tiles on the bathroom walls instead of plain drywall and an LED lighting system instead of fluorescent. Having staff work both locations will offset some of the costs.
Szekely has also added a number of other features, including free diagnostic house calls and a valet drop box at the Burlington GO Transit station that owners can leave their keys in to have their vehicle serviced while they are at work.
In addition, customers are treated to free car washes on Saturdays and the service centre is open until midnight six days a week. The bells and whistles have made the dealership a destination that even boasts “regulars” who, Szekely says, “if they miss a day, they call.”
Szekely’s experiment has so far yielded mixed results. The dealership was among the top Mercedes-Benz Canada performers in 2012 and 2013 but failed to make the cut in 2014 (based on 2013 numbers), at a time when Canadians bought a record number of Mercedes. The owner attributed the result to dealerships with smaller volumes achieving higher percentage gains.
He bought the dealership in 2006 with the aspirational goal of turning it into a focal point for Burlington’s well-heeled residents.
The space has hosted some charity functions such as the Joseph Brant Hospital Foundation’s annual Crystal Ball. Szekely insists he is catering to a lifestyle and that the relationships being fostered with his customers border on friendship. For some, the dealership has become part of their daily routine: they have breakfast there, get a car wash, read the paper, enjoy the spa and hang out with staff.
“All of these amenities are now resonating with them in terms of their lifestyle and where they are in their life and the way they perceive themselves going.”
1.7 million: Canadian car sales in 2013, an all-time high
2.25%: Average return on every car sold in Canada in 2012
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