As consolidation rolls through Canada’s automotive dealership sector, owners are spending tens of millions of dollars on prime real estate and modern outlets to try to grab customers’ attention and build loyalty.
Thanks to the investments, it’s becoming increasingly easy to complete purchases and service vehicles. Across product brands, dealers are adding more display space and introducing indoor drop-off stations and luxurious business lounges.
The changes are geared to meet rising standards set by auto makers and to keep tech-savvy customers engaged in what remains a highly competitive bricks-and-mortar retail business.
At the newly opened Porsche Centre Oakville, west of Toronto, the cavernous showroom is filled with 22 vehicles. Another 20 pristine specimens, direct from Zuffenhausen and Leipzigare, Germany, are tucked away in a backroom as inventory. Outside, under a canopy, a handful of 911s, Cayennes and Boxsters sit poised for test drives.
This impressive sight might seem anachronistic in the age of online retail tools and brokers. But appealing displays and on-site inventory still matter. This dealership sold more than 30 vehicles in its first two weeks of operations.
“Buying one of our cars is still a passionate purchase,” says Francesco Policaro, managing director and general manager. “Every customer makes their way in here.”
The bright, cool design of the glass and steel building and the touches inside play on those passions. From the fitting lounge – where customers can personalize made-to-order vehicles right down to their names on the door sills – to the spacious and transparent service bays, the dealer attempts to immerse visitors in the Porsche culture. Customers are greeted by a six-metre video screen above the showroom that runs a cycled stream of Porsche content. In the evenings, spotlights move between specific floor models to match the video content.
“Gone are the days of other people’s ads playing over a commercial radio station,” says Policaro.
This is only the third Porsche dealership in the Toronto area. The franchises are a cherished venture among dealers because high-end German vehicles offer some of the fattest profit margins in the business. Sticker prices start at $60,000, and every sale has the potential to deliver years of revenue and profits for the service department, which houses 15 bays.
A lot of the design details come straight from Porsche. These include the office layouts and furniture, the Wega Gemini espresso makers in the walk-up cafe and the charging pedestals that will soon serve the manufacturer’s first electric vehicle – the Panamera S E-Hybrid that is due in November.
The Policaro Automotive Family already owns six other dealerships, whose brands include Toyota, Honda and Hyundai. It is a relatively small operation compared with some of the country’s biggest players. The Dilawri Group of Companies, for example, owns and operates more than 46 dealerships representing 29 automotive brands in Ontario, Saskatchewan, Alberta and British Columbia. And AutoCanada operates 30 franchised dealerships in six provinces, with brands ranging from Chrysler to Subaru.
Nevertheless, the Policaro business had sufficient scale and experience to enable it to finance the three-year process to acquire and build a Porsche franchise, as well as to invest in adding some of its own touches.
The giant video wall is the most apparent example. Other Policaro features include a biometric check-in system for employees, which feeds directly into payroll. All staff are wired with Apple products and customers are offered iPads during their visits. In the service area, bays are kept immaculate with the help of “aqualifts” in lieu of oil-based hydraulic lifts that are less environmentally friendly.
Across North America, auto makers encourage dealers to put as much money as they can into their buildings in order to showcase the product better. In many cases, renovation programs are mandatory. But dealers have to weigh that cost against other investments, such as staff training and marketing, and against expected return on investment.
A study released this year by the National Automobile Dealers Association found that mandated renovation programs designed to keep dealerships in step with auto makers’ brand campaigns do not pay off. NADA urged that facilities be upgraded based on sound business decisions and it warned against the dealership of the future becoming an overbuilt “Garage Mahal.”
One area, however, where many dealers are finding a good business case for investing is in the environment. Porsche Centre Oakville’s spotless service bays leave customers with a sense of high professionalism. At the same time, they are enclosed by high-end industrial stacking doors from Butzbach GmbH that maximize insulation.
Across the country, dealers are not only promoting the fuel efficiency upgrades of their new models, they also boast about the green designs of their buildings.
The new $4-million Stratford Toyota dealership in Southwestern Ontario this year became the first Canadian dealership to achieve gold certification in the internationally recognized Leadership in Energy and Environmental Design rating system. A thermoplastic roof and other conservation technologies have reduced energy consumption by more than one-third, the dealer says.
Green initiatives come at the same time as dealers are building larger facilities to house more of their inventory and services indoors. Weber Motors Ltd. began construction last month on an 80,000-square-foot Mercedes-Benz dealership in Edmonton. The design follows the manufacturer’s Autohaus specifications, but it also includes a drive-through service area and a basement for additional inventory to shield customers and vehicles from Edmonton’s harsh weather.
Pfaff Automotive Partners has implemented a similar design at its recently opened Volkswagen dealership, the largest in Ontario. By housing extra inventory indoors, the Newmarket facility is able to get most buyers out the door in their new vehicles in less than three hours. Previously, there was a two- to three-day waiting period before a vehicle was ready, says Christopher Pfaff, chief executive officer and president of the company, which also sells Audis, Porsches and Toyotas through nine other dealerships.
Pfaff VW Newmarket also integrates a 22-bay service department with indoor drop-off. The layout is designed so that the customer has the comfort of remaining indoors. And while clients are always in eye contact with the service manager, they also find themselves within conversation distance with sales reps.
“This is not old-school car retail anymore,” says Pfaff.
The latest customer satisfaction report from J.D. Power on service at dealerships and aftermarket shops suggests that, overall, the new initiatives may be having a positive effect. Customer satisfaction averaged a score of 830, up slightly from 827 in 2012. The firm surveyed 21,600 owners with vehicles between four and 12 years old.