From the January 2016 issue
If Apple enters the auto business, as some observers think is inevitable, it may not be its cars that matter. At least, not as much as the stores in which they are sold. The Apple Store ethos—seamless customer interaction, effortless problem solving, speedy service—has become the benchmark for retailers of all stripes. This customer experience is as integral to Apple’s success as its elegantly simple product designs, compelling the company’s faithful to line up to buy its new products.
That kind of sales environment has been unheard of in auto showrooms, where decades of hard-sell tactics and souk-style haggling have implanted resentment and distrust. Yet some visionary dealers are giving the Apple approach a shot, having concluded that it will take more than TV lounges and free doughnuts to win the business of tech-savvy customers in general and impatient millennials in particular.
Brad Miller is president of Miller-Nicholson, which owns Honda of Seattle and Toyota of Seattle, unusual conjoined dealerships that share a new six-story building off Interstate 5 near the city’s sports stadiums. For Miller, the dealerships’ move last spring offered an opportunity to blow up the old business model. What he has since created is nothing less than a laboratory to test a new way to sell cars. Miller says he didn’t try to copy the Apple Store, though he is seeking a similarly satisfying customer experience.
The mantra is “One person, one price, one hour.” That is, once a car has been selected, Miller says, “we should be able to get our guest onto the road within an hour, if that is what they want.”
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That kind of sales environment has been unheard of in auto showrooms, where decades of hard-sell tactics and souk-style haggling have implanted resentment and distrust.
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New cars are sold at a fixed price with no spiffs on the side; don’t even ask for free floor mats. The no-commission salespeople (only one has remained from before the move) guide a customer through the entire sales or lease process, including financing and other paperwork. The usual finance and insurance office—which sometimes twisted customers’ arms to take the rustproofing and an extended warranty, or marked up loan rates to pad the profit margin—has been banished. Financing terms now depend solely on credit scores.
Miller says early results are encouraging, despite a “hugely painful transition.” His stores have been recruiting and training salespeople who don’t have much, or any, car-dealership experience, but who have a “servant” mentality. Given the complexities of many transactions, including sales tax, insurance paperwork, and government regulations, there is a steep learning curve beyond the need to master product specs, options, and tech features.
Miller notes that one of the biggest challenges is countering customer skepticism, which is why he provides some free diagnostics in his service departments and is counting on positive buzz from customers on social media.
But even if Miller’s Seattle experiment proves successful, can it be duplicated in markets where customers aren’t as young, as affluent, or as tech-savvy? Analysts note that, with car sales booming, dealers are feeling little immediate pressure to change their ways.
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One of the biggest challenges is countering customer skepticism.
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Automakers, however, are looking ahead and floating their own showroom-level trial balloons. Toyota will soon roll out a limited test of no-haggle transactions at Lexus dealerships. Other automakers will focus on the dealership experience. Chevrolet has sent nearly 18,000 dealers and sales personnel to the Disney Institute for remedial hospitality workshops. BMW aims to ease the transition to its multilayered technology features for new owners by training 1000 product “geniuses,” specialists who serve as advisers in dealerships, to tutor customers in the car’s digital workings.
Whatever the magic formula may be, much depends on how it gets distilled. Referring to millennials, Miller says: “You have this unbelievably big buying segment coming up, and this huge disconnect, this huge distrust of the car-selling mentality. It is a collision of epic proportions. We really do have to get it right.”
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