What is in this article?:
- Automakers Push for Showroom Overhauls, and Dealers May Reap Rewards
- Resistance May Not Prove Best Strategy
- Ford’s Cultural Revolution Gaining Traction
OEs are pressing for more than brick-and-mortar changes and modern décor. They want showroom culture to evolve as well, and evidence suggests dealers who follow these new employee/customer roadmaps will be rewarded.
BMW’s Future Retail showroom concept designed to engage shoppers, eliminate high-pressure sales tactics.
Resistance May Not Prove Best Strategy
Some retailers continue to resist OE demands, including a fewdealers who reportedly would rather sell their stores than commit to a mandatory upgrade that collectively will cost $2.5 billion.
But a-backed annual study of dealership salaries and employment issues, now entering its third year, suggests a financial reward awaits those willing to take these leaps of faith.
Ted Kraybill, president of ESiTrends, the consulting firm that compiles the “Dealership Workforce Study Industry Report” formembers, says there is a close relationship between sales-staff retention, customer satisfaction and showroom profitability.
“Manufacturers are really focusing on employee retention and employee engagement, because there’s so much information that shows…there’s a direct correlation between the 3-year retention rate of sales people…and higher J.D. Power scores on satisfaction,” he tells WardsAuto in an interview.
Employees who are more vested in the store’s mission and satisfied with their jobs also are likely to stay. And the more experienced the staff, the more productive, which could have a big effect on a dealership’s bottom line.
“We have the data that show…if you have 70% retention (compared with a 50% norm), you can have two points higher gross profit as a percent of sales,” Kraybill says.
Better work environments could mean retailers would have to pay above-average rates to attract new employees, he says. Dealerships average $2.7 million in payroll, about 61% of total expenses of $4.4 million.
“Dealers are paying a premium to get talent,” Kraybill says. “And they’re paying a premium for two reasons: When there is someone good already working in the industry, they’re bidding up the price of that resource; they’re bidding up the pay. And also, they just have to pay more to get people to consider working in dealerships.
“I can’t tell you how many times I’ve talked to dealers and (human-resource) managers who are frustrated they can’t find people to even pass a drug test in some markets.”
Traditional showroom culture is making it tough to recruit and retain staff. Today’s growing Gen Y workforce demands a better work-life balance, Kraybill says. But too many dealers are resistant to flexible work hours and refuse to allow sales staff to operate from home when possible, such as when chasing down Internet sales leads or setting up appointments with potential buyers.
“The days of working bell-to-bell and putting in 70 hours a week on the sales floor…the young employees coming in are saying, ‛That’s ridiculous.’”
Trust is another factor, Kraybill says. “If a dealership doesn’t score well (on trust in NADA’s employee survey), we’re going to see low retention rates.”
Many employees leave because, like customers, they are uncomfortable with the high-pressure sales tactics and other questionable practices they encounter, he says.
Taken as a whole, dealership turnover isn’t that bad, the ESiTrends executive says, and it has been improving in the last couple of years as the industry has emerged from the recession. About 35% of dealership employees leave each year, compared with a 41% turnover rate in the private sector.
But turnover runs a whopping 63% on the sales side, Kraybill says, emphasizing experience and retention “is what drives productivity and dealer profits.”