Advocate of 1-Price Dealerships States His Case

The classic definition of inflation is, “Too many dollars chasing too few goods.” It inflates the cost of what we purchase.

We have a parallel in the auto industry when it comes to compensating sales managers. Most dealerships overall are quite profitable resulting in “too many dollars chasing too little talent.”

The severe shortage of high-quality sales managers with the requisite negotiation skills results in compensation packages that are significantly higher than other retail industries.

Dealerships pay a premium for managers with good negotiation skills. Most dealership managers are “deal managers” as opposed to a normal retail manager whose primary goals are to develop workforce talent and manage a process.

The job is a grind. There is a constant battle between the desk manager and both the salesperson and customer to close deals.

In essence, the position is adversarial. And adversarial relationships drive up costs.

Due to the highly transactional nature of the business, dealers are held prisoner to only hiring people with “car experience.”

Apple is not relegated to hiring only managers with strong technology backgrounds. If the traditional dealership model weren’t based on negotiations, dealers could hire managers from other retail industries and quickly develop them into dealership managers. The opening of the recruitment window becomes much wider.

The long hours most dealership managers are required to work leave very little time for work-life balance. This can drive away talent, as it becomes almost impossible to spend the appropriate amount of time with families and be at the dealership for the required amount of hours.

These factors need to be addressed if we’re going to implement management compensation plans that are more in line with other retail sectors.

One-price dealerships have overcome most of these hurdles, and the sales management target pay is in the vicinity of $60,000 to $80,000.

In stores where the sales professionals conduct the entire transaction, including finance and insurance, the number of managers is half that of a traditional dealership.

In the traditional dealership, there is one manager (including F&I and the business-development center) for every 2.5 sales consultant. Because we live in an era of margin compression, the traditional dealership management structure must be addressed.

Former dealer Mark Rikess is founder of The Rikess Group, a consulting and training firm. He is one of the original advocates of one-price selling.