New Small-Van Segment Finds Commercial Success

Jerry Prosise, owner of a CertaPro Painters franchise in Nashville, TN, recently traded his company’s fullsize Ford Econoline van for a smaller Ford Transit Connect.

“We’re on the road all day, every day during the peak season,” Prosise says. “We were filling the Econoline’s tank every two days. We fill up the Transit Connect once a week. It’s cut our fuel consumption in half.” Prosise plans to buy a second small van this year.

Also in Nashville, Solomon Hamzour, owner of K-1 Auto Glass, recently purchased four pre-owned Transit Connects. “It’s tall, you can go anywhere with it, and it gets good gas mileage,” he says.

Vital Media Security, a Dallas-based company that couriers sensitive data to offsite locations, recently added two new Chevrolet City Expresses to its fleet and has ordered three more.

“The Chevrolet City Express is the perfect representation of our company, as it shows our customers that we can do more with less,” says Vital’s President and CEO Jerry Judkins. “With great fuel economy and right-sized cargo room, it fits perfectly into our business.”

They are among a growing number of small business owners opting to buy compact commercial vans, a new segment that includes the Transit Connect and Nissan NV200 as well as two recent entrants, the City Express and Ram ProMaster City. Volkswagen is considering joining the U.S. segment with a version of its European-market Caddy wagon.

Small vans now “very viable part of our lineup,” says Classic Chevrolet’s Ken Thompson.

So far this year, sales in the small commercial-van sector are up 58% from like-2014. 

The Transit Connect, which bowed in model-year 2010, is the sales leader among the new batch of small commercial vans, with 43,210 deliveries in 2014, according to WardsAuto data.

Dealers played a big role in encouraging automakers to offer such vehicles. “We’ve had feedback from dealers all around the country,” says Dave Sowers, head of Ram commercial marketing. “They have insights into the market and were telling us that customers were looking for a true commercial vehicle that’ll stand up to the use that they will put it to.

“It needed to have specific configurations and equipment that would make it useful.”

“They were hearing from their customers that wanted something smaller,” says GM's Jennifer Costabile.

​Penske Truck Leasing has added 500 of the small vans to its fleet of 215,000, figuring that demand for efficiency and utility will continue to grow.   

“We have seen slow and steady interest in these types of vehicles,” says Paul Rosa, the firm’s senior vice president-procurement and fleet planning. “We have placed some in our rental fleet for our customers to experiment with.

“From there, with our sales team interacting with customers and prospects, things can happen quite fast. I expect that we will continue to add some vehicles to our rental fleet and let the organic lease activity take its natural course.”

Bringing these vehicles to market has been relatively inexpensive for automakers. Platforms, which are designed with high fuel prices and narrow streets in mind, had already existed for years in overseas markets.

“Transit Connect has been very successful serving customers around the world, so through our One Ford plan we leveraged our global assets to provide U.S. customers with even more options and flexibility,” says Yaro Hetman, a Ford brand manager.

The Transit Connect was named International Van of the Year 2014 at the COMTRANS commercial vehicle exhibition in Moscow; the Nissan NV200 has a London taxi version.

The most recent additions to the segment are the Ram ProMaster City, based on the Fiat Doblo and the Chevrolet City Express, a re-badged Nissan NV200.  

The decision to launch the City Express was based on dealer feedback.

Customers Wanted Something Smaller

“They were hearing from their customers that wanted something smaller,” says Jennifer Costabile, General Motors’ general director-marketing, rental sales, and used vehicle activity. “Over 60,000 hand-raisers indicated an interest in getting more information. Some people don‘t necessarily need a large cargo van. They need something smaller and more efficient.”

The vehicle offers relatively good fuel economy and capability and “fills a blank space in the lineup,” says Scott Sams, fleet and commercial sales manager at Karl Chevrolet in Ankeny, IA.

He adds: “There is a lot of untapped potential out there in the catering and delivery businesses with people who are using bigger vehicles that don’t really need them. We’re trying to educate people that we have something in that segment.”

But GM is at a disadvantage in terms of consumer awareness, Sams says. “If people think of that size vehicle, unfortunately they don’t think of GM, because we haven’t had anything for so long.”

Sams says he expects to meet Chevrolet’s expectation of five or six City Express sales a month at his store.

In some parts of the country, consumers eagerly awaited the van.

Ken Thompson, fleet and commercial manager at Classic Chevrolet in Grapevine, TX, says people were asking for the City Express, which was introduced at the 2014 Chicago Auto Show, before he had even one on the ground.

His customers range from a vehicle paint touch-up company to a beer distributor that uses the vehicles for hotshot deliveries.

Classic Chevrolet’s decision to display at a recent builders’ association event in Dallas has paid dividends. According to the show’s organizers, the dealership’s display, which included two City Expresses with sample body wraps, drew the largest crowd of any exhibitor.

“We had three sales people there,” Thompson says. “They called and said, ‘We’re swamped.’ We have 65 to 70 vehicles available and we’re trying to get more. It will be a very viable part of our lineup.” 

FCA U.S. foresees segment growth for small commercial vans, Sowers says. “There’s opportunity for us to carve out our own niche of volume and possibly even take some from the other guys.”

Dealers who want to sell the ProMaster City must adopt a commercial mindset and remember how they themselves operate as a small business, he says.

“Dealers don’t typically go to a showroom for an alarm system for their store or to see the lifts for their service department,” he says, drawing an analogy. “They have sales reps coming into their store to sell those items.

“We tell them this van is a tool for these other small businesses. You need to go to them to talk about the benefits from the vehicle and from the dealership service perspective.”

The light bulb goes on for the dealers “when they start thinking about if they were running another small business, how they would expect transactions to happen for them.”

Different Selling Approach Needed

FCA assists dealers that are transitioning from 100% retail to include commercial sales with a go-to-market plan. Home office advice includes the proper way to set an appointment with a small business prospect.

“Don’t expect to walk into a small business owner’s office day one and sell them a van,” says Mike Ring, FCA manager-small business sales. “It will take four or five contacts. You start to build a relationship with that business owner and they start to have some trust in your dealership and your service department.”

The company recommends commercial dealers hire sales consultants with business-to-business sales experience.  

Until the ProMaster City was launched, FCA served the segment with the Ram C/V Tradesman, a windowless version of the Dodge Caravan minivan. While that vehicle came about as a result of dealer recommendations and chalked up 11,311 sales in 2014, it wasn’t fully competitive.

“The product wasn’t a completely done vehicle like the Ford Transit Express,” says Clayton Weber, commercial truck manager at Criswell Commercial Trucks in Gaithersburg, MD, a holder of Chevrolet, Isuzu, Ram, and Nissan franchises. “It didn’t have rear barn doors and the roof was too low.”

Criswell is prospecting and letting potential buyers test drive the ProMaster City for a few days.

Weber recalls a customer who wanted to buy a fullsize ProMaster customized with a refrigeration unit and installed shelves. He initially expected to pay a markup of only a couple of hundred dollars.

“The salesman came in to my office and said, ‘What am I supposed to do here?’” Weber says. “I told him go out and explain what you have to go through to get this van put together, how many places it has to go, the time and expertise. You go and ask for profit. Ask them what they think is fair."

That customer ultimately came around,, he says. "If you’re able to vocalize the expertise that goes into it and the logistics, you can make a fair penny.”

With more than 28% of sales involving commercial customers, Criswell has identified best practices for selling to this market.

“Proper inventory is key,” Weber says. “You have to recognize what’s going to sell in your market, who the trades are, and develop relationships with vendors to properly upfit the equipment that your contractors need.

“You also must offer financing services that cater to the commercial end of the business. We’re selling commercial leases, business-only loans. You have to have a dedicated business in every respect – parts, service, sales, and financing. And if you’re consistent, you’re going to get the repeat referral business, which is the key to our success.”