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NADA Issues Phase 2 Study Of Factory-Mandated Dealership Renovation Programs

The study, as before, added insights from other retailing industries, pointing out in particular some that have been better at developing solid, quantified business cases for facility upgrades that are lacking among some – but not all – auto manufacturers.

"We're requesting that auto manufacturers redouble their efforts to provide dealers with better business cases before investing in facility upgrades, and especially, to ease off on standardization demands that seem very hard to justify," Mercer said.

Dealerships of the Future

The second study breaks new ground by examining the Dealership of the Future: a forecast of what the facility of 2025 might look like.

With turmoil engulfing other retail sectors, as seen in the closing of Borders stores and the downsizing of Best Buy outlets, Mercer said dealers began asking "if today's investments in dealership facilities will become obsolete in the next decade or so: can this happen to us?"

"Our conclusion is that the dealership system  will fundamentally remain  intact in 2025, but there is the possibility for much more efficient design of facilities, for example  by moving support functions offsite, and by using new format approaches to grow service volumes," he added.

Mercer expressed great concern that the current trend to build more expensive and more brand-customized stores will lead to excessive and wasteful spending, as dealers repeatedly raze and rebuild their facilities, and as automakers constantly update their brand image campaigns. 

"Meanwhile, as customer needs and behaviors continue to shift, we urge automakers and dealers to get more creative in addressing those changes, especially in service work, and that automakers become more flexible in approving low-cost ways to implement these ideas. We cannot afford to tear down and rebuild the store every time the brand imaging shifts," he said.

"If we move toward lower-cost ways to reconfigure stores, the Dealership of the Future in North America will be less of an overbuilt and expensive 'Garage Mahal,' and more of a right-sized model of retailing efficiency," Mercer added.

Mercer said one of the goals of the Phase 2 study is not to prescribe a "one size fits all" solution, but to assist dealers and auto manufacturers alike to better understand each other's points of view better, and negotiate on a more informed basis for the most-efficient (low cost) and effective (high growth) way to invest in dealership facilities, not only for today, but for tomorrow as well.

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