Manufacturers Need to Recognize Two Distinct Classes of Retailers
10 December 1998
J.D. Power and Associates Reports: Automotive Manufacturers Need to Recognize Two Distinct Classes of Retailers
Separate Rules and Practices for Dealerships
Should Be Implemented by Manufacturers
AGOURA HILLS, Calif., Dec. 9 -- The automotive retail
revolution is beginning to transform the industry with the top 5 percent of
dealer principals accounting for 31 percent of all new-vehicle sales in the
United States, according to the J.D. Power and Associates 1998 Dealer Attitude
Study(SM). This year's study offers new insights into several key automotive
retailing issues including the changing face of the U.S. dealer body, dealer
perceptions of where emerging trends will lead, the future role of
manufacturer field representatives and a detailed analysis of franchise
dualing patterns.
The study shows that there is a growing distinction between small
operators and large dealer conglomerates. This distinction creates problems
for manufacturers who must interact with a dealer body that is increasingly
diverse in size.
"The growth of regional and national retail organizations could soon force
manufacturers to develop a different set of rules for dealing with an
increasingly diverse dealer body," said Chris Denove, director of consulting
operations at J.D. Power and Associates. "It is unlikely that manufacturers
can continue to have the same rules and practices apply to national retail
organizations, such as Republic Industries, that also apply to small
dealerships selling only 100 new vehicles per year."
According to the study, many manufacturers are taking steps to tailor
their practices to different dealership needs. For example, domestic
manufacturers are beginning to eliminate field staff representatives who
support small dealerships. The study shows that although dealers value the
manufacturer field representatives, the loss of them has not significantly
impacted the manufacturer-dealer relationship.
However, from a broader perspective, satisfaction levels of
dealer-manufacturer relationships have continued to decrease over the last
several years. From 1997 to 1998, the study reports an industry-wide drop in
the Dealer Satisfaction Index (DSI) of two points, and a total drop of seven
points since 1993. Continued dealer dissatisfaction could lead to dealer
turnover or apathy, making it difficult for manufacturers to implement
programs required to make continued consumer gains.
Not all dealerships are reporting problems with their manufacturer
relationships. This year, Lexus ranks highest in dealer satisfaction with a
score of 163, which is 20 points higher than second-ranked Saturn. This marks
the first time in six years that Saturn failed to come out on top in DSI.
Lexus has been successful in combining sound dealer-manufacturer relationship
practices with profitability. With successful product launches of the RX300
and the revised GS series, 86 percent of Lexus dealers gave the manufacturer
top marks for building vehicles that meet current market needs.
Continued industry consolidation has had an effect on dealer-manufacturer
relationships. Fundamental structural changes to the franchise system are
occurring, yet dealer principals seem reluctant to recognize such change.
Currently, one in 10 dealers do not consider that a fundamental change will
occur over the next five years, yet one-third of them recognize that
consolidation soon will be at a point where small dealers will find it
difficult to compete.
"Despite industry consolidation over the past two decades, automobile
retailers have failed to establish a position in the distribution chain
accomplished long ago by retailers in other industries," said Denove. "The
image of dealers remain tied to the franchises they carry, such that dealers
have been unable to establish any meaningful branding of their own. This will
change, especially in the volume end of the market. The combination of
consumer-driven pressures and availability of public capital will produce new
chain operations with sufficient volume and clout to establish the type of
retail branding we see in other industries."
The independently funded Dealer Attitude Study is unique in the industry
because the survey is completed solely by dealer principals. This year's
study included responses from more than 3,000 dealer owners -- nearly
one-quarter of all new-car dealership management organizations in the United
States.
Headquartered in Agoura Hills, Calif., J.D. Power and Associates is a
global marketing information services firm operating in key business sectors
including market research, forecasting and customer satisfaction. The firm's
quality and satisfaction measurements are based on actual customer responses
from more than one million consumers annually. J.D. Power and Associates can
be accessed through the World Wide Web at http://www.jdpower.com. Media e-mail
contact: john.pepitone@jdpower.com. This press release is provided for
editorial use only.
No advertising or other promotional use can be made of the information in
this release or J.D. Power and Associates survey results without the express
prior written consent of J.D. Power and Associates.