Over in the auto dealership world, some Cadillac dealers are facing an interesting dilemma. Cadillac unveiled its Project Pinnacle program earlier this year, which sets new facility and sales standards and incentives for dealers. As part of the program, Cadillac is setting up five tiers of dealers based on sales volume, according to a story in USA Today.
Tier 1 dealers, those larger dealerships that can meet the highest standards, have a chance to earn the biggest incentives. Tier 5 dealers, those who sell the lowest volume, will be offered the chance to set up a virtual showroom, where customers would view cars with virtual reality goggles and then order the vehicles.
Some dealers, those that sell less than 50 Cadillacs a year, will be offered a buyout of up to $180,000 to give up their franchise. What makes it more interesting is that those dealers represent 43% of Cadillac’s 925 U.S. dealerships and account for only 9% of its sales last year, according to the story.
The offer raises many dilemmas for dealers. Is their dealership and the brand they’ve no doubt worked hard to create only worth $180,000? Would anyone really be persuaded to buy a vehicle, much less a high-end brand, based on a virtual reality experience? Have they prepared for a “forced retirement” for their business?
Brian Maas, president of the California New Car Dealers Assn., says, “The challenge I think is for those dealers that are sort of in the middle, who are still trying to decide what to do.”
Dealers who don’t think the buy-out offer is fair don’t have to accept the offer, but whether they accept or not, Cadillac holds all the power in this scenario.
What’s the takeaway for rural equipment dealers, especially those single stores with lower sales volume and no plans in the works for expansion?
Make sure you understand the value of your dealership, factoring in intangibles such as brand awareness, reputation and team. You’ll be in a better position to negotiate if someday you are offered a buyout.
Know your in-line competition. You may come together as friends and colleagues at dealer meetings, but you need to be aware of how your dealership stacks up. Seek out the progressive dealers and do some competitive analysis. Compare those dealerships with yours — from the manufacturer’s viewpoint — and see about short-term and long-term adjustments you can make.
Stay vigilant regarding monitoring competing brands. Whether you’re forced to switch lines or you do so voluntarily, it’s in your best interest to have a head start on a new direction for your dealership.
Consolidation is rampant across many industries — and it’s not just big vs. little. For instance, chemical manufacturer Bayer is finalizing its acquisition of seed company Monsanto with the deal valued at $57 billion.
There may come a time when manufacturer requirements or the market may force some tough decisions for your dealership, but you don’t have to be powerless in the process.