For Scott Smith, president of Charlotte-based Sonic Automotive, revamping the car dealership model is a bit like preventive care: It’s costly at the get-go, but ultimately promises better health and a longer life.
It’s been about six months since Sonic rolled out the One Sonic One Experience concept in Charlotte. The idea behind the digital sales platform is to eliminate the “pain points” of the traditional car-buying experience: price haggling, pushy salesmen, long periods of time spent at the dealership.
Digitized transactions (all salespeople have iPads) use algorithms to determine a car’s true market price, so there’s no negotiating. From there, customers can choose from an array of add-ons, such as extended service agreements. Including appraisal of the customer’s old car, the whole transaction takes a fraction of the time it would take using the old sales process, according to Sonic.
The new model hasn’t shown equal results across all of Sonic’s five Charlotte dealerships, according to a recent earnings report, and investment in the platform’s technology has also cut into the company’s profit.
That’s a short-term pain, though, that’s worth the long-term investment, Smith told the Observer in a recent interview at Sonic’s Cotswold headquarters. Many other dealers wouldn’t want to take such a pricey risk.
“They may have an ‘if it ain’t broke, don’t fix it’ mentality,” Smith said. “But I would contend that it is broke, they just don’t know it yet.”
Bold actions like implementing One Sonic are possible because of the company’s ownership structure, Smith said. It’s a Fortune 500 comapny, but the Smith family owns about 75 percent of Sonic’s votes.
“If we were in a different ownership situation where we were constantly under the gun to make an annual number, it would be much more difficult, I think, to invest this kind of money,” Smith said.
The investment is starting to pay off, as evidenced by increased market share at some dealerships and by positive customer feedback.
At Town & Country Toyota, for example, Sonic’s market share rose to 20.5 percent in March from 13.2 percent in March 2014, according to the company. The dealership sold 257 new vehicles in March 2015, up from 155 in March 2014.
Sanjay Prakash, general manager at Town & Country Toyota, said in an interview that each salesperson is now averaging 15 or more vehicles sold a month, compared with a previous 10 to 12.
At other dealerships, results haven’t been as strong. Town & Country Ford’s market share declined to 15.2 percent in March from 19.5 percent in March 2014, and it sold 121 new cars in March of this year compared with 135 in March of last year.
Though at that same dealership, one Yelp reviewer described an “amazing experience,” and staff that went “above and beyond” after she was “disregarded and insulted” at another Charlotte dealership.
Smith said he anticipates all of Sonic’s dealerships will be fully implemented with the One Sonic model in about three years, and the next two markets will be Chattanooga, Tenn., and Birmingham, Ala. The company currently operates about 100 dealerships in 14 states.
The spread of One Sonic will be a gradual one that requires the trust not only of customers but employees, too, Smith said. That’s in part because it alters salespeoples’ pay structure and no longer bases it on commission, leading some to wonder if they will be paid less.
“Culturally, it is a very difficult thing to do,” Smith said.
Prakash, the general manager, said not having commission and set sales targets takes the pressure off a salesperson, resulting in a better customer experience.
“Can you imagine being the No. 1 salesperson versus the No. 15 salesperson with three hours to go on the last day?” Prakash said.
Smith has been in the car-selling business for most of his life, though he said he’s always felt there was a “fundamental problem” with the old, commission-based model. If two people go in and purchase the same kind of vehicle, for example, they will end up paying two different prices depending on how good their negotiation skills are.
For millennials, many of whom don’t have a basis for comparison when it comes to buying a new car, fast, digital shopping experiences are the norm. Smith said Sonic had a younger generation in mind when designing the model.
The decision to cater to younger buyers, in fact, to Smith was “painfully obvious” at the time – his then 18-month-old daughter could navigate an iPad and knew which games she wanted to play.
“The question was, how do you bridge from the old way of doing business to the way that generation was going to buy cars?” Smith said.