What You Can Learn from Small-Town Auto Dealers

Until recently, one of the less-reported aspects of the crisis in the automotive industry is the effect that its radical downsizing is having on auto dealers. Now that General Motors and Chrysler have axed roughly 1,100 and 800 dealers respectively, stories of dealerships closing are front page news. While cuts have come largely at the expense of urban dealers, some smaller rural stores are surviving — at least for now.

Many of these smaller dealerships are family enterprises; three and even four generations old. Their longevity is a testament less to Detroit's products and more to their smart and sharp business practices. And now that some of their competitors are closing they may do even better. Let's consider what business leaders can learn from these small-town auto dealers.

Know your customers. Small-town auto dealers know what vehicles their customers prefer. This comes from having long-lasting ties to individual families, selling new cars and trucks to grandparents and parents, and putting the children into affordably priced used cars. Part of knowing your customers means considering their changing tastes. Decades ago many of smaller dealers signed franchise agreements with Asian and European manufacturers like Honda, Nissan, Toyota and VW to provide their customers with even more makes and models from which to choose.

Service matters. Dealers will tell you they make more servicing cars than selling them. Manufacturers pay for warranty repairs but good dealers, particularly those in small towns, will keep their customers returning after the warranty expires because they provide reliable servicing. They also have a reputation for honesty, a word that is not often associated with automotive retailing. Local dealers have no alternative to treating their customers right; they live in the community, and word gets around.

Invest in the community. In many areas, car dealers are the soft touch for youth sports teams as well as school musicals and church raffles. True, it is good visibility to have your store's name on scores of soccer uniforms and and church bulletins, but something more is at work. Car dealers are part of the life of these towns; their philanthropy supports causes and activities that add texture to the community.

Maximize opportunity. Dealers are entrepreneurs. Those who are not closed will get aggressive. As reported in the Wall Street Journal, surviving dealers will buy up inventory at a good price, add salespeople (some from former competitors), and expand their sales reach. One Dodge dealer in Jackson, Michigan — right in the heart of "downturn valley" — said, "I'm going to buy every car I can find with every dollar I have until I run out of money." While that attitude may have led investment bankers to run Wall Street into the ground, hearing it from a dealer sounds more optimistic. He has faith in himself, his business, and his community.

Not every dealer is worthy of imitation. Just as there are poor businessmen in every field, there are less-than-reliable automotive retailers, especially ones who cheated their customers, not to mention their own employees. But these smaller, successful dealerships can teach us a lesson or two that may help us grow our own businesses.

As a youngster I recall the dealer showroom windows that were papered over every September in anticipation of the sparkling new models that would soon be introduced. I still remember drooling along with my chums at the brand-new 1963 Corvette parked at the corner of Carl Schmidt's Chevrolet in Perrysburg, Ohio. We ran our fingers over the radical new lines of the first Stingray. No salesman shooed us away; our ogling and awing was a kind of third-party endorsement.

Maybe that's another lesson; let the kids touch the merchandise and one day, he'll tell his friends about you.