Cadillac Bets on Virtual DealershipsA portion of stores for GM’s luxury division will become showrooms with virtual-reality headsets and no carsWSJ - By Christina Rogers, John D. Stoll and Gautham Nagesh, Jun 5, 2016
Buyers walking into a Cadillac dealer in the near future could find an interesting thing on the car lot: nothing.
General Motors Co. ’s luxury division has about three times as many U.S. stores as German luxury auto makers or Toyota Motor Co. ’s Lexus, but sells only about half the volume. Short of steering around rigid state franchise laws and hammering out financial settlements to shutter stores, a plan is being hatched to convert a portion of Cadillac’s 925 stores into virtual dealerships that will be low on overhead and big on sophisticated technology.
In a somewhat unprecedented way of moving metal, Cadillac President Johan de Nysschen will this month begin looking for commitments from some store owners willing to set up showrooms where buyers can get a car serviced or learn about products via virtual reality headsets without getting behind the wheel. Driving off immediately with a new vehicle will be impossible because these stores won’t have inventory.
Virtual stores are a part of “Project Pinnacle,” an extensive retail-strategy overhaul by Mr. de Nysschen first introduced to dealers a few months ago in closed-door meetings, dealers said. Hired by Chief Executive Mary Barra in 2014 to turn the struggling luxury maker around, Mr. de Nysschen is revamping the way the company compensates its dealers by rewarding them less on the basis of vehicles sold (an industry practice known as stair stepping) and more on the way those dealers mimic better performing luxury brands with perks such as free roadside assistance.
'snip'
While some dealers have voiced concern about Project Pinnacle’s potential to squeeze out small-volume stores, most say Cadillac needs to change. Once the benchmark for premium automobiles, GM has spent 15 years investing heavily in the brand—but it still falls far behind foreign rivals in terms of profit, reputation and volume.
Having so many outlets has helped the domestic brand lure people who otherwise wouldn’t consider a Caddy, but it also requires GM to produce a glut of inventory—a practice that is costly and threatens to erode the brand’s luxury cachet. Cadillac has an 88 days’ supply of sedans sitting on dealer lots, according to WardsAuto.com, a number that exceeds levels at Germany’s three luxury makers.
“We’re competing against BMW, Lexus and Audi, ” Mr. Churchill said. He says Cadillac therefore needs to quit behaving like a mass-market brand.
In a round table interview with reporters earlier this year, Mr. de Nysschen said GM knows the mass market extremely well, ranking as the No.1 U.S. player and No.3 in the world in terms of sales.
Auto makers have long flooded dealer lots for two reasons: car companies book revenue on production volumes, not retail sales. An overabundance of output can boost revenue, and the problem can be taken care of later via discounts or production cuts. Car buyers are also used to having ample selection to choose from.
'snip'
http://www.wsj.com/articles/cadillac-bets-on-virtual-dealerships-1465172482
