Poor Cadillac can't catch a break, sales are down 5.9% this year while other luxury car companies are having record numbers. The problem, according to General Motors, is not the lack of competitive product, because Caddy is making some damn good cars. The problem is the dealerships.
According to a post at the Motley Fool, Cadillac must undergo a serious strategy shift in the way they connect with customers in order to steal sales away from the likes of BMW, Mercedes, and Audi. That is why GM hired former Audi executive Johan de Nysschen who knows what it takes to bring a brand up from the ground and take on the established players.
The first problem is the number of stores. There are currently 925 Caddillac dealerships nationwide. That is about three times as many dealers as BMW. This makes the brand less exclusive and less profitable in each location.
Cadillac sold 182,540 vehicles in the U.S. That works out to an average of 197 per store. Meanwhile, BMW's 339 U.S. dealers sold 309,280 vehicles last year, or about 912 per dealership — or put another way, over four times as many.
Of course, closing down Cadillac dealers would prove costly for GM, due to the franchise laws. The automaker would essentially have to buy them out. But it is not just the sheer volume of dealers that is hurting sales, it is also location of those stores and their proximity to related GM brands.
It is a policy at General Motors that when you have common ownership of stores of the various brands of the corporation that we want them to cohabitate. So it's against the company's policy to let a Cadillac store, for example, be positioned next door to a BMW store owned by the same dealer. We want the family to be together.
Now there are, I'm sure, very good merits for that if you are running Chevrolet, GMC, or Buick. But what you do when you execute that policy for Cadillac is that you put the brand in an environment where luxury shoppers don't want to go. And if you want to exercise synergies and back-office shared services and whatever, it trickles down and you end up selling Cadillac out of the back door of the Chevy store.
And I will tell you, no BMW owner would want to go look for a Cadillac there.
The fact is luxury car buyers are looking for a more elevated shopping experience. It may sound shallow but they want to feel better than the "masses" that are getting zero percent financing on a Chevy Malibu. When you have them shopping in the same place, it turns people off. If someone is going to drop fifty grand on a brand new CTS, it doesn't matter how nice the car is, if where they are buying it doesn't have the feel of a luxury car dealership that should be selling a car of that price, it is going to be difficult to convert customers away from the Germans.
The other issue that de Nysschen brings up is the sales staff. He feels that Cadillac dealers struggle with attracting a top-notch sales staff that can represent the brand as it should be. Often the folks on the floor lack the talent and the knowledge to pitch their car against the default choices from BMW, Mercedes, Audi, and Lexus.
As a buyer's consultant I shop for a lot of luxury cars, mostly German. I haven't personally encountered many Cadillac dealers, mostly because my clients don't request Caddies. However the few times I did reach out to a Cadillac dealer I found it to be a mixed bag in terms of their level of response. Some were very knowledgeable and professional, while others didn't have a clue on how to sell a luxury car. As consultant shopping on behalf of someone else, I find that luxury car dealers tend to be more receptive to this as opposed to more mainstream brands like Honda.
From my interactions with some of these Cadillac salespeople, I found their tactics were much more aligned with a "stealership" than the relaxed no pressure environment I was used to from the German stores. Awhile back I had a customer interested in ordering an ATS 6-speed, there were not many on the lots so he decided to wait. One local dealer demanded that he visit the dealership so they can go over the "rules" of ordering the car and take his deposit in person. My BMW contacts would have sent the spec-sheet, pricing, and order information all via email and would have required nothing more than a phone call and a credit card.
He ended up buying a Mercedes.
I will give Cadillac credit for actually recognizing that if they want to be a real player in the luxury car market they have to do something about their dealerships, unlike some other brands...
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