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Auto sales: the race is on.

Competition among Anchorage dealerships is fierce.

You know a market is competitive when a crowd of well-established rival vendors report substantially different sales trends. Or when dealership managers level charges of impropriety in advertising against one another. Or when one Ford dealer sponsors a rodeo next door to the showroom of another. Competition, always vigorous in the Anchorage auto sales market, seems to have sharpened in the last couple years.

Recent patterns in local auto sales reflect many of the trends and problems confronting the auto industry everywhere. Nationally, auto prices for 1992 averaged $540 more per car than last year. While sales have improved overall, their pattern has been characterized as stop-and-start.

Anchorage auto dealers, as with home builders and other retailers, have had to find ways to coddle and convince cautious consumers who can't decide if the economy is coming or going. These dealers vary in their analysis of the current market and what has caused the competition to heat up recently.

Joe Leavitt, vice president of Anchorage Chrysler Dodge Center, says lagging sales at his agency can be traced both to the state's recent recession and

generally sharper buyers. "They want that good deal," he states. "Ten years ago, they didn't want the good deal; they saw a car they wanted, they bought it. The dealers aren't making the profit that they were 10 years ago."

Leavitt notes that manufacturers have been stressing customer service as margins shrink. Extensive staff training, mandated by automakers, is now standard procedure for most agencies. "All manufacturers, including the imports, are pushing for customer satisfaction. The training is designed to make the customer happy in a multitude of ways," he explains.

Leavitt says that nagging economic jitters in Anchorage are slowing his agency's sales. He explains that bad credit ratings stemming from home foreclosures and other troubles after the 1986 downturn have put a damper on the car purchase plans for many consumers who otherwise would have been trading in during the period since then.

"The traffic hasn't dwindled as much as the number of people with good credit has dwindled," Leavitt notes. "It's put added pressure on sales volumes. Prior to 1986, 90 percent (of potential customers) had good credit. Now, we're probably down 15 percent to 20 percent. We thought we would have recovered by now, but we haven't."

Leavitt reports that prior to 1986, Anchorage Chrysler Dodge Center averaged about 500 vehicle sales a month. Now the business averages about 300 sales per month. To stem the decline, the agency consistently has been spending about $1.5 million a year on advertising, he says. But according to Leavitt, persistent consumer pessimism about the state's economic future is prevalent and contagious.

"When The Anchorage Times went down, we didn't see anybody for three days. There weren't many dealers in town who did any business for three days," Leavitt says.

Even though his own sales are down, Wayne Drumm, general manager of Continental Motors of Anchorage, laughs off the pessimistic consumer theory. "There are so many things that affect business out there. Right now we're off some from 1991 and dramatically off from 1990," says Drumm.

Though he declines to discuss specific numbers, he says sales trends aren't down the 30 percent reported by some other agencies. "There aren't as many people coming through the doors. There weren't in the spring either," he adds.

Drumm says some Anchorage auto dealers have accelerated their promotional campaigns almost to the point of impropriety. He says some ads contain so little disclosure information that they constitute "flat out lying about the situation."

According to Drumm, exclamatory display ads offering super deals, with vaguely worded small print, lure potential buyers into showrooms where they fall prey to a sales technique called "liner-closer." Sales staff line up a customer with a car. Then the buyer is quickly paired with a closer who turns on the adding machine and starts writing the contract.

The bottom line, says Drumm, is that customers never get the car for the fabulous price printed in two-inch letters that got them into the showroom in the first place. "There's a lot of strong competition; there's a lot of money spent on advertising. It's very intense to say the least, and I think desperate people do some desperate things," he adds.

In contrast, Drumm says his agency uses what's called a straight-sell technique that gives the customer a little more room to breathe. According to Drumm, the technique depends heavily on customer loyalty and repeat business. While he feels at a momentary disadvantage because other agencies' tactics have changed the rules of the game, Drumm argues that the softer approach is the best long-term strategy. As proof, he cites the five straight years of double-digit growth his agency enjoyed prior to 1990.

"I spend a lot of money in advertising, on training my technicians. I spend a lot of money on customer satisfaction. I really push the honesty factor all the time. No matter how bad things get, I'm not going to be dishonest. You have an edge here if you do well by the customer," Drumm asserts.

Another agency that claims to use the straight-sell approach is Alaska Sales and Service, the state's largest auto dealership and a competitor for Anchorage auto sales for almost half a century. Leonard Bryant, president and general manager of the General Motors agency, says there is no question that increased competition in the last couple of years, as well as hesitancy in the market caused by bad news on the economic front, has affected his agency's sales performance.

"Compared with last year, sales are down. They're probably off 20 percent. What's occurred is there are more players and the pie is smaller. However, even though the pie is smaller, our market share hasn't changed," Bryant explains.

The Alaska Sales and Service general manager adds that it's simply unrealistic to think that announcements of job cuts in major state industries wouldn't be reflected in sales tallies. "These are the things that make the market go down. Our commodity is one of the first that people cut back when the news is bad," says Bryant.

An important aspect of this picture is that while downturns in the Alaska economy typically alternate with a healthy national economy, troubles here lately have been running parallel with negative trends elsewhere in the country. And while there's noticeable improvement in the nation's auto markets, recovery has been slow to reach Alaska, Bryant says.

He also notes that the used car business and parts/service revenues are fairly stable. "That's another indication that they're fixing, rather than buying," Bryant says.

One indicator of increased Anchorage competition in auto sales is growth of the Nye auto dealerships throughout Southcentral Alaska. Harold Nye, a car dealer from the state of New York, first jumped into the Alaskan auto arena in 1984, when he bought a Palmer Ford dealership and moved it to Wasilla.

He has diversified into makes other than Ford and has several showrooms in Anchorage, as well as an agency in Soldotna. Some of his competitors feel Nye has overextended himself and is dramatically undercutting other dealers to capture the market share needed to pay for his costly expansions.

In contrast to the sales performance of several agencies, Rick Cheverton, general manager of Anchorage Nissan/Jeep/Eagle/Itasca, says that dealership in spring produced "two absolute-record months in the history of the company." According to Cheverton, the agency sold 197 cars in April and 193 in May. Sales in parts and service also were up.

He attributes the company's success in part to aggressive training in a modified liner-closer approach. Cheverton, who recently returned to the dealership, says the training focuses heavily on psychology, body language and customer needs and anxieties. Two regular sales meetings a week, supplemented by two additional training sessions each week, are standard operating procedure at the agency.

"We've concentrated on treating everyone as nicely as possible, because service is all you can sell. (Our approach) is like the liner-closer, but we don't throw the customers keys on the roof and say they're going to buy a car," says Cheverton. "It's a kinder, gentler liner-closer system."

While he agrees there is a "high, high degree of competition" in the auto sales market, he doesn't attribute either the competition or the diminished sales of other agencies to recession fears. He feels some agencies simply are not keeping up with better-educated buyers who are asking more informed questions. "Our economy is a very healthy economy," Cheverton asserts.

Even those dealers more skeptical of the economic outlook aren't spending any time bemoaning their fate. They're going over advertising budgets one more time, fine-tuning their fall campaigns to coincide with the annual payment of Alaska Permanent Fund dividend checks, and working hard to deliver on their service commitments to increase opportunities for repeat business. If the economy does improve, repeat business could mean upgrades to more expensive models and some improvement in profit margins diminished by two decades of turbulent change in the world economy and the auto industry.

"We've had lower years, but this is probably just an average year," says Bryant. He adds that the picture could improve with just a few upbeat events.

"Bank deposits are up; there's money here. There are people. We know that waiting (to buy a new car) is not popular, so why in the world aren't people buying? The reason is psychology," he concludes.

Continental Motors' Drumm agrees: "If it continues like it is now, we'll have an off year. But anything could happen. It's that kind of business."
COPYRIGHT 1992 Alaska Business Publishing Company, Inc.
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Article Details
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Author:Richardson, Jeffrey
Publication:Alaska Business Monthly
Article Type:Industry Overview
Date:Aug 1, 1992
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