By on November 13, 2009

newpotemkin

While other brands are busy closing down dealers, Volkswagen is buying them. They buy the big ones, to be exact. The smaller ones have been eliminated ever since yours truly has been working for VW.

In the USA, Volkswagen Group of America signed an agreement to buy the not so swank Potamkin family’s dealership in Manhattan and convert it into fancy VW and Audi stores, Automotive News [sub] writes. The new stores will be built in VW’s new “all in white” concept.

The ugly building currently houses Potamkin GM.  That will be moved five blocks south on 11th Avenue into a smaller store that was Potamkin Honda.

In Germany, Volkswagen’s disintermediation game is nothing new. Over the last few years, Volkswagen has been busy buying the “too big to fail” dealers. They are owned by a Volkswagen subsidiary, the Volkswagen Retail GmbH.  A few days ago, VW announced an interest in swallowing  MAHAG, one of Germany’s largest Volkswagen dealers with 30 stores, mostly in Germany’s South, says Das Autohaus. Volkswagen owns or controls dealerships in most major German cities. Ever since Volkswagen opened their Autostadt Wolfsburg in the year 2000, Germany’s Volkswagen Group dealers have been casting a  wary eye on it. In the meantime, nearly half of  Germany’s Volkswagen buyers pick up their car at the Autostadt, instead at their neighborhood dealer.

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24 Comments on “VeeDub Going Retail...”


  • avatar
    drifter

    Considering the reliability of their products, they need all the dealerships they can get. This is move expected to push towing industry into deep recession in many parts of the country.

  • avatar
    kaleun

    Interesting concept to have the manufacturer sell its cars. It puts a lot of overhead on them, but more profit and control. I do like the idea if executed well.
    Execution is the key, after all we talk about the company that is successful in Europe, has efficient and reputable cars there…. but can’t shoot straight in the US (Routan, reliability anyone?)
    If they now cut out the middle man entirely and let me buy cars the same way I buy electronics… that would be cool.

  • avatar
    NulloModo

    Selling factory direct will likely never work for cars in the US market, but having the manufacturer own the dealer network isn’t necessarily a bad idea.
     
    I’m surprised  at the half of all German VW customers picking up their cars at the autostadt.  Germany is a tiny country compared to the USA though, so I don’t know if we would ever get those kinds of numbers.

    • 0 avatar
      RetardedSparks

      I think the factory delivery is more of a marketing thing, like Porsche and BMW do, rather than selling “Factory Direct.”
      Obviously, in Germany you’re never more than a days drive from Wolfsburg, so it might be fun to pick up your car here, get a tour, go to the VW museum, etc.
      It’s too bad that US companies can’t figure out how to do this. The only place I think they might do it is the Corvette factory in TN.  But who would want to pick up their Malibu at the RenCen in Detroit!?

  • avatar
    vww12

    Retailing of your own products, when done masterfully, increases market share and profitability.  Witness Apple.
    When done with mediocrity, such as at the Gateway stores, Dell stores, Microsoft stores, and Sony stores, you can have a subsidized presence which, after reality sets in, means you close all stores, or close some, and keep others artificially alive.

    • 0 avatar
      PeteMoran

      What makes you believe that Apple’s retail stores are successful? Nearly all of them have closed in Australia. I’d suggest they’re marginal at best.

    • 0 avatar
      Jeff Puthuff

      From MacWorld Live Update of most recent AAPL earnings report. The eye-opener is total visitors to stores. Unbelievable:

      Avg. revenue per store was $7.1 million, compared to $7.6 million year ago quarter.
      Dan Moren – 2:14:53—45.9 million visitors in stores, compared to 42.7 million visitors in year ago quarter.
      Dan Moren – 2:15:01—608,000 personal training sessions.
      Jason Snell – 2:15:24—As before, the average sales per retail store metric is the only place where you really, truly see the effects of the recession on Apple. Apple Retail is strong but has been hit by the recession; still, it’s weathered it pretty well.

      And that’s why I love cars.

    • 0 avatar
      UnclePete

      PeteMoran, I don’t know about Oz, but Apple stores do very well in the States. This may show that what works well in one country cannot always be transported well to another, just like VW’s presence in the US.

    • 0 avatar
      vww12

      PeteMoran,
      Color me stunned if any Apple-owned stores in Australia have closed.  Apple-Centres, which would be locally owned, may have come and gone over the decades, but certainly the three Apple Stores in Brisbane (Robina Town Centre), Sidney (George Street), and Melbourne (Chadstone Shopping Centre) are supposed to be doing gangbusters business.
      G’day,

    • 0 avatar
      PeteMoran

      @ vww12
       
      I don’t recall the actual locations, but there are fewer open than before. Maybe the more central ones have succeeded, but IIRC a company called Nextbyte took over many of the Apple-run stores, but many of those have closed or been consolidated.
       
      Also, I can see how Apple feel they’re important, but I’d be extremely surprised if the very large majority of sales are non-retail store. More than 50% of sales come from iPod and iPhones already, while CPU sales have been falling for years. Laptops are the bright spot there, and many go direct to education.

  • avatar
    PeteMoran

    VW might be setting themselves for the inevitable move to a more “build to order” model which would require service centres for test drives and warranty work.
     
    Retail sales will not be the primary aim.

  • avatar
    mtymsi

    VW needs to sell relevant products in the U.S. How much longer are they going to attempt volume sales with the 5 cyl engine? They act like they’re completely clueless in this market. Doesn’t matter who owns the dealership if the product is wrong for the marrket. VW’s very limited success in the U.S. market is 100% a result of the products they offer.

  • avatar
    John Horner

    Ford tried a big push into factory owned stores in the 1990s. Check out this exerpt from an Automotive News story:
    “The company invested in retail operations in five markets: Oklahoma City; Tulsa, Okla.; Salt Lake City; San Diego; and Rochester, N.Y. The Rochester operation was a joint venture with Republic. Attempts to expand the initiative in other cities failed.
    The Ford Retail Network, later named the Auto Collection, infuriated dealers, who feared factory-owned stores would get special treatment.
    Dealers heckled Ford executives at the 1999 National Automobile Dealers Association convention in San Francisco. The son of a Ford dealer stood at Ford Division’s make meeting saying, “I thought we were your Ford Retail Network.” The comment drew hearty applause from those packed into the room.
    Ford’s effort to manage dealerships tottered. The Auto Collection stores cost Ford sales, and the company’s 1999 attempt to overhaul them by dropping no-haggle sales and returning to commission-based pay failed.
    State dealer associations lobbied state legislatures for restrictions on factory-owned dealerships. By 2000, most states barred manufacturers from owning dealerships.”
    http://www.autonews.com/article/20030616/SUB/306160820
    I wonder how VW is getting around those state laws?

  • avatar
    brettc

    If VW starts operating dealerships directly, does this mean that the service departments will stop sucking? Maybe they’ll hire some techs that actually can comprehend how to work on one of them funny diesel engine thingies.

  • avatar

    mtymsi:
    Please tell me why the 2.5/5 is not right for the American market.  Other then a few gearheads, who cares whether it’s a 4, 5, or 6.  The engine and manual transmissions have never been a problem with vdubs.  The heartburn, as reflected in Consumer Reports and other surveys, is electrical issues.  

    The dealer has always been the biggest downside of the VW ownership experience and if more company involvement in the process improves things then the product’s image will improve.

  • avatar
    RetardedSparks

    Given how bad most VW dealers are, if they can run this shop better than it might prove to be a good thing. They won’t even have to own every dealer, just show them how it’s done. It might also help their tone deafness to hear from customer directly.
    I know that the BMW dealership at 57th & 11th is owned by BMWNA.  I don’t know if VW’s plan is to own every dealership, or just one or two “flagship” stores.

  • avatar
    jacad

    The non-automotive people are reading far too much into this. Selling automobiles is not the same as computers and electronics. Manufacturers have for decades either owned or subsidized retail stores in New York City. Mainly because with the cost of real estate and overhead it is impossible to be profitable. This is not a precursor to a new marketing scheme by Volkswagen but rather a desire to have a flagship in New York for advertising and image sake.
    Potamkin operated the largest Cadillac store in the Country for years in New York and had the worst Customer Satisfaction as well. They were pushed into selling it to Penske and GM subsidized the building and costs. Penske couldn’t make money either and gave it back. Potamkin wound up with it again and you can believe GM was subsidizing that as well. Now Volkswagen will lose a ton of money monthly so as to build an image with their presence. 

  • avatar

    Question:
    “I wonder how VW is getting around those state laws?”
     
    Answer:
    “The Volkswagen and Audi stores will be run by the Open Road Auto Group, which currently owns an Audi dealership in Manhattan as well as BMW, Mini, Nissan, Mazda, Acura and Volkswagen stores in New York and New Jersey.”

  • avatar
    psarhjinian

    The dealer has always been the biggest downside of the VW ownership experience and if more company involvement in the process improves things then the product’s image will improve.
     
    The reason the dealership experience is so bad in North America is because of the involvement, or at least the behaviour, of VWAG/VWoA.  I’ve talked to dealers—especially service managers—who have done duty in both VW and, say, Toyota shops and the difference in dealing with their respective corporate parents is like night and day.  Especially enlightening is the difference between Lexus and Audi: Lexus dealers have ironclad support from Toyota when it comes to making the customer happy; Audi service departments (granted, this was a few years back) were hung out to dry by VWoA.
     
    The result is that the Lexus customer, even when there is a problem, goes away happy while the Audi customer is left feeling spited, harassed and abused.  The dealer gets the brunt of the ill-will, and one more customer learns the “if you own a VW/Audi, get to know a good independent mechanic” mantra.

  • avatar
    hreardon

    In the last 5 years Audi and VW in the United States have really segregated their operations, giving much more indepdence to Audi.  In my experiences with two dealerships in Northeast Ohio – Stoddard Audi and Fred Baker Audi, both have always gone above and beyond for me on service issues.  That said, now that I am out of warranty, I have found myself an excellent independent mechanic because the prices at both shops are pretty astronomical.  Great work and service, but very pricey.

    I think the VW move into retail, again, if done properly, is an excellent move. It’s not just about pure sales, but a marketable presence and ‘experience’ as well.  I’ll reiterate someone elses’ comments about the Apple stores and their wild success here in the US.  If VW can make these showrooms a pleasant place to stop by to check out the latest model and not be harrassed by Stu the Salesman, they may be on to a good idea.

    Apple’s stores are in high-profile, high-traffic locations and serve just as much to control the brand image and build awareness as they are about selling Macs, iPhones and iPods.  I think this will hold even mroeso for Audi and VW since most people don’t buy a $25,000 car on a whim (I’ve been proven wrong on that statement…), but Audi/VW will be able to build a relationship with people who stop by.

  • avatar
    FromBrazil

    This is just a putsch to try to move the metal at MSRP. At first I wager it’ll be successful, but I venture to say that the average American buyer will just go on to the closest Honda store and get that Honda steal, the Brazilian consumer will smirk and move on to the Fiat shop where he’ll buy that Palio on promotion, and even the European shopper will see the wisdom in competition and get that Renault, Peugeot or whatnot and x% under MSRP.

    Then again it just might force manufacturer’s to scale down their MSRPs.

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