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Lexus Giant Adapts to the Times

The magazine takes a look inside the world’s largest Lexus dealership to learn how a new approach to F&I, CPO sales and online marketing helped it survive the Great Recession.

January 2011, F&I and Showroom - WebXclusive

by Joan Shim - Also by this author

Department heads Greg Zeigler, Lance Digges and Bob Glasser each played a role in boosting JM Lexus’ revenue from CPO units when new-vehicle sales began to slip.

What does the Lexus volume leader do when the volume just isn’t there anymore? That was the question facing JM Lexus in 2008. The Margate, Fla., dealership had just come off its highest volume new-vehicle year ever, having sold 7,722 new Lexus vehicles in 2007. But toward the end of that year, when the downturn took hold, business started to slow down.

“I could feel an undertow — that business was starting to change,” recalls Jim Dunn, vice president and general manager. “And then we went from selling almost 8,000 new Lexuses in 2007 to a little over 5,000 in 2008.”

The drop in new-car sales was a wake-up call for JM Lexus. So, in 2008, the dealership shifted gears and made adjustments. Rightsizing the business and boosting service to current and long-standing customers were major components of its strategy, but Dunn says there also was a lot of potential among the departments that had yet to be tapped.

“Prior to 2008, the focus was always on our new-car department,” Dunn says. “So we had a lot of opportunity to pay attention to other areas of our dealership, and they really picked it up.”

Everyone was challenged to “do more with less,” and Dunn cites the pre-owned, finance, service and parts as the game changers. He says those departments “really answered the call” and helped the dealership end the year on a high note despite new-vehicle sales dropping further in 2009 to 3,996 units sold.

Ramping Up Pre-Owned

In early 2007, when new-vehicle sales were still strong, JM Lexus bought a piece of property kitty-corner from its new-car facility. The lot had housed a shuttered car dealership. Dunn says the dealership was originally looking for more space to store vehicles, but the new property also allowed it to expand its body shop and service facility, as well as retail operations.

“We were committed to Lexus Certified Pre-Owned, and we felt that was an opportunity,” Dunn says. “We were already the largest volume Lexus dealership in the world. We knew we had a shot at doing the same thing in our pre-owned department, but we needed more space.”

The JM Lexus Certified Pre-Owned Superstore opened its doors in June 2007, complete with a dedicated reconditioning center for pre-owned vehicles. The timing of its launch proved to be fortuitous, with the drop in new-car demand and sales just around the corner. In true recession fashion, JM Lexus’ pre-owned sales increased 21 percent in 2009 over the previous year, while new-vehicle sales declined even further industrywide.

“It’s turned out to be a really great strategy for us, and the numbers are certainly proving that,” Dunn says. “We’re now the No. 2 Lexus Certified Pre-Owned dealership in the world, and we’ve moved up nicely in the last couple of years.” Another reason for the rapid rise in pre-owned sales is online marketing. “Most of our business right now, probably about 80 percent, is somehow tied to the Internet,” says Greg Zeigler, JM’s pre-owned sales director.

The vast majority of car shoppers will do their homework online, and Zeigler says they come into the dealership with a specific stock number in mind. For those customers, JM Lexus’ Internet department ensures that each car is well-represented on the dealership Website and partner sites. Its secret? Photos — and lots of them. “Many sites that we use have 21 photos of every pre-owned car,” says Internet Manager Bob Glasser.

Zeigler also puts great care into setting the online price for each vehicle. He uses vAuto’s pricing tool, which provides a live snapshot of consumer buying and competitor pricing trends. “We want to make sure that we are definitely the frontrunner in our area as far as having the largest amount of inventory and having it priced to market online,” Zeigler explains. “That’s where the majority of our business is coming from.”

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