A second-generation auto dealer, Paul Walser, 57, and his brother Andrew, 44, operate Walser Automotive Group, a 12-franchise enterprise servicing communities in and around Minneapolis and St. Paul, MN. Like many second-generation dealers, whatever the era, Paul Walser’s career began as a teenager doing odd jobs around dad’s dealership. He took over as CEO in 1997.
Paul, tell us about the Walser Automotive Group.
We sell Buick, Chrysler, Dodge, Jeep, Subaru, Toyota, Honda, GMC, Nissan, Mazda and Hyundai vehicles through dealerships located in St. Paul, Bloomington, Burnsville, Maplewood, and Brooklyn Park, all in Minnesota. We also operate two used car superstores as well. The new-car franchises retail 20,000 new and used vehicles a year. Our three used car operations retail another 2,000 a year. We have been in business since 1955, when Dad opened an Oldsmobile dealership. Ours is a typical dealership legacy, which my brother Andrew and I were fortunate enough to acquire.
When did your dad retire?
Which time? He is one of those guys you hear about, who reaches a certain milestone and says, “I think it’s time to back away.” He did for two years and then said, “I’m bored. I think I’ll get back in for a while.” He retired for the last time in 1997 and sold out his stock to us in 2004.
What was the operation then?
Dad had his Olds franchise and had later added Buick and Mazda. From ’88 to ’96, I went off to operate my own dealerships, and when I returned we merged some stores into the business. We then figured out our direction going forward and most of the portfolio that we have today I have added since ’97.
How do you and Andrew share responsibilities?
Ours is an interesting relationship, in that we have different skill sets but have similar operating philosophies. He had been primarily responsible for used car sales, but as of the first of the year, we co-CEO the company. Sharing a philosophy is a blessing, because such common ground is not always the case in the dynamics of family businesses.
How do you complement each other?
I’m the evil brother, having a strong administrative skill set. I’m good at follow through, big on structure, accountability and alignment and otherwise making sure all the “T”s are crossed and the “I”s are dotted. On the DISC personality tests, I would be a high D or Driven personality and Andrew would be a high I, an Intuitor. He’s a charming personality, very engaging, with a lot of creative juices. Everyone loves Andrew, meaning he is inventive and easily makes connections with others.
He runs sales.
Yes. He is physically in the stores more than I am, so he is more hands-on. However, I too enjoy that aspect of the business — particularly watching people learn and grow — so I’m making time to get into the stores more often. Andrew has reported to me and had run our used car operations all these years. While he is now co-CEO with me, he still focuses on the sales operations, which he is very good at.
Explain your similar philosophies, if you will.
It astounds me that Andrew, 13 years my junior, and so different from me, shares the same basic philosophy: a long-term outlook based on taking advantage of innovation to stay ahead. It is uncanny how we come to the same conclusions when making decisions, and do so almost simultaneously. We are both passionate about innovation. We’re risk takers and looking for the next great thing. What will the industry and our business be in three to five years? We’re both very disciplined at setting aside short-term thinking to focus on what changes might be necessary for us to embrace, if we want to be successful in the future.
This future thinking is so important today, just to stay up with the rapidly changing dynamics of the world and this business. The differences between 1965 and 1970 weren’t particularly compelling, but the difference between 2007 and 2012 are. What is 2017 going to look like?
How are you responding?
We try many strategies and some work, others don’t. Our first change in response to market dynamics was our move to one-price a decade or so ago. We certainly weren’t the first dealership to embrace this idea, and anyone who has taken that journey knows it requires everyone to buy into the change, as it is a big culture shift for the dealership.
Then five years ago, we centralized our accounting and now operate 15 businesses out of one “pod”, and that change and integration was distributive too, for our staff and our processes. We stuck to the change, worked through issues, and today have more streamlined operations and better overall group control.
We also standardized compensation plans. That too was a challenge, due to the people issues, but structurally too, because we had pre-existing plans at different stores paying people differently for doing the same things. We now have a standard, across-group, compensation plan. We also centralized our brand messaging. We created a consistent look and messaging. Obviously, every store has unique product offerings and demographics that we have to be sensitive to, but we wanted to do that all under the umbrella of what the Walser name stands for…what our customer promise means.
We also worked toward building a similar look and feel for our stores. We honor the factory programs, but create design elements and aspects to the way that we operate. For example, we don’t like walls and instead build open-system showrooms, so everything is transparent to the customer. Customers engage with sales reps within ear-shot of each other, which we hope is a friendly environment that eliminates concerns customer might otherwise have, like “What’s-going-on-behind-the-curtain.”
Finally, about two years ago, we completely changed the structure and compensation aspects of our sales operation. We now pay reps hourly only, plus some F&I bonus money. We eliminated the finance function, in terms of having a second face the customer has to meet. Now our hourly sales people also handle F&I with their customers. We’re rolling this one-face idea out in service as well, so customers deal with only one person, not several, which they don’t like. This new plan and the elimination of F&I as a second step in the sales process have completely changed the culture of the company.
Sales do F&I product presentations?
Yes. Once the customer purchases the vehicle, they work with that sales associate to handle the finance step. We have a centralized funding center, which works electronically with the sales person to provide them with an electronic menu, which the sales associate discusses with the customer. This center then places the sales contract with the appropriate lender. The process is seamless, for customers, and us because we eliminate their need to sit through the F&I office process. Our customers love this. They want all the time in the world to make the decision, but once they make it, they want to get in their car and go home.
How did your staff respond?
At first, concerned, it was going to be a big change. While most of their compensation is an eight-hour /day rate and some additional income from F&I sales, their top concern was how handling F&I might keep them from getting to their next up. They discovered that this one-face process is actually more efficient. After all, the old system kept them close to their desk waiting for customers to come out of F&I to conduct deliveries.
Their customer satisfaction scores are part of their incentive picture, which this new process gives them more control over too. Often customers felt roughed up when associates flipped them over to F&I to get to that next up. Those customers often gave the rep poor marks and that affected their bonus schedule. Now they have full control. By the way, every single one of our stores has customer satisfaction scores above the zone.
How important is technology to your success?
Everything we do touches our IT team and we continue to add capacity. Last year, Marketing, IT, and Training got the largest budget increases. We are always asking ourselves: How do we put our resources to work in the best way possible?
A year ago, we brought onboard a Six Sigma process expert who works with one of our IT project managers. We call this team SIT – our Strategic Initiative Team. I mentioned that IT touches everything we do here. For instance, we have 90 different software solutions at work here at any given time. We have a complex web of technology here and a lot of effort goes into integrating these solutions, making sure they work with our DMS and CRM, for instance.
Technology is critical for us. We have to make sure each software solution is “talking” to all the other related software solutions and all are performing for us the way these technologies are designed to do. For instance, our web design by Dealer.com does a good job for us, but we’re always evaluating alternatives. For inventory management, we have been with vAuto for some time. DealerSocket providers our CRM. We have good relationships with these vendors and they have been able to understand us.
Much of this technology supports our Triple D Strategy: digital, database and direct mail. We like these marketing tools, as we can measure their affect and ROI. The digital part is online inventory marketing like Carsoup.com, which here in Minnesota is the main online car-shopping website. We do the entire inventory VIN processing, vehicle imaging and uploading of those files ourselves to Carsoup.com and to our inventory pages as well. The database part of the strategy means data mining and we use AutoAlert for that phase of the strategy. For the third D, direct mail, we have a fully capable in-house marketing team.
Are you using technology to help you retain customers?
Walser has partnered with The re:member group since 2003. re:member group developed and manages Walser Rewards, our industry-leading, tiered loyalty program where members can earn points toward their next vehicle by completing service at Walser dealerships and by shopping online at over 400 retail merchants.
We’ve seen an 8% increase in customer retention and a 39.8% increase in customer spend among our Walser Car-buying Elite Members versus non-Members as a result of our rewards program. Walser Car-buying Elite Members receive special Dealer Benefits and discounts at over 200,000 nationwide brick and mortar merchants when they show their Walser Rewards Elite Membership Card at the point of purchase. Discounts include gas, car washes, restaurants and golf and travel to name a few.
What challenges are ahead for the industry?
The young generation now coming up is a bit risk-averse and more interested in work-life balance. The variable income and long hours of this business are not their first choice, even if other jobs are not readily available.
We must be cognizant of how this younger group wants to be employed, and what we have to do to attract talent into our industry. We don’t want to be limited to the pool of car sales people moving from store to store. That’s not a particularly effective strategy.
Another challenge is how people want to buy cars in the future. There’s still a segment of the population today that will continue to respond to traditional car-selling strategies. Yet if dealers are not waking up to the idea that this is going to be a different kind of a customer as time moves on, they’ll find themselves left behind. How we adapt so we draw this younger worker into the business and how you go about retailing your product to them are looming issues.
Finally, the nature of transactions will change. We used to count on the home runs to even out the singles and doubles to make our numbers. Consumers are too aware and informed today to fall to home run deals. When we try those tactics, they simply move on down the road to the next dealer. We had better offer customers a solid value proposition, be able to talk to them intelligently about our pricing, and be as transparent as glass.
Thinner margins but more deals.
That’s right. In our area, a number of franchises are inviting very, very low margins. That says to me two things: One, you better get costs in line and, two, you better improve ancillary revenue sources, such as fixed operations.
We cannot be lulled by the current good market. Interest rates are so low now there’s almost no floor plan impact to the business; all that will change overnight should the European market absolutely fail or should U.S. debt not be addressed. Strong reserves in F&I are a pleasure too, but again, that could change quickly. While enjoying the current market, we had better be continuing to plan for tomorrow. We better be putting good inventory control systems in place. We had better have good revenue streams coming in from many areas.
Any final comments?
This is a fun business. I’m grateful for the opportunity that my dad gave me. Every day is different and it’s just so engaging. The biggest thrill for me now is working with the people who have joined us as we move into the future. I look forward to again going from store to store and seeing those young faces. They’re excited, they’re young, and their futures are ahead of them.