Non-commission sales is an uncommon practice in the automobile industry, but one local dealer has decided to make the switch this month. St.
Non-commission sales is an uncommon practice in the automobile industry, but one local dealer has decided to make the switch this month.
St. Albert's Ron Hodgson Chevrolet Buick GMC announced in early March that it will transition from commission-based sales to non-commission sales, effectively eliminating haggling with the consumer.
Jeff Hodgson, general manager, said in March that the new sales model is directed at improving the car-buying experience for consumers, while attracting new customers to increase sales.
"The staff's main focus is going to be on helping the customer as opposed to making the sale, which is going to be paramount for us," he said.
The automobile industry typically uses a commission-based business model, allowing dealers and consumers to negotiate vehicle cost, ultimately determining how much the salesperson takes home at the end of the day.
"There are a lot of systems out there, there are a lot of approaches and there's a lot of controversy within dealerships as to what is best and what isn't best," said Dennis DesRosiers, auto sector analyst. "Every dealer you talk to will swear by their own as the absolute best."
He said there is very little information surrounding compensation in the automobile industry and there is no evidence to prove or disprove the success of non-commission sales.
Ron Hodgson is the first dealership in the area to undertake this kind of approach and Hodgson said the main motivation was the fact that buyers are tired of negotiating the price and tired of dealing with commission sales staff.
Dealership's bottom line
DesRosiers noted a non-commission model could be less motivating for sellers, who will no longer rely on their sales volume to determine their paycheque.
Bob Jenkins, new car sales manager at Ron Hodgson, said some sellers are hesitant about the new strategy.
"The other salespeople here, they're fighting it a little," he said. "They're not eager to jump into that same type of position without seeing the results."
He said it's possible sellers will lose their motivation, but added there will still be an incentive to sellers who are able to sell a larger volume of vehicles.
Salespeople will also benefit by consistent salaries that will not be affected by times of slow sales, Hodgson said.
DesRosiers said the strategy is often instituted for marketing purposes as opposed to sales-performance reasons or a fundamental shift in dealer philosophy.
"Dealerships are always trying to differentiate themselves," he said. "The move to non-commission-based selling is often advertised extensively as a way to try to massage the consumer a little bit and soften the consumer."
He said anytime a dealer is able to differentiate itself, it will see a short-term spike in sales, which is often followed by long-term challenges.
"You put the same amount of advertising dollars into a different concept, it would draw more consumers in," he said. "What's going to be drawing consumers in is the amount of advertising around this, not the concept itself."
DesRosiers said dealerships typically shift the sales strategy when there is a change in ownership or when struggling, which he said is reality for many General Motors dealerships.
Jenkins said that's not the case with Ron Hodgson, noting the business was named highest volume dealer last year and that the market in Alberta is strong.
"We're not worried," he said.
Consumers' bottom line
Although non-commission sales might attract consumers, DesRosiers said it won't be a determining factor in making a purchase from the dealership.
"It's not the compensation system that a salesman uses that gets the consumer to buy from them or not buy from them," he said. "It's the vehicles that they're selling – and GM has a lot of issues there – and it's the sales techniques being used and the quality of service at the dealer and the reputation of the dealer."
