Lincoln to stand alone

Ford’s luxury brand has been engaged in discussions with its Canadian dealer body for several months with both parties working towards a plan that would see retailers build Lincoln standalone dealerships – a move that would likely dramatically change the retail footprint for the brand in Canada.

The ambitious plan is part of a global strategy aimed at capturing a larger slice of the luxury market both here and abroad and setting a new high standard for customer experience.

Canadian dealers have confirmed the process is in the research phase and the market is probably years away from seeing a shovel in the ground.

In a country where Acura, Infiniti, Audi, Lexus and others have almost completely split from their mainstream counterparts, Lincoln is certainly coming late to the party. And while most Lincoln dealers surveyed by Canadian AutoWorld were in favour of the idea, many questioned what would happen to rural points, what impact it would have on familial succession plans and how such expensive capital projects could be supported with current sales volumes and dealer profitability levels.

“It’s one thing to have a stand-alone strategy in China where Beijing alone has a population of 30 million people,” one dealer said. “It’s another story to have standalones in this country.”

Exterior and Interior Details
Likely the first time the concept was on display outside of dealer-only communications came at the most recent National Automobile Dealers’ Association Convention and Expo in January.

There was a scaled model of a Lincoln dealership under glass at Ford’s sprawling booth at the convention hall in New Orleans. Project architects and automaker staff were on hand to answer dealer questions about the concept.

Staff told Canadian AutoWorld at the time the model was the North American version of the new global program for Lincoln.

Called Vitrine, a French word meaning a glass display case, architects at the booth asking to remain anonymous said the idea was to have the building “exude a warm quality,” and include key design objectives that made for a luxury customer experience.

The exterior is punctuated by a combination of brown and cream-coloured panels that mark a large departure from the current combinations of black and silver in Canada. There is the obligatory service drive-thru on one side with floor-to-ceiling glass panels dominating the rest of the storefront.

The interior varies depending on the size requirements, but Lincoln floor plans show at least one rectangular vehicle display area that fronts the building and holds three cars. A series of rooms run parallel with another rectangular vehicle display area and separate new car delivery area and delivery suites beyond that. (See image on opposite page)

One architect said sales interactions would occur in the series of work areas off the main showroom space in what Lincoln has termed “sanctuary pavilions.”

“These are comfortable environments that are engaging and interactive where the sales function happens,” he said.

Features also include a business centre and customer lounge complete with a waterfall feature. Move towards the rear of the building and you will find sales work areas, manager and administration offices, washrooms and the parts area just ahead of the entrance to the service department.

Building documents obtained by Canadian AutoWorld from what appears to be a U.S. dealer microsite shows large stores have to be approximately 37,000 square feet with approximately 3.13 acres of net usable land. Medium stores have to be roughly 27,600 square feet with 2.23 acres of net usable land. Small stores have to be approximately 21,400 square feet with 1.31 acres of net usable land.

It is unclear if those same standards are being considered in Canada.

There was also word of an even smaller boutique option that would let dealers continue to use their Ford store service facilities.

Regardless of the size, the look is definitely unique in the industry and one that closely mirrors what customers in China have been experiencing since the brand launched there in 2014.

The initial expansion into the world’s largest automotive market called for 60 stores in 50 cities by the end of 2016. Strong sales and high demand saw the country exceed that target as Shanghai Baolide Songjiang Lincoln opened on Dec. 30, 2016; it marked the fifth Lincoln store in Shanghai and the 65th in China.

The automaker said it would have 80 stores in China by the end of this year.

The Canadian Angle
There are 95 Lincoln dealerships in Canada and all are currently paired with Ford.

Multiple dealers surveyed by Canadian AutoWorld said the automaker had given retailers a choice to either build a standalone facility or continue to retail Lincoln through existing facilities. Those who choose the latter could continue to operate for an unspecified term. Depending on when the facility’s next renovation is due, the dealer sales and service agreement would eventually be terminated and they would lose Lincoln.

The automaker did not confirm these details.

Most dealers said the move to standalone stores was the correct one given how virtually every competitive make has employed a similar strategy for years. But, as with all factory-mandated facility programs, Vitrine has earned its share of detractors. Complaints around unrealistic volume targets and costs were common refrains from dealers contacted by this magazine.

“How many models does Audi have? A dozen? We have seven vehicles with comparatively low volume. The ROI for some of us is totally unrealistic,” one dealer said.

Compounding the issue for Canadian dealers is the fact many are not far removed from completing Ford’s most recent Millennium image. The corporate facility program called for separate entrances and interior design requirements for all Lincoln dealers.

Details have been sparse from Lincoln Canada regarding the plan. When contacted by Canadian AutoWorld, head office would only say: “Lincoln has a new global retail vision and we will be bringing that luxury consumer experience to Canada. We look forward to sharing more details with you in the future.”

Lincoln Canada dealer advisory board chair David McQuilkin said the company continues to investigate the global standalone program and it has engaged dealers in the process.

“This is still in the research phase. They still would have to identify markets and dealers would have to find property, secure proper zoning and build. Any real movement on this is likely years away,” he said.

The Steele Auto Group owns and operates Steele Ford Lincoln in Halifax. Company COO Dave MacRitchie said any conversations, regardless of the OEM, about standalone opportunities or separating brands has to make business sense for everyone.

“Sometimes OEMs look at all of their markets as being the same, but when you are talking about image standards or the template for what they want, sometimes it’s not scaled appropriately to the market,” he said.

“I certainly understand that as the premium segment continues to grow, OEMs with a separation of brands will get a better result and the customer will likely get a better experience with the focus a standalone store offers. I can’t argue with the logic, it just has to make sense.”

The logic component of the argument has to start with sales volume.

Lincoln finished 2016 with 8,320 vehicles sold up from the 7,939 sold in 2015. Comparing those totals to the luxury leaders shows just how far Lincoln has to travel. BMW bested Lincoln’s 2016 YTD total by nearly 30,000 units; Mercedes-Benz beat it by more than 38,000 units.

The story isn’t much better compared to brands that have built separate retail networks within the last 15 years with Audi selling 30,544, Acura selling 20,227 and Infiniti selling 12,094 units respectively in 2016.

Combine those sales totals with the size of those brand’s retail networks – Acura has 50, Audi has 44 while Lexus and Infiniti both have 39 dealerships each – and there is likely some contraction required in Lincoln’s dealer footprint for the sake of dealer profitability.

Sources confirmed there has never been a stated objective for the number of stores Lincoln will end up with. Most dealers said it will be around 50.

Also compounding the issue for dealers in many metro and surrounding markets is the cost of land. Readers of this magazine know all too well how property values in certain pockets of the country have soared in recent years making the business case for downtown and urban sales locations harder and harder to justify.

Case in point, a condo developer paid $21.7 million for a 16,635-square foot Robson Street site in Vancouver in 2015, according to REW News.

Real estate costs aside, where the Vitrine strategy will likely be felt hardest are in rural markets and with single-point operators.

“If you have a 64-year old dealer principal with one franchise and he’s looking at a multi-million dollar investment like this and he doesn’t have a succession plan, this is a really hard decision to make,” said a large dealership group operator that counts Lincoln amongst his brands.

One such retailer facing that decision is a long-standing Ontario Ford Lincoln dealer wishing to remain nameless. He said he would likely not build a standalone store as the volume in his market isn’t enough to support a separate facility.

He also lamented that he would be unable to pass the franchise to his son, despite already having had a clear succession plan in place.

“If you die, they automatically take it away from you. The only way it can stay in my family after decades in business is if I stay alive,” he said. “And I don’t think that’s a nice way to do business.”

It should be stressed the details of this plan have not been finalized and discussions continue between dealers and the OEM. Lincoln Canada is expected to address the plan again with dealers later this year.