Dealer Profile: Lexus of New Orleans

One of the highlights of ASE’s annual trip to the Nada Convention and Expo is the visit to a local dealer to see first-hand how cars are retailed in the US. This year it was the turn of Lexus of New Orleans.

The long established family-owned business is part of the Price LeBlanc Auto Group, now run by the eponymous founder’s two sons. The Lexus business is located on New Orleans’ Veteran’s Memorial Boulevard, a busy thoroughfare which serves as the city’s motor mile.

Price LeBlanc’s story is one of a driven entrepreneur. He grew his business from a two-vehicle used car lot after quitting his job with a Ford dealer after just a couple of weeks, believing he could do a better job himself. The business is now one of the state’s most respected groups, representing Lexus, Toyota and Nissan across the neighbouring cities of New Orleans and Baton Rouge. It has represented Toyota since 1969 and is Louisiana’s biggest seller of Lexus cars.

The group has operated from its New Orleans location since 1992 and underwent a major expansion 15 years ago. It occupies a multi acre site big enough to display 85 new and used cars and with space for two large workshops and a dedicated valeting area.

Monthly sales total around 125 new and 80 used units. This 1.5:1 ratio reflects the emphasis of US dealers on selling the new models they hold in stock which are supported by generous OEM margins; a factor not wasted on the visiting UK dealers.

Like their UK counterparts, customer retention is the name of the game but how many Lexus dealers here have sold 15 cars to the same customer? Yet during our visit that’s exactly what happened, according to our host Ralph Bailey, sales operations manager.

“We have tremendously high levels of repeat business and we aim to win customers for life by building relationships with them,” he said.

What makes the business’ achievements impressive is that New Orleans does not have a high concentration of wealth; something of a challenge for a premium brand.

However, as Bailey pointed out most cars are sold on a three year finance deal with customers being contacted after two years and offered a trade-in and trade-up offers to maximise the equity left in their vehicles.

“Seventy-five per cent of our business is based around three year leases and we use the Auto Alert data mining tool to pull customers forward. We aim to capture them before they start looking for a replacement and go elsewhere.”

Furthermore, the business has a pragmatic attitude to trade-ins and will even part-exchange cars aged over 20 years in order to establish and then build a customer relationship.

“When it comes to pre-owned Lexus cars the illusion is that we don’t sell inexpensive models. But, we actually sell them from just $2,000; we’ll buy cars registered in 1994 in order to win new customers and then start to trade them up.”

A surprising initiative for the visiting UK delegation was the business’s novel approach to displaying the prices of its used car stock: it doesn’t.

“We don’t put the prices on our pre-owned cars, customers can shop online for the prices; it’s all about driving traffic to our dealership.”

For Bailey displaying windscreen sticker prices is also a matter of aesthetics: “It’s an unattractive look for a high market brand.”

The strategy clearly works for the business as it achieves a 30-day stock turn. However, some of the visiting UK dealers noted that it was not immediately obvious which cars on the forecourt were new, used or customer vehicles in for work. The only clue was the fact sheet attached to the front passenger window which included everything a customer needed to know about the vehicle except the price.

When it comes to conducting transactions the 15-strong sales staff are remunerated along similar lines to their British counterparts with commission on the price and various up-sales from F&I to extended warranty. Paint and interior protection are not offered as its customers have no appetite for these products. Cars sold at their current market price attract an additional bonus of $300.

The workshop business is impressive in terms of size and throughput with 100-110 jobs a day and  70-75% service absorption.

Its two large air conditioned workshops house 40 ramps with three dedicated to its express service handling anything from level checks and tyres to more intricate 90-minute jobs.

The site employs 30 technicians, eight of whom work solely on the express service. In the centre of the workshop is a parts outpost, stocking the most popular items, it’s manned by a dedicated team who deliver to the ramps and fetch other items from the site’s parts shop.

Cars with a waiting customer have their flashers left on from the moment they enter the workshop to keep technicians and managers focused on a prompt turnaround. The aftersales department has also developed a useful up-sell item in the form of a full showroom valet, performed by dedicated staff not contractors, costing $299. It sells 150 of these a month equating to an annual turnover of $540,000.

A lot of the business’ success is down to its long-serving staff cultivating a loyal customer base. In the immediate aftermath of Katrina the site provided a daily hot food service for staff affected by the hurricane. The night prior to our visit all staff had been taken to an upmarket restaurant in town to celebrate their ongoing success. There’s also an air conditioned gym on site especially for employees to work-out during their downtime. No wonder that staff retention is high with one employee being the third generation to work there.

A popular initiative has been the daily bakery service whereby a receptionist will make fresh muffins and cookies for the customer waiting area, a move that has prompted regular customers to stop by for a takeaway coffee and cake as part of their daily commute. Now there’s food for thought.