Is Australia ready to ditch the dealership model?
Yet another delay to the opening of Hyundai’s first wholly owned showroom for its premium brand, Genesis, suggests Australia might not be ready for this radical departure to automotive retail.
The latest hold-up, now taking the project six months beyond its original planned opening date, has been blamed on slow construction progress at the site on Sydney’s Pitt Street, where G70 and G80 sedans are slated to be sold under Hyundai’s spin-off luxury marque. The Korean carmaker has now picked June for the new franchise-free store’s opening.
Plans for two more of these non-traditional showrooms, in city centre malls in Melbourne and Brisbane, have also been put on hold. The two-level Sydney “flagship store” comes at an estimated cost of $7 million and will house seven cars when it opens. Genesis executives have admitted they have “got a little ahead of ourselves with [their] enthusiasm”.
Hyundai was always going to struggle to bring this new approach to selling vehicles to Australia, where the dealership model is dominant—regardless of the apparent building issues at the black-and-copper themed luxury car boutique.
There are good reasons why the time-tested franchise system works well here, according to Grant Cameron, a partner at Deloitte and automotive sector leader at the global professional services firm.
“In most cases, factory-owned retail models have not succeeded in all key business performance measures because car dealerships have one focus: their customers,” he told The Drive Network.
“Dealers have proved they can offer customer service in sales and after-sales like no others.”
This was seen most clearly when Ford Australia purchased most of its dealerships back in 1999 to create a direct “factory-to-consumer dealer network”. In the end, these showrooms were sold back by the manufacturer to the former family operators
“Most local dealerships are owned and run by individuals with skin in the game,” said Cameron. “Having made large investments in the business, they are hands-on and committed to success. They invest in staff, they invest in the local community and they invest in their customers.”
Hyundai management will no doubt have studied this history lesson and used it to inform their radical approach to Genesis sales in Sydney.