As the Ron Marhofer Auto Family celebrates its 100th anniversary, you might ponder: How does a family-owned business that started in 1919 as a vehicle repair garage survive for a century?
It changes with the times, all while finding its niche and becoming good at it.
For the Marhofer family, that meant adding its first new-car franchise, Chevrolet, in the late 1920s and adopting a one-price, no-haggle sales strategy in 1991 and staying with it.
And in fall 2018, the Akron, Ohio, dealership group began giving its customers the option of doing some or virtually all of their new- and used-vehicle purchases, including obtaining financing and arranging home delivery, online and/or on the phone.
None of these business practices were or are out of the reach of most dealers.
But these and other practices, combined together and with a team of dedicated employees, represent the Marhofer family’s commitment to provide customers a painless, “transparent” and fast car-buying experience, said Chris Marhofer, the group’s president and chief operating officer.
Currently, home-delivered vehicles make up about 5% of the group’s sales volume. Marhofer said the program is a success, and he expects it to grow.
“When we saw Carvana hit the market, it was intriguing because their business model picked up on something consumers didn’t like which was shopping at a car dealership,” said Marhofer, 34.
“My reasoning was, why can’t we as a car dealership do the same thing? There’s consumer demand for it. If people are calling from far away or can’t get here, we offer that as an option.”
Carvana is an online used-car retailer that allows consumers to have their vehicles delivered to their home after completing the purchase entirely online.
The Marhofer group sells Buick, GMC, Chevrolet, Hyundai, Genesis, Mitsubishi and Nissan vehicles at five locations. It also operates a stand-alone, used-car lot that specializes in sales to consumers with blemished credit histories.
Marhofer’s father, Ron Marhofer, is the group’s dealer principal; Marhofer’s grand-uncle founded the business.
One-price strategy still works
At one time, the Marhofer group operated two Saturn dealerships and implemented that brand’s no-haggle, price strategy into its other stores. General Motors halted production of Saturn vehicles in 2009 and discontinued the brand in 2010.
But the price strategy still works for the Marhofer group, because it prices its vehicles to be competitive with surrounding dealerships, Marhofer said. “We don’t negotiate and go back and forth; we make it a pleasant experience for the consumer,” he added.
The Marhofer group’s vehicle home delivery service within a 150-mile radius of the dealership is free. The group will make vehicle deliveries for distances more than 150 miles and up to 400 miles for a “nominal” fee. Customers who opt for home delivery sign necessary paperwork at the time of delivery.
Marhofer believes that demand for home delivered vehicles will grow but won’t exceed about 15% of sales, because most shoppers want to see and touch a vehicle before they purchase it.
“There’s still a high value on the dealership experience,” he added.
In addition to making it easy for consumers to find vehicles that fit their needs, the dealership group’s websites have software that enable consumers to calculate loan and lease payments and apply for financing.
Also on the websites is Kelley Blue Book Instant Cash Offer software. The do-it-yourself tool asks consumers to provide information about their vehicles’ features and condition and then generates a cash offer for the vehicle from a participating dealership, pending a dealership inspection.
Used-car demand ‘consistent’
Used cars are an extremely important part of the Marhofer group’s business, because the demand is “consistent” and not dependent on the actions of auto companies, Marhofer said.
“We’re pacing to sell about 5,000 new vehicles and 8,500 used,” this year, compared to 5,218 new and 6,786 used in 2018, he said.
“The used-car market is a consistent market as long as we keep buying cars that meet consumer demand. Over time we’ve figured out that we’re pretty good at it. We deploy a lot of energy and focus on that part of the business.”
The group’s inventory director, Greg Palmer, said Marhofer Auto prefers to acquire its used-vehicle inventory from consumers though trade-ins or purchase, but that method is not enough to support sales volume.
The group acquires used-vehicle inventory at physical auctions but prefers buying vehicles online from ACV Auctions, an app-based dealer-to-dealer marketplace that allows dealers to sell and buy vehicles during 20-minute auctions, Palmer said.
Among other things, ACV Auctions’ condition reports document that vehicle computers have been checked for trouble codes and include photos of vehicles’ undercarriages, Palmer said. And the company stands behind the vehicles its sells, he added.
“The condition report gives a lot of confidence. Our ACV reps really work hard to put deals together with other dealers,” Palmer said.
“Their 20-minute format is nice, too. You know pretty quickly, if you’re buying the car,” as a result of a winning bid.
Sights on the future
With a full century under its belt, Marhofer Auto has its sights set on the future.
For example, in response to the industry-wide shortage of service technicians, the company decided to cultivate and nurture its own.
So five years ago, it stopped recruiting “mid- to high-level” service technicians and started focusing on hiring and training entry-level technicians, Marhofer said.
“We’re hitting the tech schools like every other car dealer,” Marhofer said. “They (entry-level technicians) are younger, and they don’t have the skills yet. We’re telling them, ‘that’s okay, we’ll train you. And we’ll supply your tools’.”
About 70% of the entry-level technicians stay on the job and are promoted to the next level, which is maintenance or used-vehicle technician, he added.
In the third quarter, the dealership group will tap into a new program offered by its service department software provider Xtime, to use Lyft drivers to give rides to customers who drop off their vehicles for service.
“I have only one shuttle, and that’s an expense,” Marhofer said. “There’s technology so that I can use Lyft, and I can have as many shuttles as I want. I’m pretty excited about it.”
Marhofer believes that the retail auto industry will continue consolidating and said his group has it eyes on acquiring more stores.
“My view is you’re going to need eight to 10 rooftops to get the economy of scale to survive through the next 20 years,” he said.