The only way is up for automotive retailing

The place to be selling cars in Australia is anywhere above the Luxury Car Tax threshold.

Prestige brands are seeing consistent sales growth in the local market, where margins are better. But volume-selling brands are finding the going harder. All three local manufacturers sold fewer cars last year than in 2013. Well-known import brands like Mazda, Mitsubishi, Nissan and Suzuki were in the same boat.

In contrast, all German prestige brands, including Porsche, grew sales in double-digit percentages last year.

According to Bobby Zagame, MD of the Zagame Automotive Group, the trend to buy prestige has accelerated since the Global Financial Crisis, but the signs were already there before the world-wide economic disaster that pushed the Australian dollar to US $1.10 – and made imports much more affordable.

"Australians want a better life – and they can afford to do so," Zagame told motoring.com.au during the press conference announcing his group's appointment as the country's newest Rolls-Royce dealership.

"I think the GFC was a turning point in some respect, but it was a growing market [and] the market seems to be growing year on year..."

Zagame suggests that in the past, prestige cars were sold with a built-in deterrent to wider ownership – the buyers had to be cashed up to keep them properly serviced and on the road. Prestige vehicle ownership has increased in this country not just because the cars are more affordable to buy, they're also more affordable to own.

"Products are getting more user-friendly as well, across all these prestigious brands, whereas previously you'd get a nice car, but it could probably only be driven on a Sunday.

"Today you can drive these things to the milk bar – and every day – and do all the things you want to do, and have all the luxury as well."

Zagame is not talking about an entry-level C-Class in that context, he's thinking specifically of cars costing a quarter of a million bucks... and higher.

It's not possible to picture anyone driving a Maserati to a milk bar without first forming in the mind a stereotype of a typical prestige car buyer. Zagame says in fact that there's no such thing as a prestige buyer stereotype. They can come from all walks of life, and other than the disposable income available for the purchase of a new car, they can't be pigeon-holed.

"No, it's very diverse. That's why the market is growing, because it is diverse.

"You've got some small business owners who may have sold out, and just got a really good price for what they've done – and they've never seen that sort of money before... and say: 'Well okay, I'm going to spoil myself'.

"Or it could be building developers who have done really well – whether it be the residential market or commercial. It could be a lot of the medical industry, [which is] very consistent, because that's a growth industry. Whether it be dentists, doctors, whatever, they know their business aint going to stop."

And leaving aside the lotto winners and once-off business vendors who have struck it rich, how much of a part does repeat business play in prestige automotive retailing?

"A huge part..."

That is part of the attraction for selling (and buying) prestige cars, says Zagame. If buyers feel comfortable with a salesperson, they'll come back. They want to come back, after all, so why not come back to do business with someone who's a known quantity? Someone with whom the buyer may have a well established relationship, indeed, who may have been discussing your next automotive purchase for months or even years prior?

Zagame says that selling a high-end car "can take years. Especially at the premium end, it can take years."

But it's worth the effort. Sales staff wouldn't persist with that sort of 'embedded' strategy in the case of a prospective buyer who wasn't personable to some degree, and amenable to negotiation.

"It's a nicer space to work in..." says Zagame. "I think the customer expectation – if you do it well – you get rewarded greatly for it.

"Once they're comfortable with you, they'll keep coming back – if you do it well.

"You can focus a lot more on those individuals...

"When you're paying this sort of money, it's about the experience. They've got to feel good about what they're doing, it's not just the money. It's about the complete experience, and that's what we really try and give ownership to... to the customer.

"With that, they tend to keep coming back.

"A lot of our customers can afford to do something like this every year... or they choose to have a number of cars in the garage at any singular point in time. That's where the opportunity is... if they feel good about doing what they're doing.

"If they don't feel good about it, then they'll go on holidays and spend their money elsewhere."

Maintaining or preferably exceeding customer expectations requires a level of creativity to come up with something that will endear the salesperson to the buyer. Lexus pioneered enhancing the customer service experience when it arrived in Australia back in 1990. Since then other prestige brands have followed Lexus, offering nice seats at the opera or an opportunity to meet a brand ambassador at the Melbourne Cup. This sort of initiative can come from the distributor – at a national level – or it can be driven by the dealer in the local PMA (primary market area). What does that involve for a dealer group like Zagame?

"It's always challenging to try and come up with new ideas, but we just try and do things that money can't buy.

"Fine dining restaurants that you can't get into..."

The promotional event for the Rolls-Royce Dawn at the Royal Exhibition Building was something special. People off the street can visit the historic building for special events like Motorclassica or the Hot Rod and Custom Car Show, but being one of a select few seeing a new Rolls-Royce unveiled there is a rare honour.

"Simple things... are priceless to a degree..." says Zagame.

Coordinating this level of customer care with a broader marketing strategy requires a close collaborative relationship between the dealer and the distributor. Zagame admits to being surprised that there can be so much friction between dealers and distributors within the automotive industry.

"When I first came into the car industry, I couldn't believe – then – that the dealers were always at loggerheads with the manufacturers. So there was never any love there.

"The industry I'm from, which is hospitality, it's the opposite. You always have good relationships with the breweries and wine companies and so forth, because you generally just got better information and you were rewarded better. Companies will always like to deal with other companies that are like-minded.

"It is a team effort, and we share intelligence if you like – and at the end you get a better outcome."

Overall, Zagame believes the industry is improving and is leaving behind the popular perception that it's run by sharks.

"Real estate agents may have just pinched us now – they're number one and we're number two.

"That stigma always annoys me... the Current Affairs of the world will try and put us down. Car sales is an art, the consumer is much smarter than they're made out to be in respect of TV's portrayal, and sales [people] really have to be the psychologist, working out what does the consumer want when they come in the door.

"The days of the hard sell really sticks with the old used-car trader – if it's still there... but not in our camp."

Zagame says that the most effective business model for his dealerships (selling 13 brands now that Rolls-Royce is on board), is one that is more or less equally reliant on parts, service and sales.

"It's a combination... you've got to get all elements right. Sometimes your sales will be down and you don't have the product, because the new models... you're waiting for them. The back end of the business is always a core part of it – and much more consistent... being service and parts.

"And it's a good part of the business. I think manufacturers are becoming more consumer-friendly in respect of service [intervals] and cost of maintaining these cars. Cost has been reducing, which is a positive for the consumer. But as the car parc grows, of course, there's going to be more requirement to fix [them]."

Fresh from having secured the Rolls-Royce franchise for Victoria, Zagame is in no hurry to head off in some new direction, he says.

"Immediately, probably not, but there are a couple of things we're looking at. At this stage we're very comfortable where we are. We've achieved a great goal for us in Melbourne... and I just want to focus on it... make sure we get our customer service and experience right."

Certainly heading downmarket to sell a volume brand is not a consideration, he says.

"Volume for us is Audi, and we're comfortable with that... but that would be about it..."

Pictured: Bobby Zagame (left) with Paul Harris, Rolls-Royce Asia Pacific Regional Director