Traditional auto dealers in Los Angeles face a powerful threat on the horizon: The automotive superstore, a new type of dealership soon to explode all over L.A. County.
AutoNation and CarMax Inc. have already begun constructing or operating local superstores, and Driver's Mart will likely follow in the coming year.
All three chains offer giant selections of new and used cars, often sold at a discount. They use a sticker-priced, haggle-free computerized system designed to make buying a car more pleasant and convenient for consumers. They also tend to offer numerous brands under one roof or in close proximity, to make comparison shopping easier.
In January, AutoNation purchased Magic Ford of Valencia in a Bankruptcy Court auction for about $21 million. CarMax, meanwhile, has signed agreements to develop superstores in Carson and Duarte, part of its plan to build between eight and 12 giant dealerships in Southern California
Close on their heels is Driver's Mart, which was formed a year and a half ago when 20 of the nation's largest auto dealers banded together to create a chain of used car superstores.
The group is represented in L.A. by Galpin Ford owner Herbert F. Boeckmann II, who in June signed an option agreement to purchase 8.3 acres of land on Front Street in Burbank near the Golden State Freeway (5). Boeckmann has said he plans to build up to five new dealerships on the site, and while he has given few specifics, analysts say it's likely that at least one of them will be L.A.'s first Driver's Mart.
All three chains have said they intend to build up nationwide networks of new- and used-car superstores. Each has targeted Southern California for anywhere from eight to 14 outlets.
Donald L. Keithley, a partner at J.D. Power & Associates, said past experience in other parts of the country has shown that when multiple auto superstores enter a market, smaller retailers begin to suffer. But the superstore concept is too new to be sure how it will impact L.A.'s network of smaller dealerships. In fact, the big new dealerships might even boost business for the smaller ones.
"In other cities where this has happened, the immediate effect when the first superstores arrive is typically to help (existing) new car dealers by legitimizing them," he said.
The coming onslaught is of little concern to Bud Barish, owner of the Barish Volkswagen dealership in Woodland Hills. Barish predicted that the auto superstores will be a short-lived phenomenon, because they provide an inferior level of customer service to traditional, smaller dealers.
"I'm not at all concerned," he said. "My personal opinion is that the big stores run without an individual owner do not give the kind of courtesy and personalized service that they should. I don't think those kinds of companies are meant long for this world."
But others disagree including billionaire Blockbuster Video founder Wayne Huizenga.
Huizenga's Republic Industries is building an automotive empire, having in recent years bought or started up a group of conventional dealerships, rental agencies (Alamo Rent-A-Car), and the AutoNation superstore chain.
Driving the trend toward bigger auto dealers is a general consolidation in the auto retailing industry, said Keithley. "These are all new, time-efficient ways to purchase cars," Keithley said.
Like many superstores, the new mega-dealerships generally offer low prices and a wide selection. Most will also have fixed pricing systems for new and used cars a feature preferred by many consumers who dislike the hassle of bargaining for their car purchases.
AutoNation considers the Southern California market one of several nationwide "clusters," said company spokesman Jim Donahue. The Southern California cluster will eventually have as many as 12 new and used car dealerships.
"We have an AutoNation currently under construction in Irvine and could see seven additional ones in the L.A.-San Diego market by the end of the decade," he said. AutoNation will likely open at least one used-car superstore possibly in Woodland Hills to complement Magic Ford, which sells new cars, Donahue said. AutoNation's other dealership so far in Southern California is Champion Chevrolet of Manhattan Beach.
"Our objective is to take already well-run dealerships and make them part of a well-run cluster," Donahue said. "We typically will not do anything to disrupt things. Our objective isn't to micromanage stores. It's to develop a cluster where all the elements add up to something greater than the sum of the parts."
Boeckmann must purchase the Front Street site in Burbank by the end of October under an option agreement signed with Zero Corp., the land's current owner.
He has said that he intends to buy the site for the option price of $12.7 million. Following the purchase, he could open a new facility in as little as 18 months with about five dealerships.
As for CarMax, it is expected to start construction on two superstores in Carson and Duarte this winter.
"When (CarMax owner) Circuit City comes into a market with a concept, they don't open one or two stores. They blow it out. So stores will open relatively quickly once they start opening," said Michael Heslov, a partner at real estate brokerage Soboroff Partners of Santa Monica, which is helping CarMax identify new sites for its Southern California stores.
Both CarMax and AutoNation have inquired about two sites in Burbank as possible locations for future stores, said a source close to the discussions.
Both are former manufacturing sites, including one at the Golden State Freeway and Alameda Avenue and another at the Golden State Freeway and Buena Vista Street.
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