MINI COOPER Dealers Eye Profits on Extras
SAN FRANCISCO - Mini dealers hope to make their new baby a household name in America.
The car goes on sale Friday, March 22, at a base price of $16,850, giving dealers what they say is a decent 10 percent profit margin. But dealers still plan to make most of their money from accessory sales and merchandise.
"Ten percent is a fair margin, but it still will require us to be good at merchandising," said Warren Waugh, managing partner at Mini of Peabody in Peabody, Mass. "I'm asking for the price of the car, and I'm not going to sell over that."
Licensing is a huge opportunity for the auto industry, raking in nearly $7 billion last year, according to License magazine.
While the $2 billion plus that General Motors makes on licensing is far out of reach for Mini, the estimated $150 million to $200 million that Mercedes-Benz garners could be a target someday.
Jack Pitney, general manager of Mini USA, said Mini sold 1,000 of its $85 cuckoo clocks online over the past three months, totaling $85,000 in sales.
Denise Wood, dealer principal of Princeton Mini in Princeton, N.J., said she has no idea how much money she can make on merchandise this year, but she expects a gross profit of $125,000 on parts. Her general manager, Gian Tosti, said the dealership's 200 vehicle orders are averaging $21,000, meaning $4,150 each in customization.
If customers accessorize their vehicles at the point of purchase, those accessories will be under warranty for four years or 50,000 miles.
Gordon Wangers, a managing partner at Automotive Marketing Consultants in San Diego, said Mini is smart to push customization with its dealers instead of leaving it to the aftermarket.
"Honda dealers, for example, have not taken advantage nearly as much as they could on things like wheel and tire packages, special lighting and seats," he said, referring to what mostly young owners add to their Civics.
Mini plans to produce 20,000 units for the United States in its first year. It recently added a third shift at its Oxford, England, plant to produce 150,000 units worldwide, which could bump the United States up to 25,000 units.
So Mini will communicate often by e-mail with those who have placed orders. It's asking customers about their favorite music so it can provide a compilation CD at vehicle pickup. The brand also is sending customers a stencil to spray paint "Mini parking only" in their driveways.
Mini also is hosting a Web site, MiniProductions.com, which will feature at least four films, one every couple of weeks. In one of the films, a circus clown's car breaks down and a Mini picks up the hitchhiking clown.
Mini's advertising agency, Crispin Porter & Bogusky in Miami, created a $35 million national campaign using print and outdoor media.
The brand is offering its 70 dealers co-op funds to match individual dealerships' media spending, which can include events. Pitney would not reveal the spending cap.
"Twenty-five percent of (the agency's) bonus this year will be based on how well of a job it does supporting dealers," Pitney said. "They all will play a part in critiquing the agency."
Article reprinted thanks to Autoweek.com