Strategy: Focus Channel Program Around Profits

Forbes magazine has a great channel article this week, The Lexus Nexus. In it they explain why Lexus' has the best channel in the automotive industry: "They make their dealers very rich." Hear is my favorite quote from the article. "It's a license to mint money. When you and I die, we should hope to come back as Lexus dealers."

Lexus dealers sell more vehicles for more gross margin. They then reinvest in their dealerships fueling a virtuous cycle that puts them even further in front of competitors. Look at the numbers cited in the Forbes article:

Sales are up 21% through April, while Cadillac's have grown 5%, BMW's are up 2% and Mercedes-Benz's have shrunk 3%.

Lexus vehicles an average of 21 days to be sold off dealer lots. Mercedes-Benzes have sat around 44 days, BMWs 47 days and Cadillacs 58 days.

Lexus dealers sell for six times earnings before interest, depreciation and taxes (EBITDA)--in a good market, $25 million to $30 million. Other brands of dealerships sell for between two and five times EBITDA.

OK, so the dealers get rich, what has that done for Lexus? It made them number one. Not only would they win the channel popularity contest awards, but Lexus also out sells its competition, increasing its revenue and market share.

This is required reading for anyone serious about their channels. How will you address "The Lexus Nexus" in your channel?

Scott Karren, The Channel Pro

1 comments