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It would be hard to imagine a worse time to be opening a car dealership.
But John Marazzi has done just that. On Sept. 14, Marazzi bought a 25% stake in the Nissan dealership in Naples that bears his name.
“A lot of people thought I was crazy,” he says.
On Sept. 15, Lehman Brothers filed for bankruptcy, freezing the credit market that is the lifeblood of the auto business and many other capital-intensive industries.
“I buy in, and the whole economy falls apart,” Marazzi chuckles.
The John Marazzi Nissan dealership, majority owned by Palm Beach auto dealer Terry Taylor, had just opened the new $25-million store near the corner of Pine Ridge Road and Interstate 75 in Naples when Marazzi became managing partner.
But if anyone can get through this market and survive to see the rebound, it's Marazzi. The 44-year-old built Fort Myers Toyota into a selling powerhouse when he was general manager, transforming it into one of the largest dealers in the country. Marazzi took that dealership from 900 new-car sales and 1,000 used-car sales in 1991 to 6,500 and 4,800, respectively, in 2007.
Already, Marazzi has achieved milestones at the new Nissan dealership. Sales doubled in April to $4.8 million from the $2.4 million last year, he says.
Even if you're not in the car business, Marazzi's strategy offers some good lessons in surviving the downturn. By using a combination of creative advertising and competitive prices, Marazzi has been able to build sales that drive the most profitable part of the business: the service department.
“I want to be the number one dealer,” Marazzi says.
He figures that if he can capture just 5% of the market from Charlotte to Lee and Collier counties, he'll be the biggest-volume Nissan dealer in the country.
Profit from service
When he was running Fort Myers Toyota, Marazzi's strategy was to sell as many cars as possible with relatively thin margins to drive new customers to the service department.
“It wasn't real complicated,” he says. “We paid the bills with the service business.”
Of course, executing that strategy was key. While he was at Fort Myers Toyota, a service technician immediately greeted customers who pulled into the service bay and accompanied them to a booth inside the air-conditioned service center. Customers never waited outside, and efficiency and speed were critical to managing the increasing volume of customers.
Once inside, the customer explained the service issue, and the technician provided an initial assessment. Inside the waiting room, there were cappuccinos, sandwiches, wireless Internet and even chair massages.
“Those little things mean everything,” Marazzi says. “You have to wow them.”
On the employee side, the key to running a good service department is to have motivated employees. The repair shop managers are encouraging, not condescending as they usually are in the rough world of car mechanics.
“We talk about what people are doing right,” Marazzi says.
Managers get two days off a week, rare in this business. Marazzi reasons that it's important for employees to have a life outside work to stay motivated.
The new 100,000-square-foot Nissan store in Naples had just opened on Pine Ridge Road when Marazzi bought into the business last fall. It had previously been on Airport-Pulling Road, where many other dealers are located.
Pine Ridge Road was an untested location and John Marazzi Nissan was the first to build one in that area.
“We spent $150,000 a month for the first three months to let people know we were here,” Marazzi says.
One of the obstacles Marazzi had to overcome was the perception by local residents that they couldn't get a good deal on a new or used car in Naples.
“They don't need to go to Fort Myers to get a good deal,” says Marazzi, who recently outsold his Nissan competitor there. About 25% of his dealership's car sales recently were to Lee County residents.
There was a sense of urgency. The dealership had three times the amount of inventory for the level of sales when Marazzi joined the company.
“It was an absolute 150 miles per hour for the first seven months,” he recalls.
But with the economic downturn, auto-related sales have fallen steeply. Taxable auto sales in the Naples area fell 21% in February compared with the same month in 2008, according to the most recent state revenue data.
“We can't control the market, but we can control market share,” Marazzi says. “We're taking market share from Toyota and Honda.”
Marazzi also had to overcome Nissan's less-than-stellar reputation in Naples from the previous owner.
“They price gouged and didn't take care of customers,” he says.
He immediately slashed the labor rate by about 10% and offered special discounts for multiple repairs. He also instituted the kind of efficient and courteous service he had built at the Toyota dealership.
“Now, I need Nissan to come through the economic malaise,” he says. In particular, he says the car company needs to develop more hybrid vehicles in case gasoline spikes again.
Marazzi doesn't expect to gain significant new business from customers defecting from Chrysler and General Motors brands.
“They're going to buy from Ford,” he says.
In the meantime, Marazzi is scouting to acquire struggling dealerships with his partner, Terry Taylor. Values on these franchises have dropped 50% to 75% in just a few years, he says. In his view, the biggest mistakes dealers made was borrowing too much and failing to develop loyal customers.
“Ultimately, we want to expand and buy one or two more dealerships,” he says. He won't say what specific dealerships he's considering but says one is in the Naples area and the other in Clearwater.
“We're in that kind of time,” he says.
Congress' plan to encourage owners of older vehicles to trade in for newer, more fuel-efficient ones is “laughable,” says John Marazzi.
The managing partner of John Marazzi Nissan says consumers are tapped out, and it's unlikely a government incentive of a few thousand dollars such as the proposed “cash for clunkers” program will help them buy a new car.
“I'm a capitalist and a free-market guy, but it's tough to swallow what our government's been doing,” Marazzi says. While the financial industry gets bailed out with billions of taxpayer dollars, “they've left the car dealerships completely out to dry,” he says.
Despite the government bailouts, Marazzi says banks haven't been lending to car buyers or dealers. Instead, the government could spark sales by providing funds directly to automobile finance companies. They in turn could lend the money to help consumers immediately with low-cost financing.
Customers with average credit scores now have to pay interest in the high teens on a new car because credit is too tight. In April, John Marazzi Nissan sold 210 new and used cars, but the dealer says he could have sold another 50 cars if reasonably priced financing had been available.
As a consequence of tight credit conditions, Marazzi doesn't believe a full economic recovery is at hand.
“I don't see it improving,” he says.
Walking into the John Marazzi Nissan showroom in Naples, you'd never know that there's serious acting going on upstairs.
Advertising on television and radio is a big part of John Marazzi Nissan's effort to get the word out about the dealership's new location on 18 acres off Pine Ridge Road near Interstate 75 in Naples.
So the dealer built a full media production studio on the second floor of the dealership and leases the space to a production company. But instead of collecting rent, Marazzi gets television and radio spots for his dealership.
The cost of television and radio production can be prohibitive and Marazzi, known for his offbeat and humorous commercials, estimates that he gets three times the amount of production with the deal he's structured than if he had to hire a company to do it.
Marazzi currently is working on a series of video testimonials for people who sign up with his dealership as independent marketing agents. After they receive a $100 sign-on bonus, these agents agree to e-mail one-minute
John Marazzi Nissan videos to all their acquaintances and collect $250 if it leads to a car sale.
These so called “viral” videos are coded so Marazzi can track their success. If it's successful, Marazzi says the program could dramatically lower his advertising costs, he says.
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