Car dealerships are facing a roadblock: convincing workers in their 20s and 30s to work and stay in an auto retail business defined by long shifts, weekends on the selling floor, haggling and commission-based pay.
Nearly 60% of dealership hires are millennial workers, and more than half of those new hires turn over annually, according to a study by Hireology, a talent and management firm.
Millennials are especially averse to working in dealerships because they carry more debt than other generations and are looking for stable pay, but most dealerships pay salespeople only on commission, Hireology said.
Many millennials say car dealers have an outdated approach to selling that doesn’t always fit their values, even if the jobs have the potential to pay well. Younger workers aren’t interested in haggling with customers and are far less tolerant of the “bait-and-switch advertising” and “old boys’ club” atmosphere that is still common at many dealerships, said Earl Stewart, owner of Earl Stewart Toyota in North Palm Beach, Fla.
“Car dealers are selling cars like it is the 1960s,” Mr. Stewart said.
With more buyers walking into dealerships armed with pricing information pulled from the internet, salespeople are finding it more difficult to retain the upper hand in negotiating a car’s final price. That has caused profits on new-car sales to shrink in recent years, and along with it, the potential commission a sales staffer can earn upon closing a deal.
Adam Kraushaar, president of Lester Glenn Auto Group with multiple stores in New Jersey, said his employees used to be paid a percentage of the gross profit of a vehicle sale. But as margins on new-car sales compressed, he realized he couldn’t continue to pay his salespeople that way.
“They would starve if I kept the old pay plan,” Mr. Kraushaar said.
About five years ago, Mr. Kraushaar said he began offering a flat payment per vehicle sold, between $100 to $250 depending on the brand, along with bonuses from both him and the auto maker for reaching certain sales targets.
There are nearly 17,000 new-car dealerships in the U.S., which directly employed 1.1 million people last year, according to the National Automobile Dealers Association. Dealers say they are struggling to control employee turnover, which has steadily increased over the last five years even though U.S. auto sales have remained robust. A low unemployment rate has also contributed to staffing difficulties. Dealers expect the problem to worsen as generations younger than millennials enter the workforce.
Some younger workers also say they are turned off by the proverbial image of the smooth-talking, pushy car salesman out to trick buyers into paying more for a vehicle.
Drew Lowe, a 32-year-old salesman at Lexus of Lehigh Valley in Allentown, Pa., said many of his friends were surprised when he told them he was going to sell cars. When his friends hear the term “car salesman,” they think “plaid coat and gold pinkie ring, 30 trips up to the office to talk to the manager…and the salesperson pretending to be your friend,” Mr. Lowe said.
Mr. Lowe said he surprised himself with his job choice, since he had never considered working at a dealership before. But he found a retailer with a one-price policy that didn’t force him to haggle with customers. “Morally, I couldn’t do it,” he said.
Nissan Motor Co. said it has had 100% turnover for sales staff at its dealerships in the last year. That means some positions are turning over more than once a year, a rate that is costly for dealers in both time and money, said Jim Hooke, a senior manager at Nissan’s dealer training group.
The churn can be frustrating for consumers. Vehicles have become more technologically advanced, requiring salespeople to be more knowledgeable. But instead, potential buyers are increasingly dealing with staff who may know less about a vehicle’s features and technology than they do, dealers say. Even as more buyers are doing their car-shopping research online, state laws still require that most purchases be made in-person at dealerships.
“An automobile now is essentially a collection of computers,” said Keith Yancy, a director at Fiat Chrysler Automobiles NV dealer training institute. “And that takes a lot more skills to sell and service.”
Mike Gnitecki, a 33-year-old paramedic, said he was ready to buy a new Hyundai Accent when he stopped by his local dealership to look at one, but was so turned off by the salesperson’s lack of knowledge about the vehicle that he left the store. He said the Hyundai salesperson kept turning to the car’s window sticker to answer basic questions.
“If I could buy a (new) car on Amazon.com or eBay.com, I would,” said Mr. Gnitecki, who bought a Toyota Prius from a more informed dealer instead.
Chace Pate, a general manager at Hyundai of Longview—the dealership Mr. Gnitecki visited—said turnover has been a problem. The dealer recently began requiring online training for salespeople and changed the pay structure, so employees are paid by how many vehicles they sell a month, rather than on a traditional profit-based commission, he said.
Some dealers are also instituting no-haggle policies, where the dealer sets an advertised price and sticks to it, relieving salespeople from having to negotiate to complete a sale. Others are increasing pay, shortening workday hours and offering perks such as free college tuition for employees who stay. The average car salesman earns $44,700 a year, according to 2017 data from the Bureau of Labor Statistics, much higher than the average annual pay of $27,500 for all retail sales jobs.
Ryan Gremore, president of O’Brien Mitsubishi in Normal, Ill., said he recently increased commission-based pay for his sales staff by 5% and began monthly sales bonuses. The efforts have helped with retention, he said.
“They aren’t looking around the corner or jumping ship every time there’s a bad month,” Mr. Gremore said.
Write to Adrienne Roberts at Adrienne.Roberts@wsj.com