February 20, 2016 — Building on a strategy he hinted at more than a year ago, Cadillac President President Johan de Nysschen outlined a retail strategy this week at a dealer meeting in California that calls for hundreds of the brand’s smaller dealerships to become virtual showrooms.

A key part of de Nysschen’s strategy is how he plans to manage the 700 dealerships that are dualed with other General Motors brands. Cadillac’s 920 plus dealerships sold more than 175,000 vehicles last year, with more than 40% of those sales generated by the brand’s top 100 stores. Many of Cadillac’s smaller dealerships sell fewer than 10 vehicles a month.

The challenge for de Nysschen is how to elevate Cadillac to becoming a premium brand while saddled with so many small dealerships. Short of closing hundreds of stores — a strategy that wouldresult in a costly financial and PR fight — de Nysschen’s hands are somewhat tied. Meanwhile his dealership strategy has been slow to evolve. Although, he has provided big hints, including remarks at the 2015 Washington D.C. auto show and the national dealer convention, also in 2015.

The Banks Report has speculated in previous articles (as have other analysts) that Cadillac could push for smaller boutique-like facilities. It appears that de Nysschen will begin moving in that direction — with a slight twist. At the meeting this week, de Nysschen presented an idea to the dealers that involves Cadillac’s smaller stores to adopt showrooms that rely on virtual reality technology. The showrooms would have limited — if any — inventory. Instead, they would rely on touch screen kiosks and virtual test drive technology.

What de Nysschen presented this week closely mirrors what The Banks Report envisioned in March 2014 in a report called The Coming Changes to Automotive Retail. The report also predicted virtual test drives would soon become a natural part of the dealership showroom. Audi and BMW have already begun implementing virtual reality technology at some of their stores. Lexus showed off a virtual test drive simulator (seen in the photo) at various auto shows in late 2014 and early 2015.

Another twist for Cadillac, though, involves salespeople visiting potential customers at their homes or offices, bring virtual test drive headsets and mobile devices with touch screen vehicle configuration software. The idea is to allow the customer complete the entire shopping and purchase process away from the showroom.

Already, some dealers are expressing suspicion that moving in that direction will make it easier and less costly for Cadillac to pull the plug on dealerships that go the virtual route.

Meanwhile, Cadillac is rolling out a new incentive initiative called Project Pinnacle replacing the Standards for Excellence and Essential Brand Elements programs. The program will place more emphasis on customer experience and less on total volume. As part of the new program, Cadillac also is eliminating the holdback incentive that was based on volume that it provided in the past.