As we all now approach the time of year when finalising plans for next year is well underway, we have been giving some thought as to where the UK used car sector is heading; quite important really because it affects us too and therefore how we will be working next year.
Like every business we are looking at our target markets, looking to leverage our offering and to continue to grow, and the process made us all realise that the UK used car market is a bit of a conundrum at the moment; in fact we have all never known a time of such little direction as we are experiencing now!
During this process we always come up with a “One Liner” that sums up the problems in a national used car market and what our general advice to our target audience in that market would be. This is vital for us because understanding our target used car markets drives the tone of our content articles, articles just like this one that we publish every week in order to engage with our customers and readership base; and this year for UK Franchised Dealer Networks our used car business “One Liner” would be:
“It’s Make Your Mind Up Time!”
We say this because as we have watched the fracturing and breaking up of the used car market in the UK we have been left wondering “Wow,” some franchised dealer networks really are handing their used car business over to their competitors on a plate. In fact the only point we all struggled to agree on was when this process would reach a “Tipping Point” for UK based franchised dealer networks and their parent manufacturers, and could no longer be retrieved?
However, we all agreed that the “Tipping Point” was close, although some of you are nearer this point than others. The reasons for this are wide ranging and nuanced for every franchised dealer network, but we all agreed that no franchised dealer network, (as a whole), or the associated manufacturers in the UK, appeared to have the strategic thinking in place to secure used car market place share, and therefore protect the investments made in the new car trading model by both themselves and their franchise partners; and this caused us to then ponder on why a franchised dealership would not want to build a successful used car business? In reality it can only be down to one of two reasons;
Those Owning Franchised Dealers Don’t Know How To!
Those Owning Franchised Dealers Don’t Want To!,,,,,, Because It’s Too Much Like Hard Work!
Now of the two options above the most worrying would be that those owning franchised dealers don’t want to because it’s too much like hard work! Now this can be down to 2 reasons; it is a mind-set driven by the manufacturer because it is not part of the manufacturer’s business plan moving forward, probably because with evolving new car retailing models the manufacturer, (unbeknown to their franchise partners), is just not interested in supporting or having a franchised dealer network, in the same way as we have been used to them. Now this is serious for those invested in multi £million buildings which are worth far less with no franchise model and/or business attached. Sadly though and having been franchise owners ourselves, we realise that it is important to remember that, (even as a franchise partner), first and foremost you are always part of someone else’s journey and that the journey may not always be to your liking!
Worryingly for those owning franchised dealerships, we have read with concern how some new car trading models are evolving in the UK and what the ultimate direction of travel may be; the move towards the technology based new car sales and servicing models where sadly, the need for fully committed franchise partners and franchised dealer networks looks like it may be disappearing. We will not name names in this article but it has been interesting to read how some very big manufacturers in the UK are looking to evolve their trading model and how some long term invested franchise partners are now selling their associated businesses, because they don’t like what they see and they need to get out before everyone else realises what is going on! But this is for another article!
The second reason is genuine lethargy to making the investments required in both businesses and people, and we have seen this many times whilst auditing used car businesses this year; a realisation that it is going to be hard work for both the business as a whole and for the people tasked with driving used car retailing forward. At inception too many franchised dealers are trading as disposers of part exchanges and ex-demonstrators, with the job of driving used car retailing being either totally ignored or split as a dual responsibility for the Sales Manager.
The folly of this is staggering; firstly their “Disposer Of Part Exchanges And Ex-Demonstrators” business model is not an example of a business that can be grown, in fact it is the exact opposite; it is the best example of “The Law Of Diminishing Returns” business that we can imagine. Secondly, the decision to make the most specialised role in the business a part time job around new car sales, is about as naïve a business decision that it is possible to make. Again, this is a huge topic and for another article, but the role of the successful used car business development professional has been explored in our article; Do Successful Used Car Professionals Exist For Franchised Dealers? So you can make your own minds up as to whether or not you still think it is a part time role after reading it.
However, if you overcome this lack of will towards used car retailing we come to the second major reason listed above; Those Owning Franchised Dealers Don’t Know How To! However, for those tasked with growing successful used car operations at franchised dealerships at the moment we do have some sympathy. Over the last decade both manufacturers and the PLC’s owning vast swathes of franchised dealer networks have decided, (either by accident or design), to ignore the invested development of used car retailing.
At franchised dealer level, evolving new car purchasing habits and the desire to run a “Real Estate Investment Business” off the back of a franchise dealer network, has seen many drop all programmes of used car business development and sadly, with their 2 main business models now either failing, (the “Real Estate” model), and becoming ever more challenging, (the “New Car” model), these decisions are about to come back and haunt those owning franchise dealer networks; those without successful used car businesses to help them ride the storms that look like coming.
This is not the article to expand on “Why” in too much detail, but with regard to the “Real Estate” model; there is not an investment company or hedge fund around that is diving head first into commercial real estate at the moment, and those commercial buildings without a profitable business attached will only sell at a price that will keep the owners awake at night for a very long time; so if the new car business is not going to pay the bills?
In the long term your financial security can only be secured from a foundation of successful used car retailing but sadly, for many the realisation may have come too late. And be warned, at all costs avoid now the “One Trick Pony” approach discussed in our recent article; Looking To Grow Used Car Sales?,,,, Beware The “One Trick Pony” Solution! We won’t explore or expand on the points covered by this article again here, those wishing to read the article again need only click on the embedded link above to read it on our Used Car Business Development Blog.
But in brief, it warned against the fatal mistakes that are being made by some manufacturers and the big PLC’s owning vast swathes of franchised dealer networks in the UK. Because there is a “Well How Hard Can It Be” mind set to used car retailing and many of you have no comprehension of just how far the bar of used car retailing has been raised by the competition over the last 10 years. This has resulted in many of you opting for the quick fix solution, “The Emperor’s New Clothes” if you like; which as a process of used car business development is akin to trying to start a bonfire by flicking matches at a pile of wet leaves.
As an example of how to get things wrong you only need to look at the brief life of Car Store; now we aren’t privy to the internal records of what happened here and why just so many of these businesses had to close? It is extremely sad for all those involved but from the outside it just looked like an ill-conceived business being launched 10 years too late and without the expertise required to make it work! We will say no more on this for now as this will be explored fully in our next article, but it is lesson in how the used car and new car businesses are evolving, but very differently to each other!
Thus our statement that “It’s Make Your Mind Up Time!” 2020 will be a make or break year for many franchised dealers when it comes to used car retailing and of course there are going to be winners and losers, depending on the brand, your position in the market and the strength of your associated franchise dealer network, but one thing is for sure; those of you who ignore the importance of used car retailing moving forward will end up with a new car model that is struggling in the monthly budget purchasing age.
Unfortunately with the under investment in used car business development over the last 10 years, the professionals required to develop the used car retailing models you require are in very short supply at both manufacturers and within franchised dealer networks. Regardless of the course of action you decide upon, successful used car retailing will still be required to underpin your new car retailing ambitions, and your entire trading model. Unfortunately, for many of you there will be no proven and experienced used car professionals to draw from during this critical period.
Now we appreciate that finding genuinely successful used car professionals is very difficult for both manufacturers and their franchised dealer networks but luckily help is at hand. If this post has resonated with you and you would like to know more about our used car business development consultancy and personnel training programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to build a successful and profitable used car business on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.
The owners of Autoformance have owned and run successful used car operations and been at the forefront of the development of approved used car programmes for a host of manufacturers and franchised dealer networks. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com
Alternatively please feel free to call me on 07796 260261.
For more information about our services please visit our website at www.autoformance.com
Andrew Banning.
Used Car Business Development Director.
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