I have been asked to write this post for quite a while and I do so with some trepidation; why? Well it is bound to course a little controversy and as the founding director of a Used Car Business Development Consultancy Company, many of you will wonder why I would want to spend, and find the time, to reply to all the comments it is likely to generate.
However, as a business model and as a lesson to us all, it is a valuable piece of relevant historical content, because the effects of the ultimately failed project not only still live with us all today, but are growing in their influence; and regardless of what sector of the Automotive Sector you operate in, there are still lessons to be learnt from this exercise.
Let me start by saying that I was not present in any of the meetings held between the founders of Virgin Cars, Richard Branson and Ian Lancaster, but I was in competition with them at that time, so I understand the rational and the raison d’etre for why the company was launched.
The idea was brilliant in its simplicity; (albeit ultimately impossible in its delivery; I’ll come to this later) what all independent importers at the time were doing was trying to put the customer first and to keep attentive and content customers under the roof of their business, for extended periods of ownership. In simple terms this was a brilliant idea because Virgin Cars no doubt thought like a potential customer and delivered a world where the customer did not have to travel from dealership to dealership to dealership, in order to look at and test drive every car they were thinking of purchasing.
What Virgin Cars identified was that the customer did not like this process and neither would we, if we ever had to do it. They also realised that all cars were becoming more like each other, in the eyes of the customer, and that customers were going to look towards purchasing a style of car, not necessarily buy into a brand for the long term. So their rational was quite simply, to put all makes and models of car available under one roof and this should have been an unqualified success.
Just imagine that you are looking to purchase a new car today and let’s say you wanted to purchase a medium sized, premium brand, 4 door saloon. You would probably be looking at the BMW 3 Series, Audi A4, Mercedes Benz C Class, Jaguar XE, Ford Mondeo or the Skoda Octavia, to name just a few. Like all customers you will be leading a very busy life and know very little about how the Automotive Sector works, but are faced with visiting numerous dealers, to meet many strangers, in order to be able to decide on your favourite and then purchase your new car.
Now imagine that there is an alternative, a showroom in your local town where you can go and look at all these cars under one roof, whilst speaking to just one individual, not spend days driving around and visiting lots of separate businesses. Virgin Cars launched this business model because they identified that the industry made the whole process of purchasing a new car very difficult for its customers, which in some respects it still does, because this situation hasn’t changed.
They endeavoured to make life simple for the customer and could do this because there was no conflict; they would sell you any car you wanted, so the perception with customers was that they could go to one business and speak to someone who was not biased towards any product, and this idea was not only clever, it was years ahead of its time.
So why did it fail, I here you ask? Well I can only surmise here and speak from my own experience of this market. It failed due to exactly the subject of my last post, and I hope this resonates, lack of stock! I’m sure that Virgin approached all the manufacturers for an allocation of stock, but this was naïve in the extreme; with existing dealer networks throughout the UK, why would any manufacturer supply a business in direct competition to one of their existing franchise partners? This really would have been “Turkeys Voting for Christmas!” So with no allocation of stock Virgin Cars, just like my business at the time, would have to build relationships of supply with European dealers, where they could buy UK spec cars and import them into the UK.
Now at this point there were many problems; the first being that you were then a currency trading business, as well as being a retailer of cars. This was the world before The Euro, where the price competitiveness of your stock holding was dictated, not only by the discount you were able to achieve, but how strong or weak the currency applicable, (for the supplying dealer), was at that time; and the exchange rate played a pivotal role in the value of your stock holding. I found out to my cost that the difference in price for the same car from Spain and Germany, could be thousands of pounds, so this made mass purchasing very difficult, without securing mass currency deals in advance.
Secondly, this whole arrangement probably made it logistically impossible for Virgin Cars to sell the volume of cars required to be profitable, so alas the project came to an end; not because there was no demand from the customer, but because it was, in practice, impossible to deliver.
So the new car market returned to the status quo, but the used car vultures were both paying attention and circling! Entrepreneurs within the used car market realised that the model, for them, not only made eminent business sense, but gave them the opportunity to get the most precious commodity to any sales operation, both very early on in their buying cycle and for a long time; customers! So they picked up the baton dropped by Virgin Cars and have taken the business model on to achieving its full potential.
Now manufacturers and those senior personnel either owning or running franchised dealerships, may be tempted to think that the rise of the independent used car retailer is no threat to their trading existence, and in some ways they may be right, but I caution this; customers are the most valuable commodity that any sales business has, we all know how hard it is to get them and to the retain them on a journey of car ownership encompassing many years.
What the founders of both Virgin Cars and the big independent retailers of used cars realised was that, once you had a customer, you had the chance to lock them into your business for a long time, thus ensuring high levels of reciprocal business.
They also realised that customers are generally creatures of habit who are resistant to change and very susceptible to old fashioned values like trust. They also appreciated that customers have a journey of car ownership lasting a life time; what you buy changes as your circumstances change, so why would you not try to lock them into your business for as much of this journey as possible, and this is what the large independents are doing.
They realise that customers are on a journey of car aspiration and necessity, and that business relationships are built on trust and habit. Get the customer early on in this ownership process, build that relationship of trust and continue to supply what your customers want and “Bingo!” You will retain that customer for a very long time, in fact you have probably and actively got to lose that customer, before the majority of them will contemplate purchasing elsewhere.
Now in finishing, and bearing in mind I have customers in every camp, (I am just the messenger), you can all read into this post what you want, but I implore everyone to grasp the fact that customers are the most valuable commodity to any business, and to appreciate that the business that has a customer’s trust and where the customer has done business before, will invariably always be the first business that customer contacts, when they are looking to change; provided of course, that the business has nurtured that relationship over time. As long as that business continues to supply what the customer wants to purchase, no other business is likely to get a look in.
Think on that as you drive past the independent used car business every day and just think of it as the modern day version of Virgin Cars!
If this post has resonated with you and you would like to know more about used car business development and growth strategies, rest assured there is help available?
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. We construct and deliver used car business development programmes for dealer networks, independents and manufacturers.
If you would like to know more about our used car business development programmes, then please do not hesitate to contact either Andrew Banning or Malcolm Thomas at ajb@autoformance.com or mgt@autoformance.com
Alternatively please do not hesitate to call us on 0345 057 3177, when it will be our pleasure to help.
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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