How Safe Is Your New and Used Car Trading Model?,,,,,,,,, (European Manufacturers Article)

At first glance this question might seem unimportant after all you are the manufacturer, you produce the product and only you decide who will get the new car product to sell, and on this basis you might be tempted to ignore the ramifications of the question.

However, those of you who read my last post; Do We Need To Discuss The “Pre-Registrations” Elephant In The Room, will hopefully be aware that for some of you, your traditional trading model may well be under threat and worse than this, some of you will in advertently already be supporting the third party independent businesses that are in direct competition with your franchise partners and who threaten your current trading model.

In the post referred to above I began to look at how over supply of new car product and the process of pre-registering unsold new car stock, was making it difficult for franchise partners to operate effective and successful used car operations, and how this situation was supporting competitor business models and changing the trading model in both the UK and in other European markets.

I began to explore the ramifications and promised that I would explore them all, so in this post let’s look at the some of the other dangers mentioned in the original post, that over supply of new car product and “Pre-Registrations” can cause;

• It forces desirable used car stock into the hands of competitor businesses, therefore feeding the growth of your competitors.

• Franchise partners are more likely to have to make new car and pre-registered stock available to competing internet based new car supply businesses.

• Drives your customers to competitor businesses.

In my opinion the 3 points above are probably the most threatening to your business and your current trading model, and at the moment all 3 of the above will already be occurring, and the long term trading dangers of not combating the points above is that both your new car and used car businesses will be under threat.

In the UK we have seen how 3rd party independent Tech Businesses and independent used car operations are targeting the existing trading model and changing consumer habits, and I have watched with interest how these companies and these business models are now targeting European markets, building on the success they are having in the UK, where alarmingly for manufacturers, they are now changing consumer purchasing habits, undermining the importance of the franchise dealer networks in the eyes of the customer and taking customers directly from manufacturers and their franchise dealer networks.

In the UK, as it is in Europe, every part of the purchasing process is being targeted by independent businesses; everything from the disposal of the customer’s current car to the supply of their next new or used car, is now a business model for an independent business in direct competition with you and your franchise partners. In the UK some of the biggest purchasers of customer part exchanges are independent electronic trading companies, we have independent internet based companies advertising on national TV as the most competitive supplier of new cars and in the some of the largest towns and cities, the largest and most successful retailers of used cars are now independent used car businesses and many of these companies are now targeting European markets.

This a dangerous time for the Automotive Sector because the illiquidity caused by the process of pre-registering unsold new car product, is leaving franchise dealer networks unable to purchase more traditional profiles of used car stock, because they are inheriting this expensive, nearly new stock profile which is actually in direct competition with the new car operation within their business. Therefore they are unable to support more traditional profiles of used car stock as it returns to the market, driving it straight into the hands of independents businesses, and forcing franchise dealer networks to make unsold new car stock and pre-registered new car stock, available to independent internet based new car companies, the likes of which are now targeting European markets.

Now as threats to business models go, the situation above is very serious, but it is happening and for many manufacturer based professionals reading this post, the most successful retailers of new and used car product may well not be some of your franchise partners, they will be these independent businesses successfully targeting your current trading model and who are, (by stealth), becoming very powerful in your market. If the current situation doesn’t change then I predict that it will not be long before some manufacturers are having to discuss trading strategies and solutions with these independent third party businesses, as well as their franchise partners, because in the eyes of the customer, they have become the businesses to go to, because they are making parts of the purchasing process either easier or cheaper, or both!

Some of you may doubt that the situation is so threatening, but I assure you all that it is; I have watched with interest how these well-funded and very professional businesses have targeted the Automotive Sector, and how they are now increasing market share by changing the way business is done, and as long as they have access to new and used car product, they will continue to grow and take customers from you and your franchise partners. I will not name them here, but I will happily discuss them, their trading models and threats they pose to your current trading model in more detail, with any of you who wish to contact me directly, so please feel free to do so.

However I will add the positive note that, as powerful as these independent businesses are becoming, the answers to dealing with the threats they pose are in your own hands. It is important to remember that they only have a business if they have access to product; remove that access to your product and the customers will have to return to the franchise dealer networks. It is our opinion that now is the time to meet head-on the challenges that these businesses represent, otherwise for many of you, your new car success in the future will lie in the hands of independent businesses with no loyalties to you as the manufacturer and no trading restrictions of a franchise agreement, the dangers of which I will be discussing in my next post in January.

But it is important to remember that the process of removing access to new and used car product for independent businesses, can only be achieved via a franchise dealer network that is successful at selling approved used cars and supporting your wider aims as the manufacturer.

Unfortunately though, the strong and resilient franchised used car dealer networks, (those capable of trading themselves and you, as the manufacturer, out of these perilous trading conditions), do not happen by accident, 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 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 develop a successful and profitable used car dealer network programme 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. 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 us on 0044 345 057 3177.

For more information about our services please visit our website at www.autoformance.com

Andrew Banning.
Used Car Business Development Director.

Do We Need To Discuss The “Pre-Registrations” Elephant In The Room? (European Manufacturers Article)

As we approach this traditionally very challenging time of year for the new car business, one that will no doubt be a little more challenging for some of you this year, I thought it worth exploring the ramifications of some of the practices deployed at this time of year, in regard to the achievement of new car registrations, and how the decisions you make now have ramifications reaching far into the future, in terms of how it will change your trading environment.

Those of you who read my previous post; Only A Successful Franchised Used Car Network Can Protect Your New Car Success, will now appreciate the threat I think outside forces currently pose to your traditional trading model and your future success. I don’t want to go over that post here, but the link to it is important because at this time of year, some of you will inadvertently be playing the role of architects in your own long term downfall.

The feedback from delegates at the training courses we run and the dealer groups we are working with at the moment, is all to do with the volume of unsold new car stock and pre-registrations, and this year it is causing more genuine concerns and trading problems than ever before. Now I will not use this post to argue the merits one way or the other of this practice, it has always gone on, in the UK as well as European markets, and we all know that, in reality, production numbers dictate registrations, not actual sales, and that we can’t roll over into a new calendar year with unregistered new car stock from the previous year.

But I thought it worthwhile exploring the issues it causes and how it both, feeds businesses that threaten your own success and restricts the ability of your franchise partners to then operate effectively, grow their used car operations and therefore support your new car aspirations for the future. The temptation at this time of year seems to be to get the job done, all unsold new car stock registered and then look away, but in reality the problems are building up and just beginning. I won’t use this post to discuss the remedies and the trading solutions that are going to be required, because the remedy will be different for every manufacturer and slightly different for all dealers, but I am happy to discuss openly, any trading solutions, with anyone who wishes to contact me directly, so please feel free to do so.

So whilst we can agree that there are no easy answers, there are answers to the problems, so let’s start at the beginning; new car supply and demand! Time for some honesty, I have rarely met a senior member of a manufacturer who is prepared to accept, (openly), that businesses shouldn’t budget occasionally to produce and sell less cars, because this is perceived as going backwards, but if manufacturers continue to produce too many cars for the level of demand in the market, then not everyone can be a winner. Again, I will not delve into the market dynamics of supply and demand now, it is a post and a “White Paper” in itself, but let’s all agree that regardless of what you are trying to sell, the moment you have more product than you have customers, you are going to have some trading challenges, because the trading environment has changed.

So as an example let’s look at the problems that oversupply, in terms of production and the process of pre-registering has caused in the UK market, (further down the retail chain), and how it is actually harming the long term new car aspirations for manufacturers in the UK market, not supporting them. And I will do this because there are now some dangerous parallels between our market and what is now, quite understandably, happening in other European markets.

Well! The first and most serious problem that this process causes is that it effectively “Shuts” the used car operations of your franchise dealer partners! Please do not stop reading at this point, let me explain why, and why the problems are actually more serious than this, because by allowing this trading environment to develop you are actually restricting the ability of your franchise partners to trade effectively and actually supporting, albeit inadvertently, the businesses that are now targeting European markets, (who are already changing consumer behaviour and the trading model in the UK), and that actually threaten your current trading model.

So accepting this is a huge issue causing many problems that many of your franchise dealer partners will still be dealing with as they enter the new trading calendar year, and that there are too many to be discussed in one post, let’s look at the likely problems caused by the “Pre-Registration Process” and I will explore them all separately over the coming weeks in my posts. So in the worst case scenarios these are the problems that the “Pre-Registration” process can cause within franchise dealer networks;

• Reduces financial liquidity.
• Results in 2 competing stock holdings, invariably competing for the same customer.
• Effectively “Shuts” the used car operations of your franchise partners.
• Forces desirable used car stock into the hands of competitor businesses, therefore feeding the growth of your competitors.
• Franchise partners more likely to have to make new car and pre-registered stock available to competing internet based new car supply businesses.
• Drives your customers to competitor businesses.
• Drives down the residual values of your new car product.
• Increases the cost of new car ownership.
• Undermines the stature of the franchised dealer network in the eyes of the customer.

I’m sure you will all agree that as a “Perfect Storm” of disastrous trading conditions, the points above will take some beating, but in reality this will be happening to more of you than you would imagine; so in starting this discussion let’s look at the first 2 points above and explore them in more detail in this post.

Let’s start from the perspective of your franchise partners who will have worked very hard to develop internally, or acquire the professional with the skill set required to run their used car operation. Part of the job description of this individual is the responsibility of managing a very large sum of money and investing that money in stock for which there is a demand, whilst ensuring that the stock acquired enters the business at a price that is reflective of it’s true market value and that will, allowing for reconditioning, enable the business to make it’s budgeted profit margin per unit. 

The stock holding acquired should always be reflective of demand within the used car market place and the moment you disturb this trading environment and stock profile, both the used car and the new car businesses of your franchise partners begin to unravel. When you pre-register new car stock, that stock has to be paid for and this is a very expensive stock holding, so liquidity within the businesses of your franchise partners begins to dry up, leaving them unable to purchase and stock more desirable profiles of used car stock.

Worse than this, you now have a very difficult and conflicting stock holding to retail that is at direct odds with your new car business and in many instances you will then have 2 businesses, within every business of your franchised dealer network, that is competing for the same customer! Invariably there are not 3 different profiles of customer; the new car customer, the pre-registration customer and the ex-demo customer; they are one of the same, effectively a new car customer that can be persuaded into one of the 3 profiles of stock, depending on the immediate business needs of your franchise partners.

And it is important to remember that you don’t increase the number of new car customers, just by increasing the amount of stock available for them to buy, so invariably it becomes a race to the bottom on price, in order to ensure that the problem of this excess stock is dealt with, so the used car operations can retail this stock, release the funds back to the business and begin trading and operating as a used car operation again. But whilst they are doing this guess what, they are in direct competition with the new car business within the same dealership and 9 times out 10, I would back the successful and well run used car operation to win.

It has to, because the moment your franchise partner restricts the ability of the member of his staff responsible for running the used car operation, to do their job and to earn the salary their skills can command in the open market, well guess what, this talented individual, (whose commercial skills are in high demand at the moment), will leave. Why? Well tell a used car professional that they are going to inherit a stock holding at a value that they know is not reflective of the true market value, then in effect their position is compromised, as is their ability to provide for themselves and their families.

I will explore the other points above in forthcoming posts as I am sure that the requirement to retail and handle this stock holding will be the central theme for the both the European and UK Automotive Sectors as we go into 2018. During these forthcoming posts I will expand on these points and enlighten you all on how third party technology businesses are targeting the UK Automotive sector and changing the way business is being done, threatening the trading model that has existed for decades. I caution now; don’t be tempted to think that it is a problem for the UK market only, I have watched with interest how these businesses are now targeting European markets, as they become more successful and therefore more powerful, and look to scale and leverage their successful business model in European markets. 

I have no doubt that you will all have your own challenges in trading through this period, which will require a resilient and successful franchised dealer network that is successful at retailing this challenging stock holding and therefore less likely to make valuable new and used car stock available to the independent new and used car businesses, (the likes of which I have mentioned in my previous post and that I will revisit in more detail in forthcoming posts), that are now targeting European markets and who will ultimately, only undermine your new car business and all that you are trying to achieve.

Unfortunately though, the strong and resilient franchised used car dealer networks, (those capable of trading themselves and you, as the manufacturer, out of these perilous trading conditions), do not happen by accident, 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 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 develop a successful and profitable used car dealer network programme 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. 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 us on 0044 345 057 3177.

For more information about our services please visit our website at www.autoformance.com

Andrew Banning.
Used Car Business Development Director.

Do We Need To Discuss The “Pre-Registrations” Elephant In The Room? (UK Manufacturer Article)

As we approach this traditionally very challenging time of year for the new car business, one that will no doubt be a little more challenging for some of you this year, I thought it worth exploring the ramifications of some of the practices deployed at this time of year, in regard to the achievement of new car registrations, and how the decisions you make now have ramifications reaching far into the future, in terms of how it will change your trading environment.

Those of you who read my previous post; Only A Successful Franchised Used Car Network Can Protect Your New Car Success, will now appreciate the threat I think outside forces currently pose to your traditional trading model and your future success. I don’t want to go over that post here, but the link to it is important because at this time of year, some of you will inadvertently be playing the role of architects in your own long term downfall.

The feedback from delegates at the training courses we run and the dealer groups we are working with at the moment, is all to do with the volume of pre-registrations, and this year it is causing more genuine concerns and trading problems than ever before. Now I will not use this post to argue the merits one way or the other of this practice, it has always gone on and we all know that, in reality, production numbers dictate registrations, not actual sales, and that we can’t roll over into a new calendar year with unregistered new car stock from the previous year.

But I thought it worthwhile exploring the issues it causes and how it both feeds businesses that threaten your own success and restricts the ability of your franchise partners to then operate effectively, grow their used car operations and therefore support your new car aspirations for the future. The temptation at this time of year seems to be to get the job done, all unsold new car stock registered and then look away, but in reality the problems are building up and just beginning. I won’t use this post to discuss the remedies and the trading solutions that are going to be required, because the remedy will be different for every manufacturer and slightly different for all dealers, but I am happy to discuss openly, any trading solutions, with anyone who wishes to contact me directly, so please feel free to do so.

So whilst we can agree that there are no easy answers, there are answers to the problems, so let’s start at the beginning; new car supply and demand! Time for some honesty, I have rarely met a senior member of a manufacturer who is prepared to accept, (openly), that businesses shouldn’t budget occasionally to produce and sell less cars, because this is perceived as going backwards, but if manufacturers continue to produce too many cars for the level of demand in the market, then not everyone can be a winner. Again, I will not delve into the market dynamics of supply and demand now, it is a post and a “White Paper” in itself, but let’s all agree that regardless of what you are trying to sell, the moment you have more product than you have customers, you are going to have some trading challenges, because the trading environment has changed.

So let’s look at the problems that oversupply, in terms of production, and the process of pre-registering cause, further down the retail chain, and how it is actually harming your long term new car aspirations, not supporting them.

Well! The first and most serious problem that this process causes is that it effectively “Shuts” the used car operations of your franchise dealer partners! Please do not stop reading at this point, let me explain why, and why the problems are actually more serious than this, because by allowing this trading environment to develop you are actually restricting the ability of your franchise partners to trade effectively and actually supporting, albeit inadvertently, the businesses that threaten your trading model.

So accepting this is a huge issue causing many problems that many of your franchise dealer partners will still be dealing with as they enter the new trading calendar year, and that there are too many to be discussed in one post, let’s look at the likely problems caused by the “Pre-Registration Process” and I will explore them all separately over the coming weeks in my posts. So in the worst case scenarios these are the problems that the “Pre-Registration” process can cause within franchise dealer networks;

• Reduces financial liquidity.
• Results in 2 competing stock holdings, invariably competing for the same customer.
• Effectively “Shuts” the used car operations of your franchise partners.
• Forces desirable used car stock into the hands of competitor businesses, therefore feeding the growth of your competitors.
• Franchise partners more likely to have to make new car and pre-registered stock available to competing internet based new car supply businesses.
• Drives your customers to competitor businesses. • Drives down the residual values of your new car product.
• Increases the cost of new car ownership.
• Undermines the stature of the franchised dealer network in the eyes of the customer.

I’m sure you will all agree that as a “Perfect Storm” of disastrous trading conditions, the points above will take some beating, but in reality this will be happening to more of you than you would imagine; so in starting this discussion let’s look at the first 2 points above and explore them in more detail in this post.

Let’s start from the perspective of your franchise partners who will have worked very hard to develop internally, or acquire the professional with the skill set required to run their used car operation. Part of the job description of this individual is the responsibility of managing a very large sum of money and investing that money in stock for which there is a demand, whilst ensuring that the stock acquired enters the business at a price that is reflective of it’s true market value and that will, allowing for reconditioning, enable the business to make it’s budgeted profit margin per unit. 

The stock holding acquired should always be reflective of demand within the used car market place and the moment you disturb this trading environment and stock profile, both the used car and the new car businesses of your franchise partners begin to unravel. When you pre-register new car stock, that stock has to be paid for and this is a very expensive stock holding, so liquidity within the businesses of your franchise partners begins to dry up, leaving them unable to purchase and stock more desirable profiles of used car stock.

Worse than this, you now have a very difficult and conflicting stock holding to retail that is in direct competition with your new car business and in many instances you will then have 2 businesses, within every business of your franchised dealer network, that is competing for the same customer! Invariably there are not 3 different profiles of customer; the new car customer, the pre-registration customer and the ex-demo customer; they are one of the same, effectively a new car customer that can be persuaded into one of the 3 profiles of stock, depending on the immediate business needs of your franchise partners.

And it is important to remember that you don’t increase the number of new car customers, just by increasing the amount of stock available for them to buy, so invariably it becomes a race to the bottom on price, in order to ensure that the problem of this excess stock is dealt with, so the used car operations can retail this stock, release the funds back to the business and begin trading and operating as a used car operation again. But whilst they are doing this guess what, they are at odds with the new car business within the same dealership and 9 times out 10, I would back the successful and well run used car operation to win.

It has to, because the moment your franchise partner restricts the ability of the member of his staff responsible for running the used car operation, to do their job and to earn the salary their skills can command in the open market, well guess what, this talented individual, (whose commercial skills are in high demand at the moment), will leave. Why? Well tell a used car professional that they are going to inherit a stock holding at a value that they know is not reflective of the true market value, then in effect their position is compromised, as is their ability to provide for themselves and their families.

I will explore the other points above in forthcoming posts as I am sure that the requirement to retail and handle this stock holding will be the central theme for the UK Automotive Sector as we go into 2018. You will all have your own challenges in trading through this period, which will require a resilient and successful franchised dealer network that is successful at retailing this challenging stock holding and therefore less likely to make valuable new and used car stock available to the independent new and used car businesses, (the likes of which I have mentioned in my previous post and that I will revisit in more detail in forthcoming posts), who will ultimately, only undermine your new car business and all that you are trying to achieve.

Unfortunately though, the strong and resilient franchised used car dealer networks, (those capable of trading themselves and you, as the manufacturer, out of these perilous trading conditions), do not happen by accident, 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 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 develop a successful and profitable used car dealer network programme 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. 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 us on 0345 057 3177.

For more information about our services please visit our website at www.autoformance.com

Andrew Banning.
Used Car Business Development Director.

“Pre-Registrations” And Shutting Your Used Car Operation!,,,,,,, (UK Dealer Article)

As we approach this traditionally very challenging time of year for the new car business, one that will no doubt be a little more challenging for some of you this year, I thought it worth exploring the ramifications of some of the practices deployed at this time of year, in regard to the achievement of new car registrations, and how the decisions you make now have ramifications reaching far into the future, in terms of how it will change your trading environment.

Let me start by saying that I am entirely sympathetic to the situation, I have had to come into the dealership myself in the past having to overcome the problems you will face today, so I appreciate the strengths and the skills required to trade yourselves out of challenging trading environments, although in all honesty, the long term threats to your trading existence that are around today, were not there waiting to catch us all out.

Those of you who read my previous post; Only A Successful Used Car Operation Can Protect Your New Car Success, will now appreciate the threat I think outside forces currently pose to your traditional trading model and your future success. I don’t want to go over that post here, but the link to it is important because at this time of year, some of you will inadvertently be playing the role of architects in your own long term downfall. It may be unavoidable in the short term, but our advice would be that discussions need to be taking place between successful franchise partners and the manufacturers that they represent, if the industry is to avoid this continual cycle of encouraging a trading environment where in reality, 3rd party independent businesses are inadvertently made more successful, thus threatening both the current trading model and your long term existence.

The feedback from delegates at the training courses we run and the dealer groups we are working with at the moment, is all to do with the volume of pre-registrations, and this year it is causing more genuine concerns and trading problems than ever before. Now I will not use this post to argue the merits one way or the other of this practice, it has always gone on and we all know that, in reality, production numbers dictate registrations, not actual sales, and that we can’t roll over into a new calendar year with unregistered new car stock from the previous year. After all the job has to be done!

But I thought it worthwhile exploring the issues it causes and how it both feeds businesses that threaten your own success and restricts the ability of you and your fellow franchise partners to then operate effectively, grow your used car operations and therefore support the new car aspirations of the manufacturer. Quite understandably the pressure at this time of year is to get the job done, all unsold new car stock registered and then look away, but in reality the problems are building up and just beginning. I won’t use this post to discuss the remedies and the trading solutions that are going to be required, because the remedy will be different for every manufacturer and slightly different for all dealers, but I am happy to discuss openly, any trading solutions, with anyone who wishes to contact me directly, so please feel free to do so.

So whilst we can agree that there are no easy answers, there are answers to the problems, so let’s start at the beginning; new car supply and demand! Time for some honesty, I have rarely met a senior member of a manufacturer who is prepared to accept, (openly), that manufacturers shouldn’t budget occasionally to produce and sell less cars, because this is perceived as going backwards, but if manufacturers continue to produce too many cars for the level of demand in the market, then not everyone can be a winner. Again, I will not delve into the market dynamics of supply and demand now, it is a post and a “White Paper” in itself, but let’s all agree that regardless of what you are trying to sell, the moment you have more product than you have customers, you are going to have some trading challenges, because the trading environment has changed.

So let’s look at the problems that oversupply, in terms of production, and the process of pre-registering cause, further down the retail chain, and how it is actually harming your long term new and used car aspirations, not supporting them.

Well! The first and most serious problem that this process causes is that, unless you have access to unlimited funds, it effectively “Shuts” your used car operation and those of your fellow franchise partners! Now if that was not serious enough in isolation, there are further dangers lurking at this point, because whilst your business is restricted in its ability to trade effectively, the trading environment is now actually supporting, (albeit inadvertently), the independent businesses that threaten your trading model.

So accepting this is a huge issue causing many problems that many of you will still be dealing with as you enter the new trading calendar year, and that there are too many to be discussed in one post, let’s look at the likely problems caused by the “Pre-Registration Process” and I will explore them all separately over the coming weeks in my posts. So in the worst case scenarios these are the problems that the “Pre-Registration” process can cause for your business and those of your fellow franchise dealers;

• Reduces financial liquidity.
• Results in 2 competing stock holdings, invariably competing for the same customer.
• Effectively “Shuts” your used car operations and those of your franchise partners.
• Forces desirable used car stock into the hands of competitor businesses, therefore feeding the growth of your competitors.
• You and your fellow franchise partners are now more likely to have to make new car and pre-registered stock available to competing internet based new car supply businesses.
• Drives your customers to competitor businesses.
• Drives down the residual values of your new car product.
• Increases the cost of new car ownership.
• Undermines the stature of the franchised dealer network in the eyes of the customer.

I’m sure you will all agree that as a “Perfect Storm” of disastrous trading conditions, the points above will take some beating, so in starting this discussion let’s look at the first 2 points above and explore them in more detail in this post.

Let’s start from the perspective of your Used Car Operation, the part of your business at the core of your future success, which has taken years to build to where it is today and as part of this journey you will have worked very hard to develop internally, or acquire the professional with the skill set required to run your used car operation. Part of the job description of this individual is the responsibility of managing a very large sum of money and investing that money in stock for which there is a demand, whilst ensuring that the stock acquired enters your business at a price that is reflective of it’s true market value and that will, allowing for any reconditioning, enable your business to make it’s budgeted profit margin per unit. 

This is a position of huge responsibility within your business and quite rightly you would demand of this individual that the stock holding being acquired should always be reflective of demand within the used car market place, but the moment you disturb this trading environment and stock profile, both the used car and the new car businesses within your business begin to unravel. As we are all aware, when you pre-register new car stock, that stock has to be paid for and this is a very expensive stock holding, so liquidity within your used car operation invariably dries up, leaving it unable to purchase and stock more desirable profiles of used car stock.

Worse than this, you will now have a very difficult and conflicting stock holding to retail that is at direct odds with your new car business and in many instances you will then have 2 businesses within your business that are competing for the same customer! As we all know, there are not 3 different profiles of customer; the new car customer, the pre-registration customer and the ex-demo customer; they are one of the same, effectively a new car customer that can be persuaded into one of the 3 profiles of stock, depending on the immediate business needs of your business.

And it is important to remember that you don’t increase the number of new car customers, just by increasing the amount of stock available for them to buy, so invariably it becomes a race to the bottom on price, in order to ensure that the problem of this excess stock is dealt with, so your used car operations can retail this stock, release the funds back into the business and begin trading and operating as a used car operation again. But whilst they are doing this guess what, they are in direct competition with the new car business within your dealership and 9 times out 10, I would back the successful and well run used car operation to win.

It has to, because the moment you restrict the ability of the member of your staff responsible for running the used car operation, to do their job and to earn the salary their skills can command in the open market, well guess what, this talented individual, (whose commercial skills are in high demand at the moment), will leave. Why? Well tell a used car professional that they are going to inherit a stock holding at a value that they know is not reflective of the true market value, then in effect their position is compromised, as is their ability to provide for themselves and their families.

I will explore the other points above in forthcoming posts as I am sure that the requirement to retail and handle this stock holding will be the central theme for the UK Automotive Sector as we go into 2018. You will all have your own challenges in trading through this period, which will require a resilient and effective used car operation that is successful at retailing this challenging stock holding and therefore leaving your business less likely to make valuable new and used car stock available to the independent new and used car businesses, (the likes of which I have mentioned in my previous post and that I will revisit in more detail in forthcoming posts), who will ultimately, only undermine your used and new car businesses and all that you are trying to achieve.

Unfortunately though, strong and resilient used car operations, (those capable of trading themselves and you, as the owner of the business, out of these perilous trading conditions), do not happen by accident, 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 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 develop a successful and profitable used car operation 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. 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 us on 0345 057 3177.

For more information about our services please visit our website at www.autoformance.com

Andrew Banning.
Used Car Business Development Director.

Only A Successful Franchised Used Car Network Can Deliver Your New Car Success!,,,,,,(European Manufacturers Article)

 

Those of you who read my previous post; Effective Stock Disposal Will Lie At The Heart Of Your New Car Success, will hopefully be in no doubt as to the importance that we place on effective used car stock disposal, in terms of the success of your franchised dealer networks. Without these procedures in place within your franchised dealer networks, the oxygen of funds cannot be returned to businesses and made available to support successful used car operations, the success of which is vital to your new car aspirations.

 

I return to this subject having received an invitation to attend the 10th Vehicle Remarketing Conference to be held in Amsterdam in January, which I think is a wonderful initiative and one I will do everything to attend, if for no other reason than to get the opportunity to meet many of you who I am in contact with, thanks to our used car business development posts and our used car business development and consultancy programmes.

 

And I do so having looked at the agenda for the event which looks very in-depth and looking to tackle some important issues; I have even offered to present some content should they feel it appropriate? But one thing is troubling me when I look at the very in-depth agenda and maybe the future direction of travel, in terms of the narrative here, and how, if left unchecked, it may actually harm manufacturer efforts to support their new car aspirations.

 

I will comment no more because the event has not taken place and therefore I am not fully aware of the content, but I will caution and draw a comparison between European markets and the world’s most successful used car market, the used car market operating in the UK; be wary of allowing a situation to occur where your franchised dealer networks are no longer being seen, (by the customer), as the “1 Stop Shop” for all things associated with purchasing their new or used car.

 

As a company of used car professionals who have constructed and delivered many manufacturer approved used car programmes, in conjunction with franchised dealership based used car business development and consultancy programmes, the agenda points of most interest to us are the following;

 

• Used Vehicles Programmes and Strategies That Drive Profits.

 

• The Relationship of New and Used Vehicle Strategies.

 

These are two very important issues for manufacturers that will go to the very foundations of both your used car remarketing and your new car success in the future and I for one will be listening very intently to whoever presents on these topics. 

 

Every individual market has its individual challenges but the one constant for all manufacturers is that the only way to ensure future new car success, is via a foundation of used car success. There is no other way to ensure that you protect future residual values and therefore keep the cost of ownership for new cars at affordable levels for new car customers, other than via resilient franchise dealer networks that are successful at selling used cars and supporting approved used car programmes.

 

Most manufacturers we speak to have stopped looking at their used car and new car operations as separate businesses and accept that they must work together and in unison, in order to ensure success in the future. But how this is achieved is what I would be covering in the topics listed above; in fact they are so important that you could argue that they are “The Conference” as far as manufacturers are concerned.

 

The other agenda points, as important and as noteworthy as they are, can only be discussed and the operational procedures implemented, after the foundations of successful used car networks have been achieved, because without these foundations, there is a danger that 3rd party businesses will target the new and used car supply chain process and in some instances, become more powerful than your franchise dealer networks in influencing customer purchasing behaviour, the purchasing process itself and your future residual values; just as they are currently doing in the UK market.

 

We have seen this happen in the UK, where technology entrepreneurs are targeting established markets at will by using technology to work in synergy with changing consumer purchasing habits, and in some cases actually changing them. The automotive sector is being targeted in almost every area of the supply chain, and in reality many manufacturers have to accept that their franchise dealer networks are no longer perceived as the “1 Stop Shop” when it comes to purchasing a new or used car.

 

Many parts of the sales process including the part exchange valuation/sale to the actual supply of the new or used car have been targeted via 3rd party businesses and they have now become so ingrained in the subconscious of the consumer, that these businesses are now seen as the place to go by customers and the growth of these businesses is relentless. Businesses like “We Buy Any Car,” Carwow and the many professional and successful independent retailers of used cars, (Motorpoint is just one example), are taking over many parts of the new and used car sales process and in my opinion, it is leaving manufacturers and their franchise dealer partners very vulnerable.

 

Why? Well customers are very valuable to any business but they are also habitual in their behaviour and once you have lost them, it can be very hard to get them back. I will be exploring these businesses in greater detail in some of my next posts, but I caution; in the UK the most powerful and impressive new car website for the supply of new cars is not owned and run by a manufacturer or their franchise partners but by an independent business. The businesses selling the most used cars in some of our largest towns and cities are now not franchised dealers but independent businesses and the most successful purchasing platform for used cars is now an independent business.

 

These are now very successful businesses but with no shared objective with you as the manufacturer, and in many cases they are now setting prices and therefore effecting the future residual values of new car product, (because they are trading in such high volumes), and bearing in mind the direct effect that future residual values have on the cost of ownership of new cars, I would want to be controlling this myself, as the manufacturer, not leaving it to third party businesses.

 

Thus we return to the agenda points listed above and the importance of understanding that new car success can only be delivered from the foundations of used car success. It will be fascinating to listen to the speakers delivering the content on these topics and to see if there are any solutions offered. If I were presenting here I would be advocating the strategic importance of having effective approved used car programmes working in synergy with used car business development and consultancy programmes delivered at dealership level.

 

But I would caution that resilient and successful franchised used car networks cannot be delivered over night, or just off the back of branded point of sale material or via standards programmes alone. For sure these things are important but for any programme to be a success, someone has got to work with your franchise dealer networks and deliver the independent consultancy and business development programmes required, to enable them to grow their used car operations and therefore protect your shared new car objectives for the future. 

 

Unfortunately though, strong and resilient used car dealer networks do not happen by accident, 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 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 develop a successful and profitable used car dealer network programme 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. 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 us on 0044 345 057 3177.

 

For more information about our services please visit our website at www.autoformance.com

 

Andrew Banning.

Used Car Business Development Director.

Only A Successful Franchised Used Car Network Can Protect Your New Car Success!,,,,,,(UK Manufacturers Article)

 

Those of your who read my last post; Effective Used Car Stock Practices Will Lie At The Heart Of Your Future New Car Success, and who follow my blog, will know that in this post I promised to discuss the threats to the new and used car supply process that third party independent businesses now pose, and therefore the threat they pose to your new car aspirations.

It is my opinion that more threats to your new car and used car success exist now in the UK market than have ever existed; and I speak as someone who has been working in the Automotive Sector since 1989. Like many retail sectors, advances in technology have made it possible for technical entrepreneurs to target our established market and change customer purchasing behaviour. The advent of the internet, tablets and smart phones has changed consumer behaviour and I really worry where this will end, especially for manufacturers and even more so for their franchised dealer networks.

These tech businesses are targeting various stages of the new and used car supply process and building them into independent and powerful businesses which threaten the status quo, because they are undermining the status and the role of the franchised dealership, when it comes to purchasing a new or used car, because in the eyes on the consumer, the franchise dealership is no longer required to be the “1 Stop Shop” when it comes to purchasing their new or used car.

Many of you who know me, know that we post similar articles to these in the European markets and I was caused to reflect on how our industry is changing in the UK, to warn against the migration of these third parties businesses into Continental European markets and once I had finished the article I knew it had to be sent to our UK contacts base.

I will start with what could end up being the worst case scenario, but where I generally think the sector, as a whole, is heading and then leave you all to ponder, because left unchecked we could be well on our way to this trading environment, which may suit some of you, but I caution; ultimately the direction of travel in the market is going to leave your future residual values in the hands of third party independent businesses and more than likely increase the cost of new car ownership, thus threatening your new car aspirations.

In saying this I do so asking you to remember that the customer is the key to all our success and the customer is having his or her behaviour changed when it comes to purchasing their car. We live in a world where 3rd party independent businesses advertise on national TV to purchase their current car, so your franchised dealer network is no longer required in the disposal of the current car: and just as threateningly, we now have internet based new car suppliers advertising on national TV telling customers that they can supply their new car cheaper than a traditional franchised dealer.

Now it doesn’t really matter what we as industry insiders think about these companies, only what the customer thinks, because theirs is the only opinion that matters and the more that consumers use these companies, the less control you have over the customer and therefore your future success, and to give you an idea of how dangerous this could be, I will discuss a web based new car sales company, which I won’t mention, but I am happy to expand upon with any of you who wish to contact me directly.

But having visited the company’s website, let me give you all some genuine consumer feedback; the website concerned is very professional, far more so than any franchised dealer websites I have visited; in a clear and concise layout it gives any customer visiting the site immediate sight of all the discounts available on a very large range of new cars, from over 50 manufacturers, to include over 50 Audi models, nearly 40 BMW models and nearly 30 Ford models, to name just a few. The website has advisory pages on all the elements of purchasing a new car and more importantly, very cleverly implies that franchise dealers have to earn the right to be an accepted supplier for this company! 

Now just let that statement sink in and what they are saying there; that your franchise partners have to earn the right to be an approved supplier for an independent business trying to undercut you, as the manufacturer, on the pricing of your new cars; now as a threat to your future success goes, this is as emboldened and threatening as they come! Now you may be tempted to say that the information on the website can’t possibly be true, but “Perception IS Reality” and all that matters is what the customer thinks. If enough customers can have their purchasing behaviour changed, as has happened with “We Buy Any Car” and this business continues on its journey to being the “1 Stop Shop” for new car discounts? Well I will leave to your imagination as to where that will leave your new car aspirations and profitability?

So in the UK, you could argue that the Automotive sector looks like this; in some of our largest conurbations the largest and most successful used car retailers are independent businesses, (with the numbers only increasing), the number of part exchanges at franchise dealer networks is decreasing due to third party electronic purchasing platforms, and new car pricing is well on the way to being set by independent third party internet based companies!

It is not for me to tell anyone reading this post how to run their business and if this is the new and used car supply model that you want to run in the UK, then I will be first to respect your decision and mention it no more. However if you don’t, well with the trading environment becoming more challenging there is much to consider, if manufacturers are to stop these independent businesses becoming more powerful and reducing their future profits.

The first place to start, in terms of dealing with these threats head on? Well that will be the effectiveness of franchised dealer networks in supporting manufacturer approved used programmes, who are successful in retailing used car stock in the volumes required to protect future new car residual values, thus ensuring your future new car success. Only then will you have a network of franchise partners capable of retailing approved used cars in the volumes required to dispose of the increased number of cars returning from PCP agreements, thus avoiding the need to dispose of this stock via independent used car retailers, therefore undermining your franchise partners and threatening future residual values and the cost of ownership for new cars. 

This will result in a more resilient and successful franchised dealer network who will also become more successful at retailing new cars and therefore less likely to make stock available to the independent new car businesses, (the likes of which I have mentioned), who will only undermine your new car business and all that you are trying to achieve.

Unfortunately though, strong and resilient used car dealer networks do not happen by accident, 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 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 develop a successful and profitable used car dealer network programme 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. 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 us on 0345 057 3177.

For more information about our services please visit our website at www.autoformance.com

Andrew Banning.
Used Car Business Development Director.

Only A Successful Used Car Operation Can Protect Your New Car Success!,,,,,, (UK Dealer Article)

 

Those of your who read my last post; Effective Used Car Stock Practices Will Lie At The Heart Of Your Future New Car Success, and who follow my blog, will know that in this post I promised to discuss the threats to the new and used car supply process that third party independent businesses now pose, and therefore the threat they pose to your business as a whole.

 

It is my opinion that more threats to your new car and used car success exist now in the UK market than have ever existed; and I speak as someone who has been working in the Automotive Sector since 1989. Like many retail sectors, advances in technology have made it possible for technical entrepreneurs to target our established market and change customer purchasing behaviour. The advent of the internet, tablets and smart phones has changed consumer behaviour and I really worry where this will end, especially for manufacturers and even more so for their franchised dealer networks.

 

These tech businesses are targeting various stages of the new and used car supply process and building them into independent and powerful businesses which threaten the status quo, because they are undermining the status and the role of the franchised dealership, when it comes to purchasing a new or used car, because in the eyes on the consumer, the franchise dealership is no longer required to be the “1 Stop Shop” when it comes to purchasing their new or used car.

 

Many of you who know me, know that we post similar articles to these in the European markets and I was caused to reflect on how our industry is changing in the UK, to warn against the migration of these third parties businesses into Continental European markets and once I had finished the article I knew it had to be sent to our UK contacts base.

 

I will start with what could end up being the worst case scenario, but where I generally think the sector, as a whole, is heading and then leave you all to ponder, because left unchecked we could be well on our way to this trading environment, which may suit some of you, but I caution; ultimately the direction of travel in the market is going to leave future residual values in the hands of third party independent businesses and more than likely increase the cost of new car ownership, thus threatening your new car aspirations and your business as a whole.

 

In saying this I do so asking you to remember that the customer is the key to all our success and the customer is having his or her behaviour changed when it comes to purchasing their car. We live in a world where 3rd party independent businesses advertise on national TV to purchase their current car, so the franchised dealer network is no longer required in the disposal of their current car, in fact in many cases it is not even seen as the specialist services provider in this process! But even more threateningly, we now have internet based new car suppliers advertising on national TV telling customers that they can supply their new car cheaper than a traditional franchised dealer.

 

Now it doesn’t really matter what we as industry insiders think about these companies, only what the customer thinks, because theirs is the only opinion that matters and the more that consumers use these companies, the less control you have over the customer and therefore your future success; and to give you an idea of how dangerous this could be, I will discuss a web based new car sales company, which I won’t mention, but I am happy to expand upon with any of you who wish to contact me directly.

 

But having visited the company’s website, let me give you all some genuine consumer feedback; the website concerned is very professional, far more so than any franchised dealer websites I have visited; in a clear and concise layout it gives any customer visiting the site immediate sight of all the discounts available on a very large range of new cars, from over 50 manufacturers, to include over 50 Audi models, nearly 40 BMW models and nearly 30 Ford models, to name just a few. The website also has advisory pages on all the elements of purchasing a new car and more importantly, very cleverly implies that franchise dealers have to earn the right to be an accepted supplier for this company, almost as if they are a special club of dealers providing the best customer experience in the industry! 

 

Now just let that statement sink in and what they are saying there; that you as a franchise partner of a manufacturer, (with all the achieving of manufacturer standards that that process involves), then has to earn the right to be an approved supplier for an independent business trying to undercut you, as the franchised dealer, on the pricing of your new cars; now as a threat to your future success goes, this is as emboldened and threatening as they come!

 

Now you may be tempted to say that the information on the website can’t possibly be true, but “Perception IS Reality” and all that matters is what the customer thinks. If enough customers can have their purchasing behaviour changed, as has happened with “We Buy Any Car” and this business continues on its journey to being the “1 Stop Shop” for new car discounts? Well I will leave it to your imagination as to where that will leave your new car aspirations and your profitability?

 

So in the UK, you could argue that at the moment the Automotive sector looks like this; in some of our largest conurbations the largest and most successful used car retailers are independent businesses, (with the numbers only increasing), the number of part exchanges at franchise dealer networks is decreasing due to third party electronic purchasing platforms, and new car pricing is well on the way to being set by independent third party internet based companies!

 

It is not for me to tell anyone reading this post how to run their business and if this is the new and used car supply model that you want to run in the UK, then I will be first to respect your decision and mention it no more. However if you don’t, well with the trading environment becoming more challenging there is much to consider, if manufacturers and their franchised dealer networks are to stop these independent businesses becoming more powerful, therefore undermining their businesses and reducing their future profits.

 

The first place to start, in terms of dealing with these threats head on? Well that will be the effectiveness of your used car operation, and those of your franchised dealer network partners, in supporting effective and fit for purpose manufacturer approved used programmes, who are successful in retailing used car stock in the volumes required to increase profits, retain customers and protect future new car residual values, thus ensuring your future new car success. Only then will you individually have a used car operation capable of retailing approved used cars in the volumes required to dispose of the increased number of cars returning from PCP agreements, thus avoiding the need to dispose of this stock via independent used car retailers, which will only continue to undermine your own business and those of your franchise partners, as well as threatening future residual values and the cost of ownership for new cars, and all that that entails. 

 

This will result in a more resilient and successful franchised dealer network who will also become more successful at retailing new cars as a whole, and therefore less likely to make unsold new car stock available to the independent new car retailers, (the likes of which I have mentioned), who will only continue to undermine your new car business and all that you are trying to achieve.

 

Unfortunately though strong, resilient and successful used car operations do not happen by accident, 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 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 develop a successful and profitable used car operation 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. 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 us on 0345 057 3177.

 

For more information about our services please visit our website at www.autoformance.com

 

Andrew Banning.

Used Car Business Development Director.