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.
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