As much as it might be difficult to get this message across to our manufacturer based audience during September, we thought it worthwhile returning to this subject so that once the dust has settled on the new car sales performance during September and the planning process begins in earnest for 2019, minds can turn to reviewing this year and planning for the next.
There is no doubt that it has been a particularly bruising new car market for some this year and with no immediate reason for the trading conditions to change as we go into 2019, the importance of looking at the 3 franchises making up the whole of the business has never been more important; the 3 franchises that are vital if you’re are going to secure your long term new car success and that of your franchise dealer network;
- The New Car Franchise.
- The Nearly New Car Franchise.
- The Used Car Franchise.
We say this because all manufacturers are focused on the 1st franchise, the majority have a focus on the 2nd franchise but the 3rd? Well there is a huge disparity in the sector in terms of the support and focus that the development of successful used car businesses receives and if manufacturers are going to ensure that their long term new car objectives are achieved via a financially robust network of franchise partners, well then this is going to have to change.
As automotive professionals and the sector as a whole, continues to come to terms with the evolving new car retailing landscape, the importance of having a network of successful used car operations has rarely been so important. With the new car market place fragmenting and being attacked by entrepreneurial, aggressive internet based businesses who are looking to manipulate consumer behaviour and to control and hold to ransom vast amounts of consumer data, we would argue that the new car market may never be the same again. Not because manufacturers can’t compete head on with these threats, but because the purchasing behaviour of consumers has been changed and the sector, (in the main), has been caught out by the speed at which the new car trading conditions have been evolving.
As much as some manufacturers have performed above the challenging new car market conditions being experienced in 2018, performance within the new car market can be outside of the direct control of the manufacturer and those of your franchise partners; in buoyant markets volumes of stock and pricing are set by the manufacturer, as they are in challenging markets, (when driven either by product life cycles, economic conditions or both).
There is no doubt that there are many challenges that all manufacturers face in the new car market but the foundations of your long term success in the new car market are in your own hands as they lie directly in your success in the used car market.
The used car market in the UK is still over 3 times the size of the new car market and it will be no coincidence that within franchise dealer networks, the businesses that are most successful at new car retailing are also the ones that are most successful at used car retailing. They will be achieving all of the KPI’s set by the manufacturer, adhering to all the standards required, they are model businesses that work with you and support everything that the manufacturer is trying to achieve.
In reality though, all the dealers in your network want to aspire to this model, they did not invest in the franchise to not succeed, it’s just that at the core of their success is the business that the manufacturer can’t control, in the way that you can control the new car business.
Although manufacturers can aid success, unfortunately the used car business is not one that can be leveraged and controlled so much by manufacturer initiatives. It is the tertiary and potentially most profitable part of the businesses making up your franchise dealer network, but it is also the business where there is no agreed level for volumes of stock, to any specific model mix and of course all the stock acquired for this business will need varying levels of preparation in order to meet the stipulations set by the underwriters of the manufacturer’s warranty.
But the benefits to the manufacturer of a strong dealer network that is successful in the retailing of used cars are numerous, everything from:
- Increased new car profitability for both the manufacturer and their franchise dealer network.
- Increased overall profitability of the dealer network, resulting in a financially stronger and more resilient dealer network.
- The ability to increase levels of part exchanges, therefore more new car business.
- The maintaining of core standards set by the manufacturer.
- Larger customer bases presenting the opportunity to take more customers on the journey form used car to new car ownership.
- Increased opportunities for repeat sales and increased levels of margin retention.
- Increased levels of customer loyalty to the brand.
- The control and protection of residual values.
- More competitive financial packages and reducing costs of ownership for customers.
- More control over the used car and new car vehicle parks.
- Protection of the brand.
- A business that is not vulnerable to the aggressive business models attacking the established new and used car retailing business models.
However, to get to here and enjoy these benefits, your dealer network will need to meet head-on, and take responsibility for, the challenges presented by the used car market place and making this task more challenging will be the inconvenient truth that every dealer within your network will be at different stages in their used car development.
On top of all this, there is the problem of the availability of the used car professionals required at both manufacturer and franchised dealer level, those with the skills-sets required to ensure that your used car success can be achieved. This subject was covered in our last post; Do Successful Used Car Professionals Exist For Manufacturers and our advice would be to not underestimate the task involved here. We will not repeat the advice contained within the article here but for those who didn’t see it, please follow the link above to the original article on our Used Car Business Development Blog, because in the rush for genuine used car professionals, (those with the talent and skills-sets required), you don’t want to get left behind. It is ironic that the professionals you most need now, may be those most ignored in the past and, as a whole, the sector is hugely under supplied in these professionals.
For those struggling to find these professionals, (and there will be many), we sympathise because 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 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 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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