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 also 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 party businesses into Continental European markets, as used car markets there continue to grow, 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 and now servicing 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 running regular national TV advertising campaigns, advising customers that they can supply their new car for a cheaper price 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. 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 and protecting your individual business? 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. Those that 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.
If you don’t grasp the unique opportunity that the used car business offers franchised dealer networks, then there is a danger that the industry continues down its current path, where some elements of the new car purchasing and servicing process are now being targeted by third partner technology entrepreneurs, the likes of We Buy Any Car and Carwow, to name just a few. This is dangerous, as your franchised dealership is now not being seen as a “1 Stop Shop” by customers, therefore you are losing control over the customer, because these businesses are reacting to changes in consumer behaviour and becoming very powerful in your market place; something I have covered in my previous articles below;
Internet New Car Sales 2, Judgement Day!
“Wow An Internet Company Got Me Over £5,000:00 Off My New Car!”
On top of this there is a danger, (in a world where customers have immediate market information available on their smart phones regarding the cheapest price to supply their new car and then to service it once the warranty and any servicing pack has expired), that you will have a business trading in an environment where you have lost control over new car pricing and therefore margin retention, as well as the lucrative servicing market once the warranty and servicing packages have expired.
If you don’t see the danger in this situation, just run your budgets again on this basis and decide whether or not you would be rushing to invest in a business with these sorts of returns? The only advantage you have is in control of the new car vehicle park when it returns from the first period of ownership and that can be pivotal in the process building used car operations that are successful at retailing used cars and therefore supporting your business and the manufacturer you represent.
This will result in a more resilient, profitable and therefore successful business which 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 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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