In a year when the sector has seen many challenges, especially those associated with new car sales volumes, it has been interesting to see just how many more manufacturers are looking to the used car performance levels within their own networks, having grasped just how important successful used car businesses are going to be as we enter 2019 and beyond.
There is no doubt that manufacturers are correct in this assumption and we will not use this article to go over the old ground of reconfirming just why successful franchised used car networks are so important to both manufacturers and their franchise partners; besides these critical business arguments have already been covered in our recent article; Want To Grow Your New Car Business? Never Take Your Eye Off Your Used Car Business as well as in many more articles that can all been found on our Used Car Business Development Blog.
Having been involved in strategic planning on behalf of many manufacturers looking to assure their future used car success over the course of the last 12 months, I thought it worthwhile discussing this subject more openly with our manufacturer based audience. Now it is true to say that the issues discussed will affect every manufacturer in different ways, but it is also true that you all face the same problems and long term planning obstacles and in our opinion, only those investing in their long term success in the used car market can now secure their futures and those of their franchise partners.
And this last point is important; I will not name names or discuss my observations from travelling the country and throughout Europe in specific detail, but from the amount of shared franchise sites I see now, some manufacturers are obviously having problems finding the investment required from the institutionalised investors and larger dealer groups, in order to run a network of independent sites, and this is not a healthy sign either for the franchise owners or the manufacturers involved.
In many cases these are the up and coming new car franchises that are perhaps dealing with the franchise network they initially secured, in order to first have a presence in the UK market and developing franchise networks can, of course, be a challenge. Either way I predict that for manufacturers leading with just the new car, servicing and warranty supporting franchise model, the future will be difficult for everyone other than the already established successful new car manufacturers; many of whom though are now looking at their used car model and how they support their franchise networks in developing used car businesses.
So for those manufacturers looking to support and promote successful franchised used car dealer networks, just what is the inconvenient truth? Well in truth there are many so I have included a brief selection of the used car business development hurdles below which will hopefully help people to avoid the much seen short term used car strategic decisions of the past, being made again, because unfortunately there is no easy answer or short cut to used car success! It is just hard work!
The Model: In terms of a process and the daily operational procedures, successful used car retailing is very much “At Odds” with new car retailing. It is best summed up as thus; “Taking a very large sum of someone else’s money, investing it in a depreciating asset type and dealing with people in a very small window of profit opportunity!” This is the polar opposite of the new car retailing model.
The People: As consumer behaviour has changed due to busier lives and advances in technology there has been a rush by some manufacturers, (quite understandably), to embrace technology and to use it to control more of the new car sales process. This model has proven to be successful and the profile of staff employed to fulfill this selling model is cheaper to invest in because the expertise required is not as all-embracing.
Unfortunately though the skill-sets involved in this role are very different to those of the successful used car sales professional, and the default appears to be to try and combine the 2 roles in the selling process at businesses which is doomed to fail, as a long term strategy, in terms of achieving used car growth.
The Used Car Stock Holding: The ability of any used car operation to grow is directly linked to its ability to acquire used car stock in both the correct profile and in enough numbers, (on a continual basis), to feed both the ambition and the potential. Unfortunately used car stock acquisition is now one of the most competitive, specialised and skilled roles in the industry; the harsh reality is that if you do not know how to secure your future used car stock holding, you are not going to be able to grow your used car business.
Training and Development: As the new car market has taken advantage of both cheap interest rates and the embracing of PCP agreements by new car consumers, many manufacturers no longer saw the need to invest in the long term training and development of used car professionals. Many manufacturers and large dealer groups appeared to think that there would no longer be a need for them to train and develop used car professionals and this lack of investment and forward thinking, will leave many behind the curve when it comes to building their used car businesses.
The Competition: Whilst the new car market has been changing, in line with the points above, the used car market has also been evolving and in reality with successful independent used car specialists and used car volume retailing businesses now common place throughout the country, the most successful retailers of the used car product for many of you reading this article, will be independent businesses outside of your franchise dealer network.
In fact for some premium, specialised and supercar manufacturers, the retailing and pricing of your product in the used car market is now out of your hands and in the hands of very professional and successful independent specialists, who are setting residual values and the bar of expectancy with the customers then purchasing your product, once it has entered the used car market. For many of you reading this article, there is years of much specialised hard work required to redress this.
Short Term Thinking: This is a “Double Edged Sword” for many of you reading this article and the question I would ask of you all, as well as the large dealer groups investing in your franchises is this; “Are You Dressing Your Business or Building Your Business?” This is important and I add the caveat that it is not for me to tell you what to do but in terms of the development of your used car business, there is a huge difference between the two. If all you are concerned about is a short term increase in performance, (for whatever reason), then that is a totally different approach to that of investing in the foundations of your business in order to ensure your continued future used car success. Unfortunately this is a longer and far more involved journey of used car business development, but the only one that will secure your long term success.
However, all is not lost because there are many advantages that can be leveraged, that only you and your franchise dealer networks can access, but it will require some long term strategic planning on behalf of you and your franchise dealer networks.
In the trading conditions of today it is an inconvenient truth that manufacturers will only be able to develop strong and resilient franchise dealer networks, those capable of supporting their new and used car aspirations, and free from high levels of manufacturer support and subsidies, if they invest in and promote the expansion of approved used car business development programmes, those that will be required to ensure that a network of successful used car operations can be built.
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 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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