We make no apologies for the confrontational tone in the heading of this article because this statement goes to the very heart of why so many franchise dealers struggle to grow successful used car operations, and just at the time when they are most needed to support both the new car business model of the manufacturer as well as to secure the financial resilience of their franchise dealership; and worse than this, the decisions of most to have all auction policies came down to two things, lack of trust in their staff employed and laziness!
We remember very well being told that this was the brave new world when the big franchise dealer groups began implementing this policy in the mid to late 1990’s, but it is only during the last 5 – 10 years that the folly of this policy became apparent, in terms of the damage this was going to do to the long term success of the traditional franchise dealer network.
But let’s go back to the mid 1990’s to try and understand what happened and how this policy was first sold to unsuspecting franchise dealers because in many ways, it was a disruption campaign of genius by the auction companies, who went right over the heads of the operational personnel at the businesses direct to the accountants and those who had little idea of how a business was run on a day to day basis; in fact we can imagine their pitch now, it would’ve gone something like this;
- Listen, you don’t want all the hassle of employing people to dispose of all your horrible non-retail part exchanges and trade cars.
- No! Why would you when we will send a transporter to your business once a week, collect all your non-retail part exchanges and trade vehicles for you, valet them and then put them in front of the trade and members of the public, to achieve a higher price for them than you would’ve achieved in the trade.
- And on top of all this, you don’t need to entertain all these “Horrible Types” from our industry, these “Ruffians” from the used car market who bring the tone of the business down! Oh no, you are above all this as new car franchised dealers, do you really want to bring the tone of your business down in this way?
And so it began, the exploiting of the lack of trust, (un-substantiated), by the auction companies and the selling of the one company fixes all problems solution by the auction companies; and unbelievably the “Men in Suits” fell for it and so the damage began and as we now review the trading landscape, I wonder whether everyone can survive in the new world, the world delivered to them on a plate by the previous misguided generation?
The decisions made back in the mid to late 1990’s caused an exodus of talent from franchise dealer networks and now we live in a world where vast proportions of franchise dealer networks are completely reliant on a new car sales, service and parts business model that is being attacked by disruptors and independents, and is also running out of the “Steam” injected into the new car trading model during the financial crises, by low interest rates and the rush to purchase new cars on PCP agreements from consumers.
Worse than this, we now live in a world where vast swathes of franchise dealer networks have no used car professionals employed within their businesses, so they are totally reliant on auctions for the valuation of part exchanges and have no ability to begin to build the only business that can save them, in the world of fracturing new car markets and dwindling new car returns; a successful and profitable used car operation. And this point must not be lost, because expecting you, as the manufacturer, to increase new car margins to keep the businesses of your franchise partners both profitable and growing just isn’t going to happen, it would be naive in the extreme to expect otherwise.
No the reality for most is that they are now in a battle to build successful used car operations and secure used car market share, as this is the only way that your new car trading model and their financial security can be assured. But there is a major problem because to have a successful used car operation you need many skills, but first of these is the ability to be able to acquire a used car stock holding; and this is where the all auction policies of the past come back to haunt franchise dealer networks.
Not only did they dispense with used car professionals and all used car training and development courses, (at both franchise dealer group and manufacturer level), thus leaving themselves bereft of genuinely capable used car professionals, (a subject we covered in our recent post Do Successful Used Car Professionals Exist For Franchised Dealers?) but they also cut ties with the trade and the ability to build reciprocal relationships of supply; and now that franchise dealers need both the expertise and the used car stock, the majority have no idea how to get the process of developing used car retailing strategies under way.
And let’s take used car stock acquisition as a case in point, and by used car stock acquisition I don’t mean your franchise partners ringing you, (as the manufacturer), purchasing a hundred 6 month old cars and then putting their feet up, because that is not effective used car stock acquisition, that is purchasing, en masse, a profile of used car stock in direct competition with their struggling new car business, which is fine in premium markets and those involving long new car lead times; not a trading environment being enjoyed by many reading this article.
Everyone reading this article and/or returning to expanding their used car stock acquisition initiatives, should be in no doubt just how challenging building and retaining used car stock levels is going to be; it is the challenge that will never go away, as nothing can be taken for granted year on year, when it comes to your used car stock holding.
In fact this element of used car retailing strategy has become so important and challenging that it prompted our decision to make our Used Car Stock Acquisition Master Class And Mentoring Programme, (from our complete programme of used car business development and consultancy), available as a standalone consultancy offering, something we launched last month.
But we warn everyone now; this is not a one trick fix that will last forever, we are building these programmes now and, (to keep ahead of the competition), we will continue to push boundaries and to raise the bar. With more time and expertise being devoted to this area of the used car business than any other, (because without used car stock, you will have no business), this will be the “White Heat” area of the used car business for years to come.
This process is already a full time job and for those relying on an increasing level of part exchanges and ex demos to fuel your used car growth, well those days are over, because suddenly part exchanges will not be appearing, because we can show one of your competitors, someone who maybe on our Used Car Stock Acquisition Master Class And Mentoring Programme, how to ensure that the part exchange you were expecting never arrives at your dealership, on the day the new car is to be collected.
Those wanting to discuss our Used Car Stock Acquisition Master Class And Mentoring Programme and how we can build the used car stock acquisition programmes required, to ensure that you survive whilst others don’t, please feel free to contact one of our Used Car Business Development Directors in the strictest confidence; 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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