We’ve been reading a lot of articles and statements from senior professionals in the automotive sector recently, the last of which was in This Is Money and concerned one of the country’s largest dealer groups and their associated businesses.
It was an interesting article as it highlighted 25% drops in the share value in a single morning, due to a myriad of reasons and across all of its businesses, which interestingly does include an independent used car supermarket operation, which by all accounts is suffering significant and mounting losses.
More significantly the article quoted those responsible for the running of this motoring goliath as saying that they now expect to make just a small annual loss during 2019, hoping to have turned round the dire performance in the first half of this year; blaming this on a combination of internal operational challenges and tough market conditions!
This comes off the back of many announcements by senior Automotive Sector professionals to cover over the cracks of under achievement and failure, many of which have blamed tough market conditions and “Uncertainty Regarding Brexit;” Honda aside who went out of their way to state that the reasons for closing their plant in Swindon had nothing to do with Brexit.
Now as business owners ourselves we wonder about these statements and the excuses for getting things so catastrophically wrong; for sure trading conditions are challenging across our many business interests, which include used car business development consultancy and training, specialist used car stock acquisitions companies and used car retailing, but in reality if you are blaming Brexit or the challenging conditions for failure, then you are more than likely hiding from the unpalatable truth.
And to be blunt, the truth is the failure to prepare for challenging conditions and to invest in your staff, in order to ensure that you can take advantage of market challenges, not be beaten down by them. The truth is that if you have no prospecting plan, no initiatives to ensure that your sales professionals are driving customers to the business, no initiatives to ensure that your staff and therefore your businesses are always finding the answers to overcome the trading challenges, then you have NO STRATEGY.
The problem for the industry is not the challenging trading conditions, because in reality this is when the opportunities are at their greatest, no it is in the lack of investment in staff and a lack of awareness/experience required for the new businesses being opened up. Having read that the used car supermarket operation was really struggling, we were surprised at first reading that a business that has a continual opportunity to grow, if run effectively, was proving to be such a negative drag.
But statements like this go to the very heart of the problems for many in the Automotive Sector and although we were not present when the strategy and investment decisions were made, we bet it went something like this;
- Why are we sending all our part exchanges to auction, we should be retailing them ourselves!
- OK, well let’s open up some used car centres across the country and send all the part exchanges there to retail them!
- Great!,,, Agreed!,,, Ker Ching!
Now these statements and the rationale behind them are correct in principal, the only reason why this will not be working, is a lack of experience and ability in the target market place. There can be a misguided perception that if you put cars on display and under the roof of a specialist used car centre, then the customers will come running into the arms of the waiting sales team, and this is where the strategy comes falling down!
It’s not that this used car trading model doesn’t work, it is that it is a very specialist business, very different to the new car franchise business, and the challenge of getting customers to the business is never ending; the ethos of “Build It And They Will Come” is over and this business can only survive, (just like any other business), if the right people are in the pivotal roles within the business.
If they are not available and few are, (as covered in our recent article; Do Successful Used Car Professionals Exist For Franchised Dealers), then there must be the training and development programmes within PLC’s to ensure that used car professionals can be developed, otherwise there is a danger that those running the sectors big PLC’s will continue to close businesses like this, (businesses that should be working and delivering fantastic returns), instead of training and developing the professionals required and ensuring that the business model succeeds.
Dare we say it? We think the real problem here is one of arrogance and not realising just how far the competition have driven forward some automotive business models, whilst you weren’t looking. There is no doubt that the idea was, and remains sound, it is in the execution that it has all gone wrong and, as much as we have no insight into the internal workings of this business, we would caution that now is the time to be investing in the right people, not cutting costs and seeing what happens; more of the same will only deliver more of the same!
But we are guessing that time will probably be of the essence here; once the beast is built it can be become unwieldy and impossible to control very quickly, but one thing we do know is that the staff employed will be at the very heart of the performance of this business, from those at the bottom to those at the very top. To succeed from here they will need to be developed and have an in-depth understanding of a market place that bares no relation to the new car business, from where they have probably come.
But for those considering a move into the lucrative and profitable used car business model, or indeed any used car retailing model, do not let the mistakes of others put you off from entering the most profitable of market opportunities. However, it would be our recommendation that you avoid the mistakes of others and never underestimate the challenges involved.
Whether it be a standalone used car business or one to support your new car trading model, the financial benefits of a successful used car business are unparalleled, as are the operational challenges that must be met, if you are to succeed, 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 business 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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