Used Car Retailing?,,,,, How Hard Can It Be?,,,,(UK Dealer Article)

Well Pretty Hard As It Turns Out!,,,, 

Following on from our recent articles below, we thought now was the time to explore the recent closures of some used car businesses, especially those leveraging the “Used Car Supermarket Model.” 

Our Used Car Business Development Advice For Franchised Dealers In 2020! 

Looking To Grow Used Car Sales?,,,, Beware The “One Trick Pony” Solution! 

Now whilst doing this it is important to say that every business closure is a tragedy for those involved and the purpose of this article is not to rake over the embers of these failures but to explore why they have happened and to learn the lessons moving forward, because in failures are hidden the most important and valuable lessons, especially for franchised dealers; those looking to grow used car retailing. 

Of all the businesses suffering and closing down at the moment the one we wanted to look at, (without naming names because there is no need), is a network of used car supermarkets owned by one of the biggest dealer groups in the UK; why? Well, because we think it offers the most valuable lessons to franchised dealers. Now as we have said before, we are not privy to any financial or operational information on this business, (if they were a customer of ours we would not be mentioning them), so we are writing this article as used car business development experts and surmising; something we can do and because we are baffled, because on paper these used car supermarkets should have had an unassailable trading advantage. 

And it is such a valuable lesson because as we have seen, an unassailable trading advantage doesn’t always translate into success; why? Well before we get to the “Why” let’s look at the trading advantages that this business appeared to have; 

• Owned by a PLC owning vast swathes of franchise dealer networks in the UK. 
• Prime sites in large conurbations. 
• We assume, adequate funding. 
• Well-funded marketing and advertising campaigns. 
• Access to group used car stock holdings and part exchanges. 
• Huge on-line presence. 

So with all these trading advantages just how did we end up in a situation where the PLC owning these businesses made a statement advising that they anticipated closing 22 of the 34 businesses amid mounting losses? 

Well there can be many reasons, some of which we will explore in this article, but at the heart of all the mistakes that were made will be the people tasked with making the investment decisions and then running these businesses, and this goes right back to what we have been warning about for years; the lack of investment in used car professionals by both manufacturers and the PLC’s owning franchise dealer networks. 

Listen; it might be that the “Used Car Supermarket” trading model has run its course, (we suspect not), or probably just like many other businesses, this model has become a highly competitive and specialised business and that the real folly was in expecting it to work, when no investment was made in the professionals required to plan, launch and then drive these businesses to success. The “Used Car Supermarket” model and business is a completely different used car business to run, compared to a used car business attached to a franchised dealership; which will probably be the vast majority of the experience that the associated company have in running used car businesses. When you have no franchise attached to your used car business, you are in effect running marketing and advertising business first; and the first hurdle you must overcome, so therefore the first question to be answered must be; “Why Would A Customer Visit This Business To Buy Their Next Car?” 

When you have no new car franchise or associated aftersales operation to leverage, running awareness campaigns and used car businesses that successfully answer this question, (first and foremost), will breed a sales and operational mind-set totally different from that required to grow used car operations assigned to franchise dealerships. Our worry about what went wrong for these businesses is encapsulated in the “Well How Hard Can It Be” mind-set and attitude, where big investment decisions leveraging lots of advantages, (except the right people), get made and there is an expectancy that you can succeed in market place when you have little idea of the challenges involved and what it takes to succeed in that market place. 

However, the fact that they are only closing 22 of the 34 businesses suggests that in some locations the business model is still viable, but we will have to wait and see. So in both advising franchised dealers and in commenting on the outcome, our initial questions to the owners of these businesses would be as follows; 

• This is a highly specialised price competitive sector of the used car market; had the individuals making these investment decisions had any success and experience running similar businesses? 
• What was the USP, the reason why a customer should go to these businesses and buy their next car? 
• Did no one realise and account for the fact that they may end up being competitors of their existing franchised dealer based used car businesses? 
• Why was the stock going to these businesses not being retailed by the associated franchised dealer businesses? 
• Whose used car purchasing solution were they solving? 
• How was all the above translated into their marketing and advertising messages? 
• From the outside it appeared that these businesses traded from sites with high overheads; who wrote the budget and cash flow forecasts for these businesses? Who built the business development and sales teams tasked with delivering success for these used car businesses? 

Now in the answers to these questions is a recurring theme and therefore the most valuable lesson for franchised dealers in the UK; People! In fact The Right People! In many ways the PLC owning these businesses had all the things in place to succeed or, to at the very least, avoid the decision to go down this path, but everything goes back to the people making decisions and then those then tasked to deliver. We fear that the real problem here was both, a lack of the right people and the over reliance on technology to drive business success, and this trading and investment environment is proving to be “Toxic” for the used car sector at the moment. 

Selling used cars on price, (and therefore tight margins), from sites with high overheads and no franchise model to leverage is not, (surprise-surprise), the business to be run by those who have no experience in running these businesses. It may be that at inception the business case just did not stack up in the chosen locations so the first important lesson is; what was the experience of the individuals who made the initial business case? Was it even viable? 

And on the subject of people; you can have the best sites, great technology and big budgets for marketing, but our last question above is just as important as the first; what was the experience level of the sales teams running these businesses? We ask this because this will be paramount; even if the business case made sense up to this point, all the site locations, technology and marketing budget advantages you have will not drive sales in this or any used car business, it will only drive opportunities to your door. 

It takes the right people with the right training and experience, (and by the way very rarely found within franchise dealer networks), to drive this business model to success! Maybe, just maybe everything made sense, right up to the people involved and their experience? We will never know and in reality it doesn’t matter that we do. What matters for franchised dealers is that when they are looking to build used car retailing they stop “Rinsing and Repeating” the mistakes of the past and of others! 

Life has a habit of giving us all lessons wrapped up in a mistake and the used car sector is no different. The most damaging thing that any franchised dealers looking to grow used car retailing can do now, is to not learn from these mistakes; mistakes handed to you on a plate by someone else! Our advice to all franchised dealers looking to grow used car retailing have been discussed many times in our used car business development articles, but in summary would be; 

• Stop trying to build used car retailing on the cheap! 
• If you are not a used car professional, seek the best advice from the most experienced used car professionals you can afford! 
• Do not over rely on technology; technology is a tool to be used by professionals who know how to get the most from it! 
• Stop looking for the Quick Fix! Like everything success in the used car market will involve a lot of hard work! 
• Develop your used car personnel succession plan! 
• Choose your used car business development partners and mentors wisely! 
• Stop looking at the new car business and the used car business in the same light! 

Hopefully reading this article will make senior professionals based at franchised dealers think about used car retailing and to take the right steps moving forward; and to appreciate that the right people will lie at the heart of any used car retailing success that you require. Unfortunately with the under investment in used car business development and personnel training over the last 10 years, the professionals required to develop the used car retailing models you require are in very short supply at both manufacturers and within franchised dealer networks. And the inconvenient truth is that you will all need these professionals, and soon, because successful used car retailing is going to be required to underpin your growth ambitions, and for many of you there will be no proven and experienced used car professionals to draw upon. 

Now 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 and personnel training 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 and franchised dealer networks. For an exploratory conversation regarding our services and how we can develop bespoke used car business development consultancy and personnel training 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.