Which Automotive Manufacturers Will Be Ready For The New Trading Conditions?

We’re sure that we will all agree that there are many far more important things going on in the world at the moment, other than the world of commerce, (the automotive industry included), including many personal and tragic stories; and sadly the whole situation is still to play out. However alongside this evolving dynamic is the responsibility those owning and running automotive businesses have to themselves, their families and to those in their employ, to leadership and making the tough calls moving forward, and these will be difficult and highly personal decisions with no blue print of past trading experience to refer to. 

Difficult because as much as we all know how important it will be for life to begin to get back to normal, we are all having to plan for a trading environment that is unknown. All the predictability of the past has gone out of the window and we all find ourselves trying to prepare for a trading environment which will be unlike anything we have experienced in the past. So we live in a world of many far ranging opinions, not all of which can be right, and many of those being paid the big money to make the big decisions will be wrong, but we would remind everyone in those positions that “Command is a Lonely Game!” 

In our last article; The Automotive Sectors 3 Most Pressing Issues Post The Lockdown? We “Nailed Our Colours To The Mast” and discussed our predictions regarding the most important issues facing automotive manufacturers and their franchise partners, in terms of being ready for when the doors of businesses open again; whether that be on virtual basis and/or a physical basis. 

We feel that the current situation has caused enough damage for the dye to now be cast, especially as the duration of the lock-down continues to evolve and lengthen with subtle announcements like the chancellor’s announcement to extend the furlough programme of support until the end of June, (something we’re sure wouldn’t be happening if things were going to get back to a more normal footing before then), which although brought some much needed, (if subtle), clarity still makes planning for the trading landscape of the future very challenging. 

And we all have this challenge, (us included), but regardless of the manufacturer you represent you all have the major challenge of returning liquidity to your business, because without liquidity and the oxygen of cash flow your business will be driven into receivership. However, the challenge of returning liquidity to your franchise dealer network, (if you are the manufacturer), or your business, (if you are the franchise holder), will differ from manufacturer to manufacturer, in terms of the processes and initiatives that are going to be involved; and the consequences of getting the planning for this process wrong will be severe. 

Although you will all be trading in different markets, to customers from differing socio-economic groupings and involving different “Supply and Demand” drivers, you all have the major challenge of returning liquidity to your business; so we would recommend that you start asking yourselves these questions ASAP: • There will be money out there but can you attract it? 

• Do you have the up to date and accurate customer and enquiry data required? 
• Do you have the trade networks required? 
• Can you afford to implement the pricing strategies required to induce used car sales and return liquidity, in both retail and trade markets? 
• Do you know how to use other people’s money to generate sales and therefore cash flow for your business? 
• Do you have the team and the expertise right now to be already preparing for the trading environment? 

Do you really have sales professionals in your employ, those capable of operating successfully in the likely trading conditions? Although the trading conditions you will be entering will be heavily determined by the brand you represent sadly, for many of you reading this, your options for returning liquidity to your business will be just an unedifying “Race To The Bottom” on price, combined with the ability of “Your” sales team to secure what business is out there before your competitors do. 

For others it will be a more nuanced and highly specialised process, but for everyone reading this the key to returning liquidity to your business will be the skills you possess and the success you can then enjoy in the used car market; and by the used car market we include all used car trading disciplines from acquisitions, to retailing, to stock disposal. Now a word of warning; every process involved in adhering to an all-auction disposal policy is not a valuable skill associated with stock disposal, so for many there is much work to do because relying on the your all –auction disposal policy and the associated auction house to return liquidity to your business will be the automotive business equivalent of “Sleeping Whilst Rome Burns!” 

So there is much work to be done at the moment and all businesses not acting now and getting “Ready” are likely to find it impossible to keep up with the pace of evolution in the used car market, once the doors of businesses open again; and we focus on the used car market because this will be vital for both manufacturers and their franchise holders. As the manufacturer you must appreciate that your franchise holders will have just one all-encompassing issue upon returning to their business and we would recommend that you are sympathetic to this, if you want to retain your franchise dealer network? 

The number 1 priority for franchise holders when returning liquidity to their business, will be the amount of money invested in used car stock holdings and the likely losses involved; this will, (or SHOULD!), be the number 1 pressing issue for those owning and/or running franchised dealerships, because the money invested in used car stock holdings will be “Their Money.” Until cash can be returned to businesses via used car retailing and stock disposal the truth is that many will not have the liquidity to be able to retail new cars for a while, as they may not have the capacity to write out a cheque for a part exchange; not knowing what the market value will be and who will return cash for the car concerned, because the auctions are closed and won’t be working and they all have no skills at stock disposal and/or the trade networks required to continue to operate. 

So as much as the damage being reaped on all commodities markets by the Corona Virus is like nothing anyone alive today has seen, help and advice is at hand; we have traded through recessions and market impacting events including the foot and mouth outbreak, the fuel crisis, the events surrounding 9-11 and the financial crisis, for over 30 years, and we know what will be required in order to be ready and to return liquidity to your business; but most importantly we understand that this process must begin now. 

Realising how important the operational issue of returning liquidity to businesses will be, we have made the decision to make ourselves available for a free conference call to anyone, whether you are a senior member of personnel based at a manufacturer and/or anyone owning or running a franchised dealership or group. During this call we will discuss your business, audit your current procedures effecting your ability to return liquidity to your business and discuss the skills and operational procedures that are going to be required. 

If you would like to take advantage of the opportunity to discuss this with proven used car professionals, then please feel free to contact either Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com in the first instance, in order to arrange a no obligation exploratory discussion. 

Alternatively please feel free to call me on 07796 260261. 

For more information about our services please visit our website at www.autoformance.com 

I look forward to hearing from you. 

Andrew Banning. 
Used Car Business Development Director.

The Automotive Sectors 3 Most Pressing Issues Post The Lock-down?

Liquidity, Liquidity, Liquidity! 

Well automotive manufacturers and their franchise partners are going to face some hefty challenges when the doors of businesses open again, but the nature of these challenges will change from manufacturer to manufacturer, depending on the desirability of their new car product, how they see their future of new car retailing and their long term requirement for franchised dealer networks, in the guise that we are used to. 

Now to be fair to all those who have started reading this article, before we go on, we think it only right to state the direction of travel for this article, in terms of our opinions, because with a market as volatile as the one we are likely to return to, your thoughts as to how the market will evolve are going to be pivotal to the decisions you then make. We have witnessed many opinions of late and it is becoming apparent that there are polar opposite trains of thought appearing, so our article can only be aligned to those of you preparing for how we see the market evolving. 

Although nuanced by the desirability of you product, two of the most important questions at the foundation of your thinking must be surrounding used car values and new car demand, because we have to write this article around what we feel will emerge. Most importantly we think that apart from a few highly specialised and low volume products, we DO NOT feel that the value of used car stock holdings will go up, nor do we feel there will be tremendous pent up new car demand. 

Before the pandemic struck 95% of the people reading this article were involved in retailing, (you note that we say “Retailing” here and not “Selling;”- none of you were “Selling”), new cars from a combined approach of discounting and making stock freely available to independent third party tech entrepreneurs, who were then only going on to undercut your strategy for giving new cars away. You also staffed your businesses in a way that left them with no genuinely successful sales professionals and/or used car professionals, so 95% of you weren’t used car retailers, you couldn’t be, in reality you were only a business that disposed of part exchanges and ex-demos. 

So the trading reality of the future for 95% of you is that you have the following drivers in the used car market effecting values; 

• No skills in stock disposal or the required trade networks to release funds and return liquidity. 

• £Million’s worth of used car stock at auction houses depreciating at a staggering rate and going nowhere because they are shut! Now we have commented on the trading lunacy of over relying on auction houses many times, most recently in our articles; Your All Auction Policy?,,,,, I Bet It Seemed Like A Good Idea At The Time? and The Madness Of “All-Auction” Disposal Policies And The Cost That Will Be Paid! 

• Interesting to note the We Buy Any Car has also ceased operations for the time being. 

• New cars supplied on PCP agreements to return where the guaranteed residual value, (set when the car was sold, probably in 2017), will be markedly above the new market reality; leaving cash strapped consumers with little or no equity to move forward, unwilling to purchase their current car, so likely to return the car and walk away and purchase elsewhere. This will no doubt further flood the used car market with supply. To put this in to perspective, during March to May in 2017, 900,678 new cars were registered in the UK; that will result in approximately 765,000 cars returning at the end of finance agreements during the same period this year. 

• Franchised dealer networks with too many weak links in the chain having to return liquidity to their business, in order to survive, therefore entering a very expensive game of “Who Blinks First” when it comes to used car pricing. • A consumer for whom many will have lost jobs, businesses and/or livelihoods, many of which will take years to replenish; so therefore unlikely to see purchasing a car as top of their priority list. 

• Manufacturer new car initiatives to kick start new car retailing and the effect this will have on used car pricing. The unfortunate thing about a market dominated by the PCP agreement is that the monthly rental figure/cost of ownership for a used car must always be cheaper than that of a new car; the cheaper the new car gets in real terms, the more the value of used car stock holdings are driven down. 

Now we can promise you all; having traded and built successful businesses in many commodities markets there are 2 very important golden rules effecting pricing. The first is that “Supply and Demand” is always the governing driver for pricing and the second is that any commodity, (and a used car is no different), is only worth as much as somebody is prepared to pay. So taking all the above into account, (apart from the very odd exception), how on earth can you ever think that used car values will be going up when the doors of franchised dealerships open again? 

And please can no one else quote any figures from the Chinese new car market regarding surging new car demand! Surely the one thing the pandemic has taught the world is that there are lies, damned lies and Chinese state statistics! 

So with all this in mind let us proceed. With some manufacturers having already made the decision to drastically reduce the size of their franchise dealer networks prior to the lockdown, (Honda by over a third in the UK), it will be interesting to watch who decides to do what, in terms of their future for new car retailing; because essentially there are only really 1 of 2 options to take. 

You will either have to, (in some cases), continue down the path of leveraging technology over professionals, what we call the “Race to the Bottom” on price model and the long term preserve of those with very deep pockets; or you stop this soulless journey with many pitfalls, (provided you have the cache attached to your product and the sales professionals required), and return to the model of blending the opportunities to do business generating and recording advantages of technology with recruiting and developing the best sales and management professionals. 

However, many reading this will have little choice when it comes to this decision; for many their trading models of the past combined with the lack of cache attached to their product, means that the die is already cast. But regardless of which route you are taking all manufacturers in the UK have the same pressing and major operational issue when they open the doors for business again; 

How Do You Return Liquidity To Your Franchise Partners So They Can Return To New Car Retailing? 

It is important to remember that just because the doors of your business are open again, it does not mean that customers will be walking through them. In reality nobody, (ourselves included), knows how the trading landscape will look when we return but we know for certain that liquidity will be the name of the game when businesses open again; after all cash flow is the oxygen of business and without it you are going under. 

Although highly nuanced depending on the manufacturer and the brand concerned, in a market awash with stock and likely to be light on consumer demand, the critical “Supply and Demand” ratio that is at the profitable foundations of all commodities markets, will all be in the customers favour, and those manufacturers with no cache attached to their product and without the professionals required, will have no option other than to enter a “Race to the Bottom” on price; and quickly! 

Now this is going to affect some manufacturers more than others and for sure there will be winners and losers but they will be determined by the speed that liquidity can be returned to their businesses and the socio-demographic of their customer base, (and how soon they can be encouraged to return to purchasing once more); and the consumer is vital in all this because too many manufacturers and their franchised partners became a “One Trick Pony” when it came to liquidity and stock disposal; and sadly for many, their “One Trick Pony” is in the knackers yard. 

Too many of you became far too reliant on the following operational procedures for stock liquidation and disposals policies: Auctions! And now that auctions are shut, awash with stock and with no demand, how can they be the answer? Well they can’t because the same market dynamic applies; customers need to return to the businesses acquiring their used car stock from auctions, in order for auctions to sell cars and return you your money and this will not be happening either, for all the reasons listed above; those that are affecting your business. 

This is not the time for cheap points but anyone who follows our blog or who reads our content articles will know that we have NEVER recommended all-auction disposal policies, because it is this policy that has left franchised dealerships without the skills, the professionals and the trade networks required in order to have traded more profitably in the past and to be capable of returning liquidity to businesses again when they open. If the automotive sector has learned anything from the pandemic it must include the determination to NEVER return to all-auction disposal policies again and to invest in the skills required to ensure that they return to more rounded and successful trading models. 

So what’s the answer? Well this will be determined by the manufacturer, their franchised dealer networks, the decisions they make at the outset and the brand involved. For some there is no dressing it up, just accepting that it’s all about timing, price and the ability of your sales team; this will not be the time to be waiting for enquiries, this will be the time to roll your sleeves up and knowing how to “Prospect” and “Sell!” 

Now the ability to be able to “Prospect” and “Sell” will be required for every manufacturer and their franchise partners but some will have far more favourable market dynamics to lean upon, due to holding different positions within the market, higher levels of cache, being an aspiration brand and lower levels of unsold new car product. But this will not be many of you and even these businesses will probably be afflicted by the wrong stock disposal policies, no stock disposal skills or associated networks, and a lack of genuinely successful sales professionals; those who can operate in the likely market conditions. 

So regardless of the stock holding you are returning to, cash is the oxygen of business, and without it you will go under! Those dealers “Grasping the Nettle” early and who take the long term pragmatic view on pricing and ensuring they have access to the professionals required to get the job done, will stand a chance of being in business after what is likely to be a dramatic first 3 - 6 months of trading. 

Unfortunately this is likely to involve some heavy losses for all of you and sadly too many businesses invested everything in technology and not people, allowing themselves to become a “One Trick Pony” using the internet and pricing to get customers through the door; so many are likely to find they are woefully underprepared what is coming. 

Over the coming weeks we will be exploring the skills and operational procedures required to return liquidity to your business, leaning heavily on how we have been adapting the skills, procedures and successful behaviours we had been utilising whilst owning and running successful used car businesses of our own, and those of our clients. 

But the time for action is now if your business is to be ready for the market conditions as the doors to businesses open again; for many there is much work to be done and this can be completed during this time, therefore allowing you to hit the decks running when the doors to your business open again. Those of you who wait for the moment the doors of businesses open again before you to start thinking about what will be required are going to be left struggling to get to grips with the trading environment and left fatally behind the curve. 

For many this article will not represent your perspective and that’s fine; for us also things are changing and this is not a time for us to be training hostages and or running campaigns to convince those who are hoping that everything will return to normal, that things won’t. 

Our business can’t run under a “Stockholm Syndrome” style environment, we will be working with those who want to eliminate risk and be market ready, so if you fall into that category and/or are wavering, and you would like to know more about the services and skills available that can return liquidity to your business, please feel free to contact either Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com in the first instance, in order to arrange a no obligation exploratory discussion. 

Alternatively please feel free to call me on 0044 7796 260261. 

For more information about our services please visit our website at www.autoformance.com  

I look forward to hearing from you. 

Andrew Banning. 
Used Car Business Development Director.

The Automotive Sector And The Coronavirus; Briefing Number 4!,,,,

The unique challenges and the pace of market evolution that the Coronavirus pandemic is delivering to the automotive sector is unprecedented, in fact we feel that there will not be a business model that will not be effected by current events; many of whom will not survive. No one will be immune from the evolution and changes and this also affects us, our services offering and therefore the nature of the content articles we are publishing on our Used Car Business Development Blog and social media platforms; LinkedIn included. 

This will represent tremendous change for many reading this article and for us, as we see the market splintering and many manufacturers, whether that be by accident or by design, approaching new car retailing differently in the future, the time for our generic articles and approach is all over. So in order to have value, we need to decide our target audience, those in the 5% who we can work with, including the services offering that they are going to value the most, if we too are to remain current and grab the attention of those we want speak to. 

You may feel this is a strange subject to cover at the start of our “Sunday Briefing Article” but our decision moving forward, will be governed by the same market based decisions you all have to embrace, in terms of moving your business forward. So below you will all hopefully find some valuable and insightful content linked directly to how we feel the new and used car markets will evolve once business starts to get back to normal. 

Hopefully in supplying the information and in opening minds, you will all be able to begin the planning process yourselves. Our offer to help all businesses, (both manufacturers and franchised dealers, for free during the lockdown still stands), and we are already having conference calls with many of you, so please do not hesitate to contact us should you wish to take advantage of this offer. 

Moving forward we will still be able to help all manufacturers and their franchise partners when it comes to successful used car retailing and how this improves new car profitability, but as we appreciate that many will seek to adopt new ways of retailing, this will leave our messaging at odds with some of you as it may no longer seem appropriate to your business model. Rest assured though that we can help, but our messaging and content articles need to be written in a way that remains highly specialised and of value to our core target audience, something that will be impossible to achieve for you all in the future, which will become apparent when we explore our predictions below. 

The challenges to be faced are likely to vary substantially between manufacturers and for many reasons. In fact the only thing you all have in common is the need to employ and develop the right professionals for your eventual trading model; the one you think will be fit for purpose when the doors of businesses begin to open again. In fact we predict that this could lead to 2 completely different ways of retailing in the automotive sector, so we need to decide who the priority market is for us, because the messaging will be completely different; although we could look to work in both sectors, the messaging we put out is unlikely to mean that we will, because it will only resonate with some manufacturers and be completely inappropriate for others. 

However, everyone reading this article does have the same pressing issues because effectively businesses, especially used car businesses, have been frozen in time. Now forgive us because we appreciate that there is a huge job to be done when it comes to new car retailing, but we are going to put this to one side in this article because, (and here’s the rub), without freeing up the cash invested in used car stock holdings first, franchise dealer networks will not have the liquidity to continue concentrating on new car retailing any way. 

So as much as the manufacturer has it issues surrounding new car retailing, without addressing the used car retailing challenges below and returning liquidity to franchised dealerships, there may be very little genuine scope to be retailing new cars in any volumes and we say this because franchised dealers will be returning to businesses with some, if not all, of the following challenges below; 

• Huge personal investments in used car stock holdings, the value of which is to be defined as trading begins once more, but let’s dispel one myth that we have seen circulating on LinkedIn of late; the value of this stock holding is not appreciating. 
• Hundreds of thousands of pounds worth of stock at auction houses which is going nowhere fast and again, the true disposable value of which is unknown. 
• The further erosion of used car stock values caused by future initiatives to keep new car retailing alive by the parent manufacturer. Actual cost of new car versus cost of used car. 
• Depending on the financial robustness of each and every franchise partner, all will have liquidity issues due to lack of cash flow. 
• No skills at building the professional trade networks required so they can to begin trading once more. 
• Sales and management teams, for whom many will be lacking the skills and experience required to be able to trade in the new trading landscape.
• Little idea of when core customer bases will be returning to purchasing their next car. 

Now as much as all the issues above are an article in their own right and will be addressed in the coming weeks, one of the key issues here is when your consumer base returns to purchasing their next car and this is a very complex and variable situation, linked directly to the socio-demographic status of your core customer base and how long the current trading restrictions are in force; the last question being one that no one knows the answer to. 

Of all the lessons learnt during the pandemic one should be the appreciation that no one will be left unaffected by what has gone on; many have lost jobs, businesses and income levels that could take years to replenish and/or build up again, so we feel that expecting things to just go back to normal any time soon would be pretty naive. So our advice to you all would be to appreciate that just because the doors to your business are open again, does not mean that customers will be walking through them. 

So into this “Melting Pot” of seismic challenges we have the parent manufacturer who needs to keep new cars retailing but who, in many cases, has a franchised dealer network struggling to survive and looking to trade out of the problems that they have their money invested in first; leaving little if any appetite to sell, (or in many cases not having the liquidity to be able to sell), new cars until liquidity has been returned to their business. There will be little point in a franchise partner selling a new car if it involves a part exchange that the franchised dealership concerned cannot afford to take in to stock, and this will be more of a problem than many of you realise right now. 

So the manufacturer also has many sizeable challenges to address as well and for many they will not have the skills and experienced contained within their own organisations, let alone their franchise dealer networks, to begin trading in the new trading landscape. In fact for many manufacturers, especially those running and/or owning their own finance house, the challenges will include some if not all of the following; 

• Individually determined but sizeable allocations of new cars that need to be retailed.
• The disruption of cars returning on PCP agreements where residual values are vastly out of kilter with the new market reality, resulting in the manufacturers finance house taking huge losses. 
• In real terms; an inability to crystalise these losses and return funds to their business from disposal, either via auction houses or through franchises dealer networks. 
• Customers having no equity remaining in cars returning on PCP agreements, so therefore unable to afford to change; this will more than likely leave many to return cars and walk away. 
• Any campaigns designed to keep customers in these cars in order to reduce losses will only render any success in new car retailing even more difficult to achieve. 

These differing focuses could potentially put many manufacturers at odds with their franchise partners, so will need much diplomacy and careful thought. There will be a desire from some manufacturers to get new car sales up and running at any cost, and for many this can only be price lead around the rental payments on PCP agreements. For brands with little cache and no customers aching to purchase their product in good markets, let alone the trading conditions we are likely to return to, there will be no other way other than being cheapest! 

However strategies like this are likely to further reduce the values of the used car stock holdings of their franchise partners even further. In every market, good or bad, supply and demand is the pivotal driver on pricing and for the majority of you reading this, the used car must always be cheaper than the equivalent new car. So any reductions on new car pricing will trickle down to used car stock holdings, further compounding the losses already caused by the market being awash with stock and light on buyers; this is going to be a very difficult balance to find! 

Now we have no doubt that these unprecedented trading conditions will lead many manufacturers to reduce the size of their franchised dealer networks and to make, or bring forward decisions to change new car trading models, and this could result in the UK automotive sector fracturing into multiple new car trading models, that will invariably lead to differing used car trading models. Although highly nuanced we predict that many manufacturers will either decide to trade via a model more reliant on technology and less skills/sales professionals heavy, what will inevitably become a “Race To The Bottom” price based model; or the model of blending the advantages of technology with a desire to return to hiring and developing the best sales professionals; what we would call the “Excellence In Execution” high margin retention model. 

However, the differences in these two trading models are vast and it effects everyone involved with the businesses concerned, including ourselves. Like every other professional associated with the industry, we must also make a choice on where we want to place ourselves, where we can offer most value and deliver the most. Hopefully you can now see, as you also have to make these decisions, so do we and indeed every professional working within the sector; and thus why we can’t be writing in-depth and strategic articles for both the likely trading models. 

In the coming weeks we will address the issues above and be in touch directly with those who we feel will be likely to take the path similar to ours; in any event next week’s Sunday Briefing Article will cover the issue of returning liquidity to businesses, something that will probably take a few articles and/or a White Paper, as the strategies required are going to complex and sizeable, as well as embracing the fact that businesses must be run differently in the future, with nothing off the table. 

In the meantime, anyone wishing to further discuss the issues being raised and how we can help, can please feel free to contact either Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com in the first instance, in order to arrange a no obligation exploratory discussion. 

Alternatively please feel free to call me on 0044 7796 260261. 

For more information about our services please visit our website at www.autoformance.com  

I look forward to hearing from you. 

Andrew Banning. 

Used Car Business Development Director.

The Automotive Sector And The Coronavirus; Briefing Number 3!

When the doors of franchised dealerships open again there are going to be some pretty hefty challenges facing owners and those responsible for running these businesses, and for many it will be a time for reflection on the decisions made in the past, those that may well leave some franchised dealerships struggling to survive. 

Regardless of any financial support packages being offered by parent manufacturers, eventually all franchised dealerships must return to profitable retailing and unfortunately, the decisions made in the past to not employ or develop genuinely successful sales professionals, could come back to haunt many of you because the way you were running sales departments and sales programmes is unlikely to be fit for purpose in the new trading landscape. 

When we return to work I think we will all be faced with a new and used car market awash with stock and a consumer for whom, changing their car is unlikely to be at the top of their priority list. We saw a ridiculous post recently suggesting that the consumer will be wanting to reward themselves for their period of isolation so therefore be rushing out en masse to purchase a new car; now no one knows what will happen but really? 

Despite the generous support of government many people have lost businesses and levels of income that will take years to replace and/or build back up, and many face an uncertain future when returning to work, so our prediction is that buyers will be pretty thin on the ground for quite a while. 

Now this leaves 95% of franchised dealerships with a major operational and survival challenge because the way most used car and new car sales departments were being run, should it continue when businesses open again, will more than likely take them under. Now we don’t say this to be dramatic, just as an observation of how under prepared the majority of franchised dealers are going to be for what is likely to be the new trading landscape. 

We had been warning about this for the last 2 years; the rush to invest everything on technological solutions and not people. In our experience every manufacturer in the UK gave up on developing sales professionals, especially used car professionals, over a decade ago, having been left trance-like by the “Emperor’s New Clothes” that is technology. In fact we covered this in great detail during February, in our article; The Secret To Used Car Success?,,,, Going Back To The Future! 

Rather than explore these points again, anyone wishing to read our justification for these comments need only follow the link above to the article on our Used Car Business Development Blog. But to shine a very bright light on why the decisions made by manufacturers and their franchise partners over the last decade and more, is going to leave you woefully underprepared for the new world, let us advise you on how 95% of the new and used car sales departments based at franchised dealers were operating, the ramifications of which is covered in our article; You Start Negotiating When You’ve F@#ked Up The Sales Process! but for brevity, if you had ever audited your sales operations, especially your used car operations, this is more than likely what you would have found. 

• You have a sales department staffed by people who have attended the manufacturers 2 day sales course, they have their “Certificate Of Attendance,” (sorry “Certificate Of Accreditation”), so they fully believe that they are now a sales professional, which of course they are not! Please refer to the article above for clarification on this point; but in the interests of brevity;

• You Can’t Become A Good Sales Professional In 2 Days! A New Suit, A “Certificate of Attendance” And A Demo You Could Be Leasing Yourself, (If You Were Any Good), Does NOT Make You A Sales Professional! 

• At the foundation of this error is in convincing these people that customers buy from people they “Like,” unfortunately this is complete “Boll@cks;” customers buy from people they “Trust!” 

• Unfortunately every person attending the manufacturers training academy to get their “Certificate Of Attendance” now thinks this, because manufacturers became obsessed with being “Liked” and not “Trusted!” Now, if they had employed a successful sales professional to run these courses they wouldn’t have made this mistake but the person who, in all likelihood made the decision at the manufacturer, had never been a successful sales professional themselves and neither had the person running the course. 

• So you had a sales team that came in to work waiting for the phone to ring or a lead to come in via the internet, because this was when they had been taught that a new or used car enquiry started. When they did receive and enquiry their first two priorities were to contact the customer within a certain lead time and to be “Liked!” Now sadly this led to the “No,,, I didn’t Get The Sale But They “Liked” Me” culture; what happens when you employ and develop people to be lazy order takers instead of sales professionals. 

Now the above is many things but it is not “Selling;” and listen, if you feel this is the sales and operational dynamism required to ensure your business survives the challenges that are coming, who are we to argue? But in the world where everyone operates as above, only those with the cheapest car, the business prepared to lose the most money, will be retailing cars; but neither them nor you will be making the highest return and therefore limiting your losses. 

And be in no doubt, the first 3 months of trading will not be about profit, it will all be about losing as little money as possible when it comes to used car retailing, but the importance of being ahead of the market curve will be critical to your survival. But if you think you can rely on the sales operational model listed above to ensure you survive, well we think that is “For The Birds!” 

When the ramifications of the Coronavirus started to become clear we made a pledge to offer our advice, knowledge and expertise for free, including the delivery of free business development consultancy calls to anyone running or owning a franchise dealership or independent used car business; this also included the information contained within my articles, which we wanted to serve as an operations manual for used car retailing, to help prepare for when the doors of businesses open again. 

Unfortunately, when it comes to the used car sales operating procedures and the campaigns required to see you through what is coming, 95% of you don’t have the sales professionals with the skills and experience required to succeed and the lessons to be learnt here are very important, in terms of shaping the future of your business. 

Never again must technology be expected to sell cars; in isolation all technology can do is ensure that you are giving cars away and you don’t need any skills to do that. Now it is not to say that technology doesn’t have a role to play in the generation of and managing of new and used car enquiries, but the only way you can sell new and used cars profitably is via a team of Sales Professionals and what is going to be required when you open your business again is the skills of “Selling!” Sadly the inconvenient truth is that sales professionals haven’t been developed by the Automotive Sector for over a decade. 

No, what the Automotive Sector has is franchised dealer networks being run and owned by professionals from non-selling backgrounds; professionals from aftersales and accountancy backgrounds, those who were experts in their role but who have just about as much chance of finding and/or developing genuinely successful sales professionals as I have of carrying out a major service on a customer’s car, or of completing the year end accounts. Absolute no chance and something explored in great detail in this article; Why Won’t The Automotive Sector Embrace Entrepreneurial Operators? 

And in the past the sector thought this didn’t matter because you bought the lie from the manufacturer, the lie that was; “Don’t worry, we don’t need sales professionals anymore, technology, the internet and building our brand will drive customers to your business and we can train the professionals required to handle these leads!” 

In reality this “Status Quo” wasn’t working before we all shut our doors and it wasn’t because of one major reason; within the entire decision making chain for the manufacturer and within the majority of franchised dealerships, there wasn’t 1 genuinely successful sales professional; and the key word here in “Genuinely” i.e. a sales professional who had ripped up trees, won awards and had lived and breathed the role. 

So with this in mind we thought the most valuable information we could impart in todays’ Sunday Briefing Article is how to identify a genuinely successful sales professional and what this process is likely to involve, because there are not many around and the process of entering into discussions with these professionals is likely to take you by surprise. So we thought we had better warn you before you potentially make a mistake and lose an opportunity to secure the services of the professionals you need right now. 

Genuinely successful sales professionals are supremely confident, so don’t be surprised if an “Ego” you don’t particularly like walks into your office; this is not a process of making friends or finding the next member of your golf society, this is about pragmatism and getting the skills on board that you require. 

Prepare to be interviewed yourself and asked some challenging questions about your business! Try not to be incredulous at this point, a sales professional will want to know that the conditions required for them to be successful are going to be present and don’t get negative or frustrated when you realise that you don’t know the answers to many of these questions; after all if you did, you would more than likely be a successful sales professional yourself and your business would not be so underprepared for the challenges it has right now. 

Be prepared to be flexible in your approach towards daily operating procedures and the working environment this professional will want to create for themselves. A successful sales professional will more than likely want to utilise their own outsourced resource team to support their efforts because they will know that you are not set up for how they will operate; you will not recognise this way of working but don’t resist this because you don’t understand it, because in all likelihood this will be a way of working you have never seen. 

You are going to have your CRM systems in both sales and aftersales departments ripped apart by this individual so they will want to know how your system operates, what initiatives are currently in place to generate inbound sales opportunities and most importantly, after what point in time does a customer of the business become an opportunity they can be working with. WARNING: This will rock the boat with your current sales team but the genuinely successful sales professional will push you on this because they will want you to give them clarification of the rules; so think long and hard about how often you would want your current sales team to be speaking to their customers. 

Now this is important because the genuine sales professional will know that the dirtiest word in “Selling” is “Prospecting” but that “Prospecting” lies at the foundations of their success; why? Well because it is designed to give you choice and an ability to increase profits, by ensuring that the most critical ratio effecting profitability is in their favour; “Supply and Demand!” 

Get over your prejudices about remuneration and be prepared to be flexible; now this is not to say that you should be paying over the odds for lacklustre performance, not at all, you will have been doing this already. If I was sitting with you discussing this and had qualified that the business had the things I required for success in place, I would look to clarify your previous packages in order to come up with a package that rewards increased levels of success, (in terms of volume and profit), in an infinitely more challenging market; you cannot go into these negotiations with the prejudices of the past. 

But in finishing, my real fear for many franchise dealer networks is going to be the ability to attract the top sales professionals required, who will have their choice of opportunities when the world begins to get back to normal. The trading landscape of the future will be light on those who “Can,” those who know how to walk into a business, leverage the data along with their own systems of successful behaviour and drive sales campaigns to success via excellence in execution, something 95% of people reading this article gave up on years ago. 

To reward excellence in execution you need good margins, something that the successful sales professional knows how to deliver, but there will be many other sectors looking for these professionals, all of whom will have the same challenges as yourselves, some capable of generating far higher margins, (and therefore commissions), than the vast majority of franchised dealerships and independent used car businesses. It should not be lost on anyone reading this article that there has probably been more margin in retailing pre-owned Rolexes than there is in new and used cars; just reflect on that for a moment! 

In the future this change in demand for essential “Selling” skills will change even our services offering, back to what we do best, “Doing,” but that is for another article when the opportunity and demand has taken shape. Rest assured though that we will be building the teams and programmes required to come to your business and drive sales success; more on that soon. 

However, anyone wishing to explore any of the issues raised in this article, especially the subject of sales professionals, how they operate and what they can offer your business, please feel free to contact me to arrange an exploratory conference call; either on my mobile, 07796 260261, or at ajb@autoformance.com 

Although current events are driving the content of my articles at the moment, as they should, in my next “Sunday Briefing Article" I will lay bare and discuss the likely used car retailing challenges to be faced during the first 3 months of trading. This will include the genuine threat to used car profitability and the losses to be taken on used car stock holdings, that your parent manufacturer represents; not for the faint hearted this one! 

Regards. 

Andrew. 

Andrew Banning.
Used Car Business Development Director.