We read an interesting article on the on-line edition of MotorTrader Magazine, TalkingMotors regarding the decline of the car dealer.
The article states;
Car dealers are an endangered species and their number in the UK will be significantly reduced in the future, according to an industry analyst.
PricewaterhouseCoopers said the severe drop would be a result of vehicle manufacturers tightening control over dealership standards.
Chris Kent, a director in the automotive team at the PricewaterhouseCoopers, said he expected many more dealers to fold than had already this year.
“Manufacturers have introduced ever-stricter standards for those who hold franchise agreements in an effort to exercise closer control over their brand’s corporate identity,” he said.
“Such restrictions will cause some dealers to resign the franchise while others will be forced out, leading to a smaller pool of businesses representing each marque.
“With current economic conditions already a serious threat to the viability of some dealerships, further closures seem inevitable.”
Kent added that competition for sales will remain fierce, however, with a broader range of car brands chasing what could be a shrinking pool of prospective buyers.
He said despite the factors of consumer and manufacturer demand, the wider economy was possibly the biggest influence at the moment.
We have said for a while now that there would be fewer companies but with larger dealerships. Most manufacturers franchised dealer network has shrunk steadily over the last few years, partly due to block exemption and partly due to the controls which certain manufacturers have imposed on their dealers, meaning that profits have not been improved against spiralling investments. These investments are non-negotiable as a result of refurbished showrooms and new equipment as technology has improved cars.
The profit margins for franchised dealers have not just dwindled but we have also seen control from the big brother manufacturers reach such a stage where even customer databases have been commandeered by them to constantly bombard existing and future customers with direct offers relentlessly. This has also been used to assess the performance of any particular dealer with heavy financial penalties for any compliance failures. Unfortunately this has, in some cases meant that customers have felt intimidated and pressurized by the “love brigade” when sometimes they just want a brochure and some initial information as they begin their car search.
However the way that some sales procedures have been instigated by these manufacturers by ensuring that sales staff follow a strictly scripted process means that the customer feels that they may have to give a DNA sample before they are allowed to leave the showroom!
Good old fashioned customer service with small doses of common sense have been replaced by the ludicrous situation whereby many manufacturers supply ‘mystery shoppers’ to measure the performance of their dealer network and actually reward the dealer with bonus money for asking all the ‘right questions’ and take that profit away if the salesman forgets to ask what the customer likes to do at weekends!
So what will the effect be? Well eventually as the franchises creak under the growing expectations of their masters and see margins sink ever lower I suspect that there will have to be a softening down of these procedures and an acknowledgement that although there is a particular brand name above the door the partnership must be far more equal than it is at present and that in order to ask a fair price for a fair service both for selling and fixing cars, the dealer network must be able to run his business in a way which he believes is best and if he does not treat customers correctly then he will struggle to remain profitable and therefore his customers will vote with their feet and simply go somewhere else.