The brave new world of the franchised car dealer is constantly evolving and although new improved sales standards and practices may appear to be positive for customers, there are those in the business who are questioning whether that is really the case.
Over recent years the influence exerted over many dealers by their manufacturing masters has caused them to up their game considerably in many aspects of new and used car sales and aftersales service and this has also seen major investment by dealers in showroom upgrades and improving standards. Many dealers in the UK are ‘sponsored’ dealers meaning they are financially assisted by their respective manufacturer and therefore expected to meet the brand investment in an equal way. The problems which are currently being experienced are partly due to this obsession with brand building and creating a market that really isn’t there.
This has seen disastrous pre-registration schemes and over supply with manufacturers relying on the dealers to pick up the pieces when the market implodes. There are some parallels in the car industry with the practises of the discredited banking sector in that eventually, when cars stop selling and the market goes down what happens to the value of thousands of cars which are pre-registered to gain extra market share or the cars subject to guaranteed buy back contracts? Well we are seeing the results now, businesses do not have the cash flow to keep trading and cannot sell the stock they have for a profit therefore they simply go out of business.
The market is now reacting to the present by being more cautious in their approach to any bulk incentives and by ensuring they turn their stock much quicker, therefore making much better use of their cash flow. The car makers are recognising this and in the main have relaxed many of the restrictive standards they applied to their franchised dealers in recognising that if they cannot trade profitably they may have a seriously shrinking network and many open points with little or no brand representation.
They are also taking the opportunity, along with many of their dealers, of improving the quality of service offered to customers and stamping out the bad practices which erode consumer confidence in the car sales market. Some of the radical changes taking place are having a mixed effect for dealers and customers, on the one hand the traditional smash and grab salesman – who would maximise his profit and commission by stretching the boundaries of truth and information but had a place in the business when firmly controlled because of the sheer volume and profit he could generate – is now being squeezed out of the business altogether because of an inability to change with the times and adapt to the modern world. This is a world which includes thorough qualification, information gathering, deep product knowledge, impeccable customer service skills and a fair amount of computer literacy. These people are being replaced by younger more inexperienced examples who are very capable of adhering to a strict process, have great computer skills and will basically do exactly what they are told but may not have the ability to sell or think for themselves which could lead to a very diluted business in future.
If you could take the best bits from both of these examples everyone would win; the dealer, the manufacturer, the salesperson and especially the customer. Maybe we are moving toward a world where the best price is the one on the sticker, there is no haggling and everyone is happy with their part of the deal. This is probably seen by many as a fanciful notion but is it really? If a business wants to attract top sales people they must pay them top salary’s and the top salespeople usually generate the most business and therefore take the most managing, but with the car industry slump in new car sales how do they attract these people with a £15k basic salary? So the alternative is someone maybe on their 2nd or 3rd job who’s earning aspirations are not too high, who still live with their parents and have no selling ability but are competent at information gathering and ticking boxes but excel in delighting customers. However their lack of experience and hunger may mean that although the customers they deal with like them and they may even sell a car or two, will they have the desire to work hard to sell enough cars to justify their existence?
With manufacturers measuring dealers in more ways than ever, customer surveys before during and after the contact, mystery shop campaigns, data capture percentages and all these bringing a financial incentive for compliance, many dealers simply cannot afford to employ real sales people. They will be forced to hire customer service assistants who will do exactly what they are told but little else.
It will be interesting to see how the business finds its level and what effect, for better or worse, it will have on future customers. It could mean that any potential buyer will have to carry out all the research for the next purchase on-line (which we strongly advocate anyway) and use the dealer only to deliver the car at the price which suits. Or the dealer needs to find a way of having a motivated sales team with strong customer and communication skills which can generate income and earn top dollar by being system and process slaves. Failing that, dealers may just have to see whether it is more profitable to continue letting ‘great’ sales people loose on their prospects knowing they will achieve large profits and hope they outweigh the losses incurred by not achieving standards income set by the manufacturers.
Interesting times, what an idyllic world it would be if customers were charged fair money for great service and a brilliant car, the dealer traded profitably with contented salespeople all overseen by successful car makers building cars that people want but are, at the same time, kind to the environment.
OK, OK I can smell the coffee….