October 22, 2014

A very long dark tunnel

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Car dealers are being fairly optimistic about September as a whole as many we have spoken to have managed to get some good footfall and convert some business. It is reckoned that most dealers like to go into the “plate change” month hoping to have achieved 50% of the September target in order to have a chance of getting near to it by the end of the month, and where they don’t manufacturers start getting nervous and that’s why there are often better deals to be had towards the latter end of the month.

With the new car market only marginally ahead in august the trend is still upward in numbers year on year although many believe the last quarter will be tougher than ever and dealers will need to be on their metal (forgive the pun) to ensure we can start to perhaps glimpse the light at the end of a very long and dark tunnel!

The other interesting aspect is that we are hearing of many staff movements at present especially in sales as managers, who are fed up of not making bonus, try and find where the grass maybe greener and as the movement merry go around continues dealers are looking to recruit fresh faces to get the numbers back where they should be. Much the same as in the football transfer window we know of many large dealer groups who are losing staff at present due to the big targets set and the fact that if people aren’t performing they are moved on leaving gaps for people to come from other companies to fill the void. Being a quite incestuous business it is often the worst kept secret when someone in the franchised dealer network is moving to pastures new because nobody can or wants to keep a secret and also whether they care to admit it or not, the big boys take great pride in being able to poach the top players from their competitors to give them the extra edge they need.

Interestingly it is also a time when sales execs can earn big money if they have put in the hard yards over the last couple of years. Research suggests that brand loyalty is waning and therefore the skill of keeping customers engaged in the brand does, to a certain extent, revolve around the longevity of the staff. For example my dad, who incidentally has had more cars than I have had hot dinners, is predominantly a Land Rover man – although he has gone to the dark side on occasions – and he is very much into popping in regularly to his local dealer and having a coffee with the exec who has sold him at least 3 vehicles over the last 5 years. The fact that he is a familiar face and has looked after him ensures that the old man will continue to give them his business, however if he moves on and the new man isn’t of the same calibre it will almost certainly mean a change of direction and I am pretty sure he is not alone in this outlook.

The fact is that the more technical cars become and the more complicated and varied the packages wrapped around selling a car are, means that customers contact with dealers is likely to increase and it is that on-going service and care which will separate the good from the bad.

I was at a dealer recently who told me that the add-on business is now so lucrative that the actual profit made from the car is a fair way down the list. All the opportunities such as Gap, PCP, alloy insurance etc. may represent small income streams individually but collectively make a deal worth doing at the expense of profitability from the unit itself. Indeed he also said that his top sales exec had sold 25 cars last month and made more out of those cars from f&i and add-ons than the chassis profit by nearly £3500!

This is staggering to hear for someone who used to sell cars when there were a fraction of the ‘upsell’ products available today and it was really just a case of marrying a customer with the best car for their needs and budget as profitably as possible.

How times change.


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