CAZOO’s Numbers Part 2,,,, You Have Been Warned!

Following on from last weeks’ article; CAZOO’s Numbers?,,,,,, WTF!? I wanted to thank everyone who engaged and commented on the article, and to those who reached out to me directly, this article constitutes the 2nd half of the article I promised to publish, and will hopefully answer the questions put to me during the week.

So time to come off the fence: Do I think CAZOO will hit their 5 year objectives? No I don’t and for a myriad of reasons; from an operational, fiscal, purchasing, personnel, sales and marketing perspective the objectives quoted are staggeringly ambitious and even if CAZOO had built a “Team” of proven and genuinely successful used car professionals with a level of success and experience, the likes of which has never been brought together in my working lifetime, I still don’t have confidence that the objectives stated could be met.

However, that is not to say that there is not a business opportunity here, just because the structure and ambitions stated look unachievable, (at face value), on this occasion, does not mean that the business model of manufacturers and franchised dealer networks in the UK is not under threat, because it is; it’s just that someone hasn’t got the right people together, combined with the right model, in order to exploit the opportunity.

As I have said to many of you who have reached out for more information on this subject; you may have been saved by “Hubris” on this occasion, and for other reasons when it comes to the other models that have failed in the recent past, as covered in my article; Used Car Entrepreneurs ,,,,, Who Learnt The Most From Virgin Cars? But to expect people not to observe and learn from the mistakes of others and to then not enter the market with a different proposition, would be just as fanciful.

So my advice to manufacturers and their franchise partners; now is the time to look in the “Ugly Mirror” because whilst manufacturers and their franchise partners continue along their current paths, gaping holes will still exist in their business models and eventually someone will exploit the opportunities available, and even more ruthlessly than some are being exploited already.

So why do opportunities exist for those looking to disrupt the new and used car markets? Well to put it simply either a lack of commercial acumen or laziness; or perhaps both. Now by this I refer to the decisions made in the past that even at the time appeared to have terrible future consequences, but when you drill right down, to where all the problems began and what has led the Automotive Sector, (as a whole), down the path it is on today, at the heart of all the disruptive challenges being faced today by manufacturers and their franchised dealer networks, (encompassing all the opportunities to exploit the new and used car markets by independent disruptors), is the decision manufacturers and their franchise partners made to give up on “Selling,” developing used car businesses and the professionals associated with both.

Now it is impossible to explore all the operational and decision making errors, including the ramifications of these, in one article, so I will include some links to further articles on my Used Car Business Development Blog that will further expand on the issues mentioned. But in essence there were 4 critical errors that have been compounded over the years and have left manufacturers and their franchise partners years behind the curve. However, it is not too late, but the time for action is now, if manufacturers and their franchise partners are to protect all that they hold dear. So where do we start; well at the beginning.

Forgetting That Used Car Success = New Car Success; I have commented regularly on the relationship between manufacturers and used car retailing and in truth the vast majority of people I have met at manufacturers have zero interest in used car retailing. I have always found this situation very strange, although I appreciate that successful used car professionals and manufacturer personnel are a very difficult “Fit!”

Quite understandably the manufacturer is pre-occupied with new car retailing, but the irony is that success in the new car market, (and by success I include profitability), will only ever be built from a platform of successful used car retailing. Strong residual values have always been imperative to new car success, even more so now that the new car market is hooked on cheap interest rates and the PCP agreement.

The PCP agreement has transformed customer purchasing habits, resulting in 85% of customers now purchasing entirely with a monthly rental budget in mind, and key to being competitive will be the residual values being achieved by your cars in the future. High residual values are key to the overall cost of ownership for the customer because they impact directly on monthly rental payments, and residual values will not be supported by anything other than franchised dealer networks that are successful at retailing used cars; a subject discussed in our article; Want To Grow Your New Car Business? Never Take Your Eye Off Your Used Car Business!

And in my experience not one manufacturer retailing new cars in the UK has a franchised dealer network that is successful at used car retailing, which has led to a range of issues and problems, many of which will be discussed later, but alarmingly it has resulted in manufacturers and their franchise partners giving business away for free to competitors, many of whom now have a far more successful businesses than yours!?

Unbelievably though no one within manufacturers or the PLC’s owning vast swathes of franchised dealer networks in the UK wants to discuss this, or how we change the situation; thus my observation that the current trading landscape has been caused by a lack of business acumen and/or laziness.

I will point out again, (as this is not for the first time), that the highest paid used car professional in the UK Automotive Sector works at a company owning auction facilities, not for a franchised dealer group, a retailing PLC or a manufacturer. Just let that fact sink in for a moment; an auction business, a business that has been handed to someone on a plate by the Automotive Sector, because the sector abandoned the skills and the professionals required to never have had to use them!

Now I have discussed this issue many times with manufacturers and there just is no interest in employing, (on any basis), the professionals required to develop successful used car retailing within franchised dealerships. So with manufacturers giving up on used car retailing, many of their franchise partners have given up on used car retailing as well and this benefits no one, neither the manufacturer nor the franchised dealer.

This almost “Needy” relationship leaves the franchise partner wholly dependent on the manufacturer for their survival, and as much as the manufacturers decision to turn its back on used car retailing is mind boggling, I can sympathise a little with the manufacturer because why are those owning and running franchised dealerships not investing in their own education and growing their used car businesses?

In reality neither manufacturers or the vast majority of their franchise partners know what successful used car retailing involves; most franchised dealerships in the UK don’t have a used car business, they are just retailers of part exchanges and ex-demos, so neither senior people based at manufacturers or those running franchised dealerships, would know the first thing about how to find and employ a genuinely successful used car professional, so here is the first of my free gifts, some links to a couple of articles covering the skills sets involved;

Do Successful Used Car Professionals Exist For Franchised Dealers?

Do Successful Used Car Professionals Exist For Manufacturers?

Giving Up On “Selling” and Developing Sales Professionals.

Now this has proved to be a prickly and controversial subject because many manufacturers think that they are but I can say without doubt that no one is training sales professionals! Now the ramifications of this were covered in my recent article; You Start Negotiating When You’ve F@#ked Up The Sales Process!

In truth the Automotive Sector gave up on attracting and/or training genuinely successful sales professionals over a decade ago, (a subject covered in another of my articles; Why Won’t The Automotive Sector Embrace Entrepreneurial Operators? ), when manufacturers and their franchise partners got seduced by the “Emperor’s New Clothes” that is technology and what it was achieving in transforming the FMCG markets, as explored in my article; A Pivotal Piece Of Used Car Business Development Advice!,,,, And For Free!  But more on this later!

Thinking that technology was the answer to all their problems, manufacturers set about filling showrooms with polo shirt wearing customer handling professionals, whose main aim during the sale process and any interaction with the customer, was to be “Liked!” So these are the now the professionals being trained to work within sales departments and this more than anything is reducing new car profitability and making it impossible to grow used car retailing.

As much as I will not use this article to give all my secrets away for free, (those interested in any of our Sales Master Class and Mentoring Programmes need only contact me for more information), it is important to remember that at the foundations of successful “Selling” is the leveraging of effective systems and successful behaviours, the vast majority of which is done before a new customer even contacts the business.

But as a gift I would remind everyone that the dirtiest word associated with “Selling” is “Prospecting” but it is important to remember that this process is designed to give you choice!

A genuinely successful sales professional realises this and generates a trading environment that is capable of keeping margins, so therefore commissions, higher than you will ever achieve by employing lazy order takers who are hiding behind their basic salaries and waiting for the phone to ring; which to be fair is customer handling, all the current incumbents have been trained to do. The mistake is in telling them they are sales professionals upon leaving your training academy, because they are not! In fact the bigger mistake is in thinking that you can run a successful and profitable sales operation with these professionals.

Now in finishing this point, I’m afraid I must ask you to look in the “Ugly Mirror” once again because at the heart of the decision to give up on “Selling” and sales professionals was money and jealousy! You didn’t want to pay the money that successful sales professionals can command and the ramifications of this decision are adequately demonstrated in my recent article; Why Would An Automotive Manufacturer Give Up On “Selling?”

Here’s A Business,,,, On Us!

Let’s be in no doubt that all the internet based independent new car or commercial vehicle companies shouldn’t exist! The auction companies should have none of the power they wield over manufacturers and franchised dealer networks! In fact CAZOO should never have been a business that anyone one was thinking about launching!

But yet they exist; why? Well the “Why” goes right to the heart of all the intransigence that exists in the Automotive Sector, both at manufacturer and franchised dealer level, and I’m convinced that these businesses only began to flourish when the Automotive Sector began to think that the route to increased profits was to cut overheads, not to invest in businesses and their people!

So let’s look at some of these flourishing businesses in isolation, those that, (in reality), should not exist, and the decisions that allowed them to exploit the commercial weaknesses of manufacturers and their franchise partners. Well it all began with “All Auction Trade Disposal Policies” which were nothing about business improvement, they were all about lack of trust!

I have written many articles about this issue, most recently my articles;

Your All Auction Policy?,,,,, I Bet It Seemed Like A Good Idea At The Time?

The Madness Of “All-Auction” Disposal Policies And The Cost That Will Be Paid!

And no doubt I will get the usual comments from people again, those who have never run a successful used car business, (or any business for that matter), saying that the auctions offer such a good service and return more money for trade part exchanges etc. etc. etc.

However, this is not the article to fully explore the trading restrictions and ramifications of “All Auction Trade Disposal Policies;” the subject is too specialised and besides, I can’t train hostages, so don’t work under a “Stockholm Syndrome” like environment, when it comes to the complexities of used car business development. But I urge those who are curious and have that little niggle at the back their mind telling them that this can’t be right, to read the article above and to reach out to me to discuss this issue, should it raise any questions?

I guarantee anyone taking the time to do this, opening their mind, deciding to be a Lion not a sheep and then contacting me, that reversing policies like this will be responsible for putting more money on your bottom line than any other initiative you currently have planned. For all those who never worked in the Automotive Sector before “All Auction Trade Disposal Policies” came along, or refuse to look past the “Smoke and Mirrors” of the little bit of trade profit you may get after weeks of funding the auction houses, I’m sorry but you are more than likely in the 95% of people I can never work with.

Unfortunately I have neither the time nor the energy to take you hostage, open your mind and change your thinking; that is your responsibility and besides I know exactly the first thing you will say in your comment, so my gift to you is to give you my stock answer to your comment in advance; “Why Are You Employing People You Don’t Trust?” Please feel free to copy and paste it yourself.

However more baffling than the decisions discussed above is the allowing of access to new and used car stock holdings by internet based competitor businesses. What manufacturers and franchised dealers don’t appear to grasp is that if you control access to stock then you control access to your market; but if you give access to stock holdings to businesses in direct competition with your own, well you really are handing them a business on a plate for free, as you have done with the independent new car internet based companies.

Now the new car and used car internet companies are a case in point; something I explored in many of my articles over the last 2 years, two of which are listed below;

The Fatal Mistake Made By Motor Manufacturers Over The Last 10 Years?

Is This Really Your Future For Used Car Retailing?

Again these are meaty articles involving evolving business strategies, so not for repeating here, but hats off to many of them, they have duped manufacturers and franchise dealers into handing their business and their customers over to them, on a plate, and they are gaining traction.

They probably realised that manufacturers and franchised dealers had given up on “Selling” as well and therefore the process of building trust with customers, so guess what, they decided to do it themselves. So now we have internet based independent new car and used car retailers, who own nothing, setting the pricing on new and used cars, making money and leaving franchised dealers happy if they get to do all the hard work!

More alarming is whilst this is all going on these competitor businesses are enjoying the first and most influential contact with your customers, and this is allowing them to become the most trusted point of contact with your customers, something that will only make them more powerful in years to come. Now before your say it; I know they didn’t say this when they came to see you to negotiate relationships of supply, but I have an inkling about where this is heading, so please feel free to read the articles above if you want a more enlightening and alarming insight.

Especially the article covering their growth from new car retailing into used car retailing, because it shows just how emboldened they have become, due to the total lack action from manufacturers and franchised dealer networks, in terms of countering their aggressive overtures. How can an internet based used car retailing platform, one that owns no stock and/or has any proven and successful used car professionals in their employ, have the temerity to advise customers as to the pricing on used cars, effectively limiting your enquiries on used car stock that, in some cases, you are paying them to advertise?

However more alarming than this is that manufacturers and franchise partners are allowing this to happen; in fact these businesses shouldn’t even have a business, they should all be out of business within 6 months. All you have to do is stop giving them access to new car and/or used car stock! But, and here is when the penny will drop, you can’t do this because you haven’t got the franchised dealer networks capable of selling the new and used car volumes you require, because if you did, franchise dealers wouldn’t be giving these businesses access to their new and used car stock holdings, and manufacturers wouldn’t be turning a blind eye and allowing it; and why haven’t you? Because you gave up on “Selling” and the professionals capable of “Selling” all because you wouldn’t pay the money they can command!

So the decisions to effectively Give Up On “Selling” and developing sales professionals has led us to here; where the business model of manufacturers and franchised dealers is continually under attack from disruptors and I predict that the challenges will keep coming, whilst those who should hold the power in the Automotive Sector, manufacturers and their franchise partners, continue to lack the commercial acumen, the staff and experience to effect change.

Now those of you who read the original CAZOO’s Numbers?,,,,,, WTF!?  article will no doubt remember my criticism of these independent tech based companies, especially CAZOO, in appearing to have made no investments in proven used car professionals, those who know how to run and grow used car retailing models; and this may be your saving grace, but only if manufacturers and their franchise partners avoid repeating their mistakes.

As an industry sector, the people working in the Automotive Sector are the worst at investing in their own education and I would warn you all of just one thing; STOP insulting proven professionals and trying to do things on the cheap! No one can fix your business in 2 days after years of under investment! An issue I explored in my recent articles;

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

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

However, I have begun to sense a change in attitude from some business owners, those running their own privately owned franchised dealership or small group. Now these businesses have a tremendous opportunity and an agility to exploit the current trading landscape, to their benefit, because these professionals are different to all manufacturer based staff and the staff employed at the 90 – 95% of franchised dealerships, those owned by the big PLC’s; they’ve got “Skin The Game,” it is their business so they think differently!

For the rest, especially those making the “Big Calls” at either PLC’s or at manufacturers, there is much to do if you want things to change, because it really doesn’t have to be like this. However, changing the direction of travel and getting your business back will take an open mind in the first instance, and anyone wishing to discuss solutions to the issues discussed in this article need only contact me directly to arrange a time for an exploratory conversation.