The Franchised Dealer Fight For Survival That Not All Will Survive!

Be in no doubt that all franchised dealers face some existential trading threats during 2023, 2024 and 2025; a trading threat that not all can survive.

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Aside from some parent manufacturers looking at transitioning to an Agency Model, as effectively announced recently by Volvo, Alfa Romeo, Cupra and Lotus, (Volvo and Lotus of whom, appear to have thrown their franchise partners under the bus), there is the whole used car business development issue to address; why?

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Well, as I have always warned in my articles, the relationship of new car supply with any manufacturer (and therefore the profits available), can never be guaranteed; as experienced by those owning Volvo or Lotus franchised dealerships recently; and sadly for many, your business is now going to put at risk by your inaction in the past.

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Now, the point of this article is not to review the minutiae of every manufacturers Agency Model proposals and what that then means (in practice) for franchise partners. I can only do this as they become public knowledge, as all will be different in their operation, depending on the sector of the market that the product concerned retails within.

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What I can do though is focus on how some franchised dealers can secure their survival in the markets of the future (this is important as not all can) and what that is going to take. Unfortunately though there are hefty challenges associated with this process of future survival and it is a trading reality that not all will be able to survive.

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With new car retailing models under review and changing to the detriment of many franchised dealer partners, used car retailing once again is coming onto people’s radar. Alas though, when it comes to used car retailing, franchised dealer networks will not be operating in a world where all can be successful; why?

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In essence 3 reasons; a lack of stock, a lack of people and an abundance of competition; all of which will have a negative compound effect on franchised dealers, because the vast majority are woefully under prepared for the current used car market; in most cases years behind the curve.

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Now covering all this, including the strategies required is a huge topic and impossible to cover here; that said there are the articles published on my Used Car Business Development Blog over the last 5 years, so the answers are there for anyone who wants to follow the link and start reading. I will also refer back to some previous articles in this article, those that will help to expand upon the issues being raised and discussed.

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For now though I will major on the number one focus and discipline for all franchised dealers looking to be one of the survivors, in fact for all used car businesses? Stock Acquisition Expertise! Without which it will be unlikely that your business can survive long term; it is the discipline at the foundations of any used car success, as covered before in the article below 5 years ago;

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Not Enough Used Car Stock = Not Enough Used Car Sales

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As much as the article above is an important read, in truth the used car stock acquisitions landscape has changed beyond all recognition since it was written, and is now a subject requiring 3 -4 articles to cover on an in-depth basis. So today I will expand upon the three issues above before covering the rest over the next 3 -4 articles, eventually publishing a “White Paper” for everyone’s reference.

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Now before I start one important point; when I talk about Stock Acquisition Expertise I am not talking about trotting off to the auctions to acquire used car stock or thinking we are clever because we have launched our own online valuation tool and think we can go head to head with We Buy Any Car!

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I promise you all that (over the coming articles) at no point will I suggest you pursue either of these strategies, both of which are proof that your business has no idea about how to acquire used car stock holdings for retail profit. In fact the limitations of both have already been explored in some previous articles; links below.

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TrustFord And How NOT To Buy Used Cars For Profit!

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Successful Used Car Businesses Aren’t Buying Used Car Stock From Auctions!

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No; I will he exploring in future articles the importance of focusing on the disciplines of Used Car Stock Acquisition on a continual basis; because you will have to, it is a full time focus and the one focus that will never go away. Be in no doubt that it is the most important focus your business will have right now and the longer you leave making the correct investment decisions in your business, the more terminal your situation will become.

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If you take just one thing away from this article, let that be the understanding that if you lack the ability to acquire used car stock holdings in the volumes required, on a continual basis and at the prices required to remain profitable, then you will probably no longer have a business!

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It is an inconvenient truth that for many reading this, the used car vehicle park required for 2023 will already be beyond them, because they weren’t deploying the initiatives required last year; those required to begin to secure the used car stock holdings required for 2023. So with some urgency in mind let’s look at the 3 issues mentioned above in closer detail and explore further the ramifications for everyone.

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Lack Of Stock

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This is the major governing factor for future used car markets, those of 2023, 2024 and 2025; and probably beyond. The used car vehicle parks for these markets will be determined by the levels of new car registrations three years earlier, (in the main), although this is not an exact science and could change.

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That said, any change that involves customers keeping their new car for longer than three years will only magnify the problem of lack of stock. So when planning your used car stock acquisition initiatives for the 2023 used car market, it is pivotal to look at the new car market 3 years earlier; in this case 2020, because this is the likely size of the used car vehicle park.

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Now unfortunately 2020 was the first year of the pandemic, a year when new car registrations were over 680,000 down on the previous year; and it didn’t get any better in 2021 either (still over 660,000 registrations down on 2019), so the size of the used car vehicle park in 2024 doesn’t look any brighter either. And with new car production supply problems still effecting sales volumes in 2022, the problems look set to roll into the used car market of 2025.

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The inconvenient truth is that the size of the used car cake has reduced by 30% but the amount of mouths to feed has remained the same; so some businesses are going to go very hungry!

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Lack Of People

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Where do I start? Well let’s just say that when it comes to the discipline of successful used car stock acquisition, there will not be many (if anyone) reading this article who has the professionals required to succeed, already within their business.

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Unfortunately both manufacturers and franchised dealers gave up on developing used car talent over a decade ago and this decision is about to come back and haunt franchised dealers; most of whom I can say are retailers of ex-demonstrators and part exchanges at best, not used car retailers! Full Stop!

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This is a huge topic, one to be covered in greater detail in an article to come, but the vast majority of you reading this will have a double whammy to contend with; no ability to acquire use car stock holdings, and no experience in identifying the professionals you require to succeed in this regard.

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It is the inability to understand who to seek out that will be the biggest problem; you can’t go out and find skills that you don’t understand. Like every other business; you don’t know what you don’t know!

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An Abundance Of Competition

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The used car retailing landscape has been transformed over the last couple of years, during which we have seen the threat of the independent on-line used car retailers materialise; Cinch, Cazoo and Carzam to name just a few. I have written many articles covering these businesses, all of which only have a business due to the laziness and ineptitude of manufacturers and their franchise partners. Yes, unfortunately that includes you!

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I won’t expand again further in this article, anyone interested can follow the links to some of the relevant articles below, which will take readers on a journey surrounding my thoughts and observations on how these businesses have been allowed to grow so powerful. Something possible because you all have been complicit in their growth journey, and yes you did read that right; you really do all have yourselves to blame.

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Is This Really Your Future For Used Car Retailing?

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Cazoo?,,,,, As A Used Car Business It’s Mad As A Box Of Frogs!

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Cinch, Cazoo or Carzam? Who Will Be The First To Fail?

However, remaining on theme, let’s look at how this competition has been allowed to grow and assume the position of having the largest single used car stock holding available in many used car markets!

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To do this I thought I would look at a selection of approved used car offerings, involving the manufacturers and associated networks that I think are most at risk and behind the curve. Now to me there was only one place to start; Volvo.

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As explored in my recent article below, Volvo has just launched their Volvo Selekt Direct initiative; Volvo’s much trumpeted, direct to consumer used car sales proposition. Now I was pretty sceptical about Volvo’s ability to deliver on the stated aims but I thought I would take a look and see how Volvo are doing, in terms of building their new used car retailing Nirvana.

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Volvo Selekt Direct?,,,,, How To Snatch Defeat From The Jaws Of Victory?

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Well at the moment it is pretty dire; on their UK website this programme is inviting potential used car customers to view just 38 cars! On the same day Cinch had 323 Volvos on their platform, Cazoo had 129 and Carzam had 63! Well done Volvo; as the manufacturer and importer of the product you have less used cars for sale than 3 independent on-line used car retailers. In the case of Cinch 285, or 88% less!

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Then I thought I would look at the BMW used car stock holdings; so I started with the BMW Approved Used Car Locator which clearly stated that there was 13,593 used cars available for sale in their UK network; a network I am informed has approximately 150 franchised dealers. Now this means that on average (a dangerous measurement I know but the only one available) each BMW franchised dealer has approximately 90 used cars in stock.

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Now you might think that this ok, until that is you look at the on-line used car retailers. On the same day Cinch had 621 BMWs in stock, Cazoo had 559, Big Motoring World and Carzam (both owned by the same individual) had 579 and 197 in stock.

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So I thought I would try one more premium brand that I would perceive has some used car retailing challenges; so I looked at Lexus. Again I started with the Lexus Approved Used Car Locator, which clearly stated that there was 1,684 used cars available for sale in their UK network; a network I am informed has approximately 46 franchised dealers.

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This means that on average (again a dangerous measurement but the only one available) each Lexus franchised dealer has 36 used cars in stock. Once again you might think that this ok, until you look at the on-line used car retailers. On the same day Cinch had 68 Lexus’ in stock, Cazoo had 45!

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Now I only looked at three manufacturers but here we have proof that three manufacturers and their franchise partners (on average) have less used car stock available than the on-line independent used car businesses. All this despite the fact that the manufacturer and their franchise partners hold all the aces when it comes to securing used car stock holdings.

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I started this article stating that manufacturers and their franchise partners do not have the professionals required for the battle to secure used car stock holdings; I rest my case! I will not expand anymore in this article, rather I will explore the issues raised in the articles to come; those that will make up my forthcoming used car stock acquisition White Paper. Besides those who haven’t yet grasped the seriousness of the trading reality discussed above are beyond help.

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For those grasping the seriousness of the current situation, I leave this with you to cogitate, whilst I complete the remaining articles covering this subject. However for those wanting to take immediate action, (now that used car market opportunities are identifying themselves), I will be working with three businesses over the next 12 months to deliver the used car stock acquisition expertise and initiatives required, for those businesses to survive and prosper in the used car market to come.

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Should you wish to explore synergies and the potential to collaborate in this regard, please do not hesitate to contact me so we can arrange a mutually convenient time for an exploratory call.

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Andrew.