How the optimal use of technology and best practice can boost profitability in the automotive retail sector

APD, the UK-based Performance Management Specialist firm, has expanded its impressive SaaS portfolio, education, training, and consulting solutions to deliver an integrated range of services designed to help provide a fast and sustainable route to profitability for dealers and OEMs.

With an impressive track record in budgeting, forecasting, and performance reporting software supported by business management services, the automotive-focused specialist helps its clients identify performance improvements by capitalising on their efficiency and profitability in a rapidly changing, competitive market.

Due to the move to battery-powered electric vehicles, the growing popularity of shared mobility, changes in legislation and regulation, digitisation, and changing retail methods (i.e., the introduction of the Agency model), OEMs and dealerships are having to become more innovative, progressive and flexible in their business strategies to improve or at least maintain operational profitability.?

A year from launching their new brand identity, John Waring, CEO at APD, talks about how the firm is helping key automotive OEMs and dealerships identify profitability opportunities across key growth areas of their businesses.

What attracted you to APD Group??

APD was an established automotive business when Ed White acquired it in 2018. In fact, the company had been running since 2006. However, it was what I describe as a 'business with opportunity' — it supported its client base effectively but lacked an ambitious roadmap for growth. The business had many hidden, undervalued assets too. Although it was small and relatively unknown, the company was profitable, cash generative, and offered a stable customer base as well as several distinctive product-based capabilities.

APD specialised in providing automotive performance management services built around a composite system that collected financial data from dealers. The system aggregated the data and processed it creating sets of comparative performance reports for both OEMs and dealers. The core software was the most modern in the market and APD's approach to delivering customer-specific solutions through the 'Configuration Layer' was unique.

I felt APD had all the prerequisites to become an agile, forward-thinking, proactive organisation and market leader in performance management solutions. Having qualified as an Engineer and after a long career working in partnership with many of the major technology companies, including IBM, Oracle, and Microsoft, I saw APD as a pioneer in the implementation of new technology to drive business advancement and transformation. Moreover, it offered the best market growth potential through the expansion and evolution of its modular product-based services.

What makes APD different?

In my opinion, there are several core values to APD that give the company a strong competitive advantage. For a start, APD has an exceptional in-house capability to conceptualise and deploy very simple and fully comprehensive performance management solutions operating on a single bi-directional data platform configured to the clients' specific requirements.

With technology and data at the heart of the business, we use the full range of Microsoft Azure products and services to make APD's digital solutions accessible and provide a SaaS (Software-as-a-Service) solution in the cloud. Microsoft Azure is the world's most recognised cloud platform (Gartner 2021), giving our products the highest levels of commercial data security with full data encryption.

In addition, it enables APD to deliver its service anywhere globally and allows our clients to access it from most browsers with no additional IT investment needed.

Another great quality of APD is our continuous commitment to innovating and improving our products and services. We invest heavily in product development using the latest technologies to simplify useability for our clients. Our technical team takes into account the users' feedback to regularly upgrade (Quarterly) our products with new features, functions, and capabilities. Plus, we are always looking to innovate with new, cutting-edge products and grow our portfolio. For example, we have launched new applications and SaaS services for Budgeting and Forecasting (ProfitPlanner+), Data analysis and reporting – Data Warehouse (multi-source data aggregation) with Power BI Integrated Dashboards, with APD Data Explorer being introduced later this year. Further products are being built as part of APD's business Roadmap for 2023.

The company was originally founded in 2006 and had a successful track record of growth, supporting its applications in over 80 markets worldwide. Being part of Ed White’s Group gives it access to resources and facilities in major global markets, supporting our goal to become a market leader in new technology application and data analysis for automotive business performance.

What's so exciting about its offerings?

The emphasis on performance. We are the type of business that pulls together in the same direction. Everything we do, whether deploying a new product, using recognised and leading technology, or investing in our staff, is engineered to support our clients in optimising their performance at all levels. Since profitability is critical to sustaining long-term growth, we develop solutions that can ingest different types of data (financial, transactional, static) to provide (subject to the data) 'drill-down', comprehensive insights on the performance and growth potential of a business. Doing so can help them address business challenges and perform more effectively, returning to and optimising profitability.

Are OEMs following a particular trend to make franchisees more profitable right now?

No, I don't think so. Dealer profitability is not the main focus for most OEMs, as dealers are generally performing much better than before, largely due to the trading conditions of the last two years. New vehicles continue to be in short supply due to the shortage of Semiconductors and other components, which should start to rectify itself in 2023 as new vehicle capacity increases. In addition, consumers are facing the dilemma of what type of new vehicle to buy — Electric, Hybrid, Petrol, Diesel — and waiting longer before making a purchase, impacting sales volume. As a result, dealers are focused on used cars, which are consequently in high demand and generating higher returns.

This scenario has forced OEMs to focus their attention on their own business, reducing the cost of their own operations, investing in product developments, restructuring their teams and processes, and identifying, evaluating, and trialling new market approaches — from the use of digital platforms, building new sales relationships to evaluating and in several cases, implementing the Agency model.

What are the most significant challenges affecting dealerships' performance in today's climate?

Dealers are seeing a huge demand for used cars, and some are even achieving record turnover and profits. However, as we move into 2023 and new cars become more readily available, the high prices in the used car market are predicted to fall. With the used car dealer margins currently enjoyed, later this year and 2023 may well see the market become more challenging with a reduction in profitability.

Also, while new car supply continues to be an issue, dealerships are now finding it extremely difficult to acquire quality used vehicles, which means they may not have sufficient customer inventory, which will impact sales and profitability.?

In addition, Covid had a significant impact on staff levels. As a result, many people have left the industry due to the trading environment over the last 2-3 years, and dealerships are struggling to find high calibre, reliable staff to replace them. As you can imagine, with the increase in sales driven by the used car sector, having too few staff can affect the quality of customer service — a less than ideal situation for a service-oriented business.

Finally, while sales are booming, it can be hard for dealers to stay on top of things and maximise profits across all parts of their company. Subsequently, many don't deploy and adhere to 'best practice' in terms of the business processes they operate, creating many lost profit 'opportunities' for their businesses.

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In today's changing landscape, OEMs and dealerships must adapt their business to meet every challenge and explore every opportunity to maintain and improve profitability.

APD uses advanced technology, data insights, and best-practice business management know-how to evaluate performance, spot growth opportunities, and improve efficiencies between OEMs and their franchise network.

Those in the automotive industry or other sectors wanting to perform more effectively to maximise profitability can learn more about APD and its services on apd-group.com or follow them on LinkedIn.

---About the author??

John Waring became CEO of APD after its acquisition in 2018. He has invested his working career in IT, using technology for business advancement and transformational change. He has ambitious plans for APD and sees a unique opportunity to position the company as an industry leader in the application of new technologies to improve processes, drive change and optimise business performance across multiple international markets.

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