By Craig Thomas

With the increased regulation of guaranteed asset protection (GAP) insurance, as of September 1 last year, the paint protection sector has emerged as an even more important profit channel for franchised dealerships.

Protective coatings can offer useful additional profit streams for dealers and it’s an area that could arguably be the most natural added value product that can be offered to consumers.

Protection packages can therefore be highly valuable – and a lot easier to sell than GAP insurance, since the Financial Conduct Authority introduced stricter regulatory controls. Indeed, these controls will have two major impacts on retailers, according to Mike Macaulay of AutoProtect.

“First, they’ll encourage dealers to widen the added-value product range they offer to every customer – and earn from a balanced performance across multiple products.

“Secondly, some dealers may switch their focus to paint protection as a non-regulated product. We have had great success in helping our dealers to develop highly compliant FCA sales processes for insurance-based products. However, some remain cautious and our Williams Paint Protection

has proved a perfect showroom product, because it is not insurance-based and has no FCA implications.”

Leading players in the industry are generally optimistic about the state of the market, with new product development, attention to customer service and a continuing emphasis on marketing paying dividends, as companies in the sector win new contracts with dealer groups and manufacturers.

Traditional paint protection products might not be the main growth area, though. Tribos Coatings managing director Russell Young told us: “I think the UK market is, certainly for paint protection, sort of saturated. It’s been around for such a long time that there are lots and lots of very cheap imports in the market. While there are some big players, the actual size of the paint protection market in the UK is scaling back a bit, if anything.”

“It’s a very competitive market out there and anything that brings the customer back into the dealership, particularly if it’s something that he wants, is worth its weight in gold” Russell Young, Tribos Coatings

AutoProtect’s Macaulay sees cause for optimism, however: “We see a bright future in paint protection. The growth in PCP finance means that customers are paying closer attention to the guaranteed minimum future value of their car and paint protection can help to support a vehicle’s future value.”

Whichever analysis is correct, companies in the sector are looking to innovation in other areas of protective coatings as a way of diversifying their offer and maintaining growth.

Tribos, for example, is winning new business for its Better View glass protection product, which Kia is using in the UK and across Europe. A hydrophobic coating that takes advantage of developments in polymer technology, Better View offers Tribos what Young describes as a “practical, quantifiable advantage” and additional safety.  He outlined the product’s advantages to consumers, saying: “We say to the consumer, you’re going to be much safer driving and there are all sorts of other benefits as well: for example, you don’t get as tired if the windscreen’s clean and it’s easier to drive at night.”

But it’s also a product with real advantages for dealers, thanks to the need to re-apply it every six months.

“Dealerships love the fact that come back. It’s a very competitive market out there and anything that brings the customer back into the dealership, particularly if it’s something that he wants, is worth its weight in gold. People are choosing cars by looking at prices on the internet. They are very rarely going into the sales environment, so this type of product, which has been developed to improve the process of hanging on to your customer, is much more relevant today. It’s the sort of next generation to the plethora of paint products that are out there.”

Supagard is another company that is innovating beyond paint protection, recently launching its Leather Preserver product. In what the company claims is an industry first, Leather Preserver offers a three-year guarantee and Supagard has seen almost all its clients offering it to new car buyers, resulting in approximately 100,000 units in the first year of sale. In addition to protecting against food oils and garment dye from jeans, it can give you peace of mind when you visit the local takeaway restaurant, as marketing director David Paterson told us.

“We had got a phone call from a customer who had a Porsche Cayenne, a brand new car with white leather interior. She had carried back an Indian takeaway in the back seat and it had spilled. Rather than wiping it up, she left it to the next day to contact the dealership to ask what she should do. They contacted us, so we told them to just give it a wipe.

“But the customer wanted one of our guys to go and have a look at it. We went, had a look, used a gentle soap solution and it wiped straight off. And bear in mind that there’s turmeric in the curry, which is a really harsh yellow. We all held our breaths, but it did what it was supposed to do.”

A greater focus on customer service, and supporting clients in the franchised dealerships with products that deliver, is also paying dividends for companies in the sector.

Victor Coutin of GardX thinks that is a vital component of its growth: “We’ve been in the market now for 13 years and we deliver what we call the GardX promise. When you start out and start delivering that promise, the news begins to spread. Thirteen years later, we’ve demonstrated unequivocally that we always deliver our promise and we make a significant difference to a dealer’s profitability. Hence why our client base is at the level that it is. We’re with Lookers, Inchcape, JCT600, Perrys, Cargiant – that’s because we’re proven. We have delivered exactly what we said  an increase in penetration and an increase in profitability.”

“We have delivered exactly what we said: an increase in penetration and an increase in profitability” Victor Coutin, GardX

And GardX is continuing to win clients with this approach. Coutin said: “We recently tendered for BMW. It wasn’t just the tender: it was also an intensive testing programme and, after 18 months, we won the tender, based on the history of our very professional account management and the performance of the product.”

Marketing initiatives have been another important component to the continuing success of the sector in the past year, with John Boseley of Jewelultra citing engagement with customers on social media channels such as Facebook and Instagram as important. This in turn helps expand its database of consumers, which can be used to drive demand and footfall into dealers.

Supagard has, meanwhile, expanded its marketing team, adding a photography studio and in-house design team to respond to requests for dual-branding or white-label products from manufacturers.

And sponsorship of a team in the British Touring Car Championship is proving successful for GardX, which has raised the company’s profile in the UK and beyond.

Whatever the reasons behind them, it seems there are a plethora of success stories in the sector over the past year with some impressive figures reported. AutoProtect, with its Williams-branded products, has seen 20% growth in the last year; Jewelultra also reported 20% growth; and Supagard saw strong growth well into double digits. Coutin told us that GardX had achieved volume growth of more than 40% year-on-year.

The one potential dark cloud on the horizon is the uncertainty surrounding the recent Brexit vote, as Supagard’s sales director Alan Graham explained: “Although the dust has settled on that a little bit just now, potentially – in terms of the retail car sales arena – there could be some knock-on effects. How to quantify that is a bit of an unknown, so that’s a potential challenge hanging over everyone.”

But external factors apart, confidence within the protective coatings sector is generally high – which can be only good news for dealers looking to this key profit channel for future revenue potential.