A glance at Arbury Group’s turnover over the past decade suggests a business that has striven to maintain stability while riding a wave of consistent growth.

Over the past two years, that growth has been mostly organic – the last franchised site added to the group’s portfolio was a £400,000 Seat dealership in Solihull, in June 2016.

The group has also been actively shedding debt and its gearing hit a low of 31.2% in 2016, down from a high point of 66.7% in 2007.

New managing director Paul Goodwin is not keen to gamble with what appears to be an established recipe for success.

“I would do nothing to put the business and the staff we employ at risk,” said Goodwin, during AM’s visit to Arbury’s headquarters in Bromsgrove, Worcestershire.

“The culture we have at Arbury dictates that we do not have an ego and we don’t have a desire to grow just so we can say we have 20 sites in our portfolio.”

However, there is a sense that the business has established foundations solid enough to embrace some change and Goodwin, who has already been given the go-ahead to add a new territory for Seat, is happily coaxed into talking of acquisitions.

Arbury Group currently represents Citroën, Fiat, Nissan, Peugeot, Seat and Škoda and is poised to add another Seat location, but there are also more ambitious plans to grow the group from eight locations to 12 by the end of 2019.

Formerly Arbury’s operations director (he joined former managing director David Stenning and finance director Neil Barrett at the group in 2004, four years after its formation), Goodwin plans to grow a market territory that skirts Birmingham, taking in the West Midlands, Worcestershire, Warwickshire and Staffordshire.

None of this will come at the expense of profitability, however.

Goodwin said turnover of £116 million and return-on-sales of 2% during 2017 would be followed by a push towards 2.5% RoS across the group.

At least some of this will come from increasing efficiency.

“There are areas in which we can cut costs. I’ve challenged my team to save £100,000 across the year – which amounts to just over £1,000 per site, or £250 per department, per month – and I think that’s achievable simply through looking at basic cost-cutting measures such as energy usage.

“There is profitability in paint protection and other add-ons, which can also make a huge difference.

“I’m confident that we can push 2.5% return-on-sales in 2018.”

 

Building on existing relationships

Arbury will pursue growth with its established franchised partners.

“We’ve been given the go-ahead to establish a new Seat franchise, which will create a new market area,” said Goodwin, who refused to offer any more information about the planned site’s location.

There is certainly scope within the group for expansion with its existing partners.

Scale currently exists only in its Peugeot operations. The business launched with the French brand in 2000 and now has five outlets (Bromsgrove, Leamington, Lichfield, Nuneaton and Walsall), alongside Nissan in Bromsgrove and Nuneaton, Citroën and DS Automobiles in Nuneaton, Fiat Walsall, Seat Solihull and Škoda Leamington Spa.

Despite Arbury’s 4% fall  in new car sales to 4,796 last year – its Peugeot sales were down 6%, Citroën down 9% and Nissan down 11% as Fiat, Škoda and Seat all recorded volume rises – Goodwin said he was keen to grow his representation.

He said: “It’s all product-led, isn’t it, and I’d be really pleased to expand with any of our current brand partners, or the likes of Kia or Hyundai.

“You’ll never see us partner with the likes of Jaguar Land Rover or Mercedes-Benz. We could have four new sites with a volume brand for the price of one new facility with that kind of brand and some of the quality in the brands we currently represent is phenomenal.

“Look at the Peugeot 3008 and the new stuff from Škoda. I’d love to see us add another Škoda site, I really would.”

Despite the faltering volume of new cars in 2017, Arbury’s margin on them was £168 ahead of the previous year, up from £882 to £1,050.

The group grew used car sales to 3,961 last year, up 14% on the year before.

Goodwin said: “Last year was a very mixed bag, of course, but I think it did us good. After an amazing Q1, Q2 really was tough and caused us to look at all our costs.

“Manufacturer demands on staff and premises were really becoming too onerous and we were thankful that our partners really stepped back and agreed that it was time to address those issues and start looking really closely at costs within the business.

“Cost control will continue to be an important area. As long as things remain in the interests of the business and the customer, we need to cut out any unnecessary outlay.

“Profitability-wise, we’re doing pretty well. We made £2.18m last year.”

While Arbury’s manufacturer partners have been supportive, Goodwin acknowledged that there are likely to be changes within all of its businesses in the years to come as the rise of online retail and EV adoption bring their own pressures.

Goodwin said he was “truly impressed” by Nissan’s Leaf and “really excited” about the prospect of EVs with 200-mile ranges and every Arbury site will soon have EV charging points installed. In fact, during AM’s visit to Arbury’s joint Nissan and Peugeot site in Bromsgrove, a taxi driver was exercising his right as a customer to charge his Nissan Leaf taxi.

While Goodwin said he was happy to meet the needs of all his customers, he did concede that free charging at car dealerships may have to stop as adoption levels increased.

 

Acquiring the lifetime customer

Goodwin, who shares an office with Neil Barrett, Arbury’s finance director, and Leigh Franklin, the group’s marketing manager, said he spends less time in his dealerships than he would like.

“There’s nothing like greeting customers into the dealership by their name, really over-delivering on customer service and knowing that they’ll be back again. I love it,” he said.

In fact, Goodwin said he would be heading into the showroom in the days after AM’s visit, to sell a car to the grandchild of a customer he first sold a vehicle to at Evans Halshaw 30 years ago.

It echoes the ethos that Goodwin said he likes to imbue in his sales executives: “I don’t want to sell you this car, I want to sell you every car you’ll ever buy.”

Goodwin joined the Arbury business in 2004 when he invested money in a move from Rydale BMW to join group founders Stenning and Barrett. The trio had all worked together at Evans Halshaw. He described his investment in the group as “the best thing I’ve ever done”.

“There was a little heartbreak in leaving Rydale, as they were one of the best employers I’ve ever had, a really good organisation, but being at Arbury has been fantastic.

“I still love dealing with customers, seeing their reaction when they come to collect a car, and that passion to deliver a really good experience is what I’d really like to filter down into the team here.”

The group will never be the cheapest, according to Goodwin, but quality service and a quality product is where he feels the franchised retailer has to excel.

A mobile SMART repair service helps to ensure all used cars are of the highest standard, among a stock which will take in vehicles of any age or mileage depending on their quality.

“There is a reason why you can turn left or right when you get onto a flight,” said Goodwin.

“Three words: quality, fast and cheap. You can pick any two of them, but you cannot have the third.”

Goodwin is aware that, while his personal touch can still hold sway with traditional car buyers, a new generation of customers is demanding a more omni-channel buying experience.

Arbury has invested £100,000 in a new website through its outsourced marketing supplier, Leamington Spa-based Denfield, to deliver online service booking and allow customers to place a deposit on a used car via PayPal.

Denfield has also led Arbury in the use of pay-per-click (PPC) advertising, the tracking of HTML promotional campaigns and online customer insights.

Goodwin said the shift from newspapers to dominating the airwaves of local radio stations with its adverts came some time ago and he is now fascinated by the scope and data insight offered by online marketing.

A third of Arbury’s annual marketing budget is now spent on PPC. Goodwin said: “We know what pages are clicked, who opened a HTML and when.

“It’s ‘super-science’ that you have to embrace. It’s costly and impossible to compete with manufacturers on brand, but it ensures that you can win on market areas.

“The effect of PPC has been amazing. We get, on average, 33,800 visits to our website every month. It was 24,000 in 2016. We have a thing called completed goal, which is someone who follows up a visit with a test drive or service. In 2016, the average was 667 a month and it’s now 1,130.

“The challenge is the marketing on site, but we know who’s coming where, why and when.

“We can target all the local dealers and when people go into the showroom we can send them a message. That’s a little intrusive, I think, but that’s out there.”

Goodwin said Arbury’s make-up ensures customers get the very best advice on their purchase.

Solus managers at each site ensure there is no crossover between brands and video assets plug any gaps in their specialist knowledge.

Every digital device in an Arbury dealership can screen a series of videos explaining key model features, many produced by manufacturers, but some created in-house.

While Goodwin said Arbury’s Peugeot businesses have seen just two leads from Peugeot’s ‘Order Online by Peugeot’ online retail platform, launched in January last year, he expects the digital revolution to continue apace and that manufacturers’ direct interaction with customers will continue to transform the role of dealerships.

He said: “We won’t be called showrooms, we’ll be called experience centres.

“I’ve no doubt that we’ll go into a fixed fee programme. No doubt. They will control the transactional process, because it’s a nonsense. You can go into one dealer for this, into another for that. It should be ‘here’s the car, here’s the PCP offer’.

“I think manufacturers will say ‘you will do this and for doing that you’ll get this’.”

 

Cutting the waste in aftersales

As part of his drive to deliver further organic growth through efficiency, Goodwin is focused on aftersales.

The group currently achieves 100% absorption at its Bromsgrove Peugeot facility – a site with the scale to serve as the group’s centralised pre-delivery inspection (PDI) centre – while the current 12 franchised outlets across eight sites deliver an average 60.2%.

He said the CI demands of manufacturers account for expenditure of about £1 million a year within the group. This level of investment makes it impossible for multi-site franchised retailers to achieve 100% absorption, he said.

Attention to detail is key in making the most of what you have got, according to Goodwin.

“We sell 82,653 hours . If I can get £2-an-hour recovery rate, I don’t need to see more people or sell more cars, but I’ve just made over a £160,000 improvement. A lot of it is down to waste that needs cutting down, efficiencies achieved.”

He gave the example of his workshop technicians, who start work at 8am. They used to be allocated a job by 8.15am and had the car on the ramp by 8.30am.

“Now we make sure they know exactly what their first job is and the car is on the ramp before the end of the day. As a result, they start the day at 8 o’clock.

“If I lose half an hour a day per technician at every site, that’s four hours a day, £65 quid, £260 times 20. That’s five grand. So those are the bits that we call efficiencies.”

Goodwin, a former apprentice technician himself, described his workshop staff as “massively undervalued”, but would not reveal what Arbury pays them.

He said: “We’re lucky in that we have excellent apprentices who are technicians. Technicians are massively undervalued. Some of our master techs are geniuses. They are clever, clever people. They have an investment in tools of ridiculous amounts.”

Arbury’s dealer principals have also tried new tactics to get the most out of their workshop personnel.

“One of our DPs has what he calls his ‘chip night’ for his technicians,” said Goodwin.

“If he thinks ‘we’ve got a lot of PDIs’ he’ll say to the techs, ‘just go and do me one more each, I’ll get the chips, we’ll get them done and then lock up’.”

Arbury prides itself on a togetherness and team ethic among staff, according to Goodwin, who admires the “chip night” concept.

“Staff churn is just over 20% and just two managers left the business in 2017,” he said, adding that one was due to a relocation and the other a sales manager who “said ‘you know what, I just want to be a sales executive again’”.

Goodwin said he respected the decision of the member of staff who stood up and said they wanted to take a step back.

“He just said to himself ‘actually I was pretty good at what I was doing before’. I was the first to shake his hand when he took the decision.

“Put the wrong person in the wrong job and it can break them. I want a workforce that is happy in their work.”

Arbury currently employs 262 staff and Goodwin claims that his ambition is to ensure that Arbury is known as the best employer in the West Midlands, Worcestershire, Warwickshire and Staffordshire, as well as driving profitability.

“We have to be able to enjoy ourselves and be profitable,” he said. “It’s the way I’ve always worked.”