After its acquisition in January by franchised dealer Sytner, CarShop exits the ID50, in which it ranked 4th last year. However, under its new parent it is likely to expand into southern England and Northern Ireland.
The business has been in operation since 1999 and has five large retail locations – Cardiff, Swindon, Northampton, Norwich and Doncaster – stocking about 2,900 cars, plus a 15-acre preparation centre in Leighton Buzzard and an in-store MG Motors franchise that retails about 400 new cars each year.
Roger Penske, the chief executive of Sytner’s American parent, Penske Automotive Group (PAG), announced the intended expansion in a Q4 earnings call in February.
Penske said: “At CarShop particularly, we see a real opportunity in the UK. A place we might go is south and we might go to Northern Ireland, where we have some people and we have capability there.
“I think we’re going to probably want to populate UK and Northern Ireland before we go marching into Italy or Germany at the moment. Because of the language in some cases, it’s tougher for us to maybe manage that.”
Early in the New Year, PAG completed its acquisition of CarSense, a five-site used car supermarket business in America, in a strikingly similar deal to the CarShop acquisition.
Jonathan Dunkley, CarShop’s chief executive, will stay in post alongside his existing team – marketing director Leo Nelson, the former head of digital for Arcadia Group, operations director Kirk O’Callaghan, a former head of operations for Halfords, and Dunkley’s younger brother, James, who is commercial director.
Dunkley said: “We are thrilled with the opportunity to join forces with Sytner to further develop and grow the CarShop brand. With our combined resources, we can leverage digital technology, further develop our people and deliver a world-class customer experience.
“We believe the CarShop model is scalable to other markets across the UK and with the significant resources that Sytner has at its disposal we believe we have the opportunity to become the largest and most admired car supermarket brand in the UK.”
The latest deal makes Sytner Group the UK’s biggest franchised dealer group, knocking Pendragon off the top spot for the first time in 19 years.
According to the AM100 table of the 100 biggest dealer groups by annual turnover, Sytner generated almost £4.3 billion in 2015, £158 million behind Pendragon on £4.46bn.
CarShop was number four in last year’s ID50 and, although it does not appear in this year’s listing, it would have held its position with a 2015 turnover of £208.6 million. In 2014, CarShop generated £195m and it estimated it would make about £275m in sales in 2017.
CarShop had increased unit sales by 12.5% (to 20,418) and achieved a 32% fall in cost per sale (from £249 to £179) between 2012 and 2015, helping it to increase profit before tax by 113% in 2015 (to £5,003,000).
Darren Edwards, Sytner Group managing director, said: “Penske and Sytner are dynamic and entrepreneurial organisations, so we are always looking at opportunities to expand.
“This move is part of a wider, long-held Penske global strategy to diversify the business.”
Edwards said the predicted slowdown in the new car market was part of the reason for the investment in used car sales: “The strong new car market of the past three to four years is likely to slow down, whereas over the next three years the used car market will continue to grow, particularly in segment two – the three- to five-year parc – at something in the region of 6% per year, so the timing feels right to move into this sector in a meaningful way, with an operator who has already shown significant success.”
Opportunities for growth
Edwards said: “In terms of the potential to grow, CarShop’s successful business model is eminently scalable and we will be working with Jonathan and his team to roll out the model across a number of new locations in the relative near term, with the ultimate aim of creating a nationally recognised and admired retail brand.”
Edwards said CarShop would maintain its MG Motor UK franchise and would not be realigning its stocking policies to avoid competing with Sytner sites where they occupied a similar market area, such as Cardiff.
He said: “We really liked the geographical spread of CarShop’s retail locations (see map, overleaf) and actually weren’t concerned whether they were in towns where we had existing franchised dealerships. We were more interested in the scale and quality of their premises and the standard of the retail environment, which, in all cases, were excellent.
“The prep centre in Leighton Buzzard is also very impressive. In particular, we loved the photo studio.”
Edwards said many of CarShop’s principles aligned with Sytner’s, including its priority on gathering and using customer data.
Dunkley, who traded a place studying English at Oxford Brookes University for life on the forecourt in 2004, is not only building a Sell Us Your Car online offering to rival the likes of WeBuyAnyCar, but also added 12 data analysts to his team after he took over the business to ensure it was identifying the right stock.
CarShop also employs number plate recognition technology to identify and greet customers.
Edwards said he was impressed with the hi-tech approach that earned CarShop an AM Award for Best Dealer Website in 2015 (it is also shortlisted for this year’s awards –see page 18 for the full list).
“When you look at the amount of awards CarShop has won, you can see that there is a great deal of substance in the business, particularly in stock/sale data analytics and their progressive approach to the digital retail environment, where I believe they are class-leading and in many ways doing a better job than a lot of franchised dealers,” he said.
“It’s a key reason why we decided to invest.”