“Adapt or die has long been a management maxim. But it has never been truer than for the small franchised dealer in today's climate. The storm clouds have been gathering for some time.
With the abolition of Block Exemption, which despite the many appeals is still firmly on the death row of European legislation, the smaller franchised dealer will no longer be able to rely on the support of its manufacturer.
Some manufacturers are beginning to prepare for the end of Block Exemption by investing in their own retail premises, either through partnerships with existing dealer groups or the outright purchase of entire dealer networks. Ford, for example has formed a joint venture partnership with a major dealer group, while Mercedes has purchased all Lex Auto Sales sites so that it can open its own retail outlets.
Manufacturers have also opened up direct lines of communication with customers, by-passing the franchised dealer who traditionally held this role. One of the major channels open to manufacturers is the internet which is becoming an increasingly popular means of buying new cars. With the removal of Block Exemption, manufacturers will be able to sell directly to any company that wants to buy their vehicles, as well as direct to customers.
Dealers will also face fierce competition from new entrants to the new car market, such as supermarkets or major high street retailers, who will be joining the queue for customers, both on and off-line.
This, coupled with the outcome of last year's DTI report which forces manufacturers to offer discounts to all bulk purchasers, but not, significantly, to the smaller player who does not enjoy the same level of buying power, means that profit opportunities in new car sales will be rarer than ever.
So where's the smaller dealer to turn? I believe that his salvation will lie in used car sales and that new car sales could become a marginal part of his main revenue stream. And with the breakdown of the franchise system in sight, the successful small dealership will be offering customers a range of different marques to choose from. Broad appeal, outstanding customer service and a flexible approach are key.
Just like the manufacturers, dealers need to prepare themselves for the winds of change NOW. That means extending their used car ranges, examining every profit opportunity, training sales staff and looking ahead to sourcing, marketing and selling more used cars.
It also means looking forward to forging new partnerships in this shifting trading climate.
Perhaps new cars will be traded like used cars some time in the future and remarketing companies, like GRS, may be able to pass on bulk purchase discounts to smaller independent dealers."