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Dealers facing battle to retain market share

Reforms to Block Exemption will herald an era of revived competition in new car retailing, allowing a spate of new players – including supermarkets - to flood the market with the consumer ending up the biggest winner.

By 2003 car dealerships will have to fight to maintain their stronghold on the market in the face of an 'avalance' of new players. A third of new car customers say they would buy a car from a supermarket and half from autocentres like Halfords or Kwik-Fit.

Results from Datamonitor's second annual interactive consumer survey, Impact 2001, reveal that consumers are using the internet for researching automotive products far more than it is used for other products, “highlighting the massive potential for automotive sales”.

Laurence Stock, Datamonitor automotive analyst, said: “Until now the primary use of the internet has been to conduct research and collect information. Online retailers have so far struggled to convince consumers to purchase goods online. However, the strong following the internet has created for finding out more about cars and car related products will inevitably lead to greatly increased online car sales. The majority of countries will experience growth rates of at least 100%.” Datamonitor says that, with the rise of the internet, manufacturers will move to the forefront of car retailing, where only independent retailers with strong branding and comprehensive networks, possibly including major non-car retailers, will be able to compete.

Datamonitor's research showed that more than 50% of consumers would buy a car from an autocentre like Kwik-Fit or Halfords. The second most popular source is a independent company such as Virgin, boosted by its strong brand name. 'Grocery multiples', Datamonitor says, are well placed to enter car retailing. In the UK, 27% of consumers questioned said they would purchase a car from a supermarket.

“If the Block Exemption reforms go ahead as predicted car retailing will undergo a rapid restructuring over the next two years. Car dealers must now re-evaluate their online offerings if they are to weather the storm of this increased competition, whilst at the same time being aware of new and unexpected players all eager to grab market share,” said Mr Stock.

In response to the survey's findings regarding the internet, Steve Evans, CEO of independent new car monitor CarPriceCheck, said the web will prove a greater influence on driving down new car prices that Government legislation.

Mr Evans said: "It's ironic that despite the Government's attempts to initiate a more transparent new car pricing policy through its New Car Supply Order, the internet has been significantly more successful in driving down prices and increasing competition.

“In fact, you could go as far as to say that the web and those retailers willing to leverage its potential have been in control for much of the past 12 months. It has been a real demonstration of how the market will always dictate the pace and direction of change regardless of regulations or supplier controls." Impact 2001 is based on 7,500 interviews in the US, UK, France, Germany, Spain, Sweden and Italy

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