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Motorpoint wants to end superstore v dealer war

Motorpoint of Derby is keen to develop aftersales relationships with local franchised dealers, despite a degree of conflict existing between retailers and car superstores. It believes they can benefit from increased business, both sales and aftersales, from the volume of potential customers who visit its showroom.

Director David Shelton said: “We draw in potential customers from outside the Derby area. Dealers should recognise this and see it as an opportunity to grow their own sales – not everyone who visits us buys a car.”

The business has facilities for PDI, servicing and cosmetic repairs, but uses several local dealers for major warranty rework and accident repairs.

Motorpoint, which retails new, nearly new and pre-registered cars, is proving that the supermarket concept can work – as long as the business adheres to a strict stocking policy.

Co-directors David Shelton and Gary Warren, veterans of Motorhouse of Cannock and the failed Car Group, launched Motorpoint in 1998.

Mr Shelton said: “Following Car Group's acquisition of Car Supermarkets, it was obvious the business was about to go down, so Gary and I resigned and started Motorpoint.” He blamed Car Group's stocking policy for the collapse, which left the car supermarket sector in a state of turmoil as investors looked to pull out.

“Car Group held onto cars for too long because they tried to increase the margin levels,” said Mr Shelton. “This left them with too many older cars and they couldn't raise the margins on newer stock to fund the losses.

“Nearly new cars is a volatile market – residuals drop quickly. The trick is to have few of these cars left when the price drops so you can react easily.

“We operate a 60-day policy – so if prices fall, we will alter ours accordingly – but our stock turn is around three weeks.”

Motorpoint has a 1,200-strong stock list of cars up to one year old, priced from £4,500-£30,000. They are sourced from UK rental and leasing companies, remarketing groups and mainland European dealers.

“There are always dealers who want to sell you cars,” said Mr Shelton. “Prices are cheaper because we are outside of the exchange rate mechanism, which makes our currency more volatile. There are also massive differences in tax.”

But the business does not solely rely on mainland dealers for its cars – UK retailers desperate to meet sales bonus targets are an important source for pre-registered cars.

“The greater the number of manufacturers, the greater the competition for sales and market share,” said Mr Shelton.

Motorpoint opened a second site, Burnley, Lancs, in December to cope with growing demand. It expects to sell 25,000 cars this year – boosted by around 3,000 sales this month – and turn over £250m.

“We have people travelling to Derby from all over the UK, including north Scotland and Cornwall, but not everyone is prepared to travel that far,” said Mr Shelton.

“The Burnley site is around 130 miles from Derby so it won't compete for sales, but it will increase the pull from Manchester and Scotland.”

He plans further expansion – in Bristol, Scotland, and one other location – but believes five or six sites, within 150 miles of each other is the optimum for the UK to prevent overlapping sales territories.

Land acquired next to the Derby site can accommodate 3,500 vehicles and will act as a central storage point for the company.

Motorpoint recently expanding into the “untapped” light commercials market. It sells around 70 vans a week across the two sites, claiming savings of up to 50% on dealer prices.

An agreement with BCH Vehicle Management means Motorpoint can offer contract hire, for cars and vans, at “much lower prices” than competitors, according to business and commercial sales manager Dale Bywater.

“Seventy per cent of the user-chooser light commercials business market is contract hire – now we have this ability,” he said.

Motorpoint's internet café trial scheme, introduced at selected Granada motorway services, has now ended. The cost – around £10,000 per terminal – made the operation unfeasible.

It now relies on its www.motorpoint.co.uk website, linked to the Channel 4 site, to attract business.

“We are receiving around 200 enquiries a day via the website, with another 7-800 phone calls,” said Mr Shelton. “We are converting around 120 calls a week into sales.”

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