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Don't rule out the supermarkets yet, says ROCE expert

Claims that supermarkets will not enter car retailing because margins are too low are based on a myth, according to a leading analyst. However, he still believes few companies will consider entering the sector because it doesn't sit well with their methods of operating.

Piers Trenear-Thomas, client services director at Grant Thornton Motor Retail, says the top motor retailers are enjoying returns that far out-strip the margins achieved by grocery supermarkets.

“If supermarkets look at the best dealer groups, they will realise they can make a lot of money,” he adds. “But most look at the industry averages and the bigger players rather than the regional specialists.”

Over the past four years, the top 10 dealers by return on capital employed achieved an average rating from 20 per cent to 30 per cent. The top 20 regularly achieved 20 per cent ROCE, while supermarkets averaged eight to 15 per cent.

“Supermarkets are most likely to look for retailer alliances with a focus on finance,” says Trenear-Thomas.

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