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'Look to Wal-Mart for future of automotive retail' – JD Power

American retailers are facing similar attacks on the franchise system as their European counterparts. One US analyst believes multi-franchised retailers will be a common sight within a few years.

Dave Power from the influential JD Power organisation, writing in the Wall St Journal, believes retailers should look to Wal-Mart, the discount food and general merchandise supermarket chain, as an example of how different brands can be sold alongside each other.

Wal-Mart, parent of Asda in the UK, also has a car buying club and fast-fit network, which it does not rule out launching in the UK.

“The franchise system was designed in part to preserve manufacturer control over distribution and pricing, while entrusting sales and service to local entrepreneurs who would do it best,” says Power. “To counter-balance control by the vehicle manufacturers, dealers joined forces to enact protective state franchise laws.”

He believes the market is paying heavily for those controls, which add around 30 per cent to the cost of a vehicle. He is also critical of sales staff who, he says, are responsible for a quarter of lost sales.

“Franchise laws are overdue for overhaul, and increasing numbers of multi-franchise dealers, who suffer greatest from the inefficiencies of the current system, would like to lead the change,” adds Power. “The current system hardly serves or satisfies anyone.” His comments have been dismissed by NADA, the US dealer association. Chairman Alan Starling, accused Power of basing his predictions on “factual errors, misleading statistics and plain fiction”.

Michael Jackson, chairman and CEO of the AutoNation motor retailing group, says the claims are “fraudulent and misleading”. Rather than costing the consumer 30 per cent in additional distribution costs, the current system added just seven per cent.

After removing overheads, AutoNation is left with a one per cent profit on new vehicle sales.

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