In total, these own 352 sites, which is 5% of the UK’s bodyshops. Consolidation of body repairers is still at an early stage.
The difficulties of consolidation in the UK surround return on investment. Bodyshops have a minimum requirement for premises and equipment, which has grown rapidly because of regulation and new technology. Then there is the pile of cash needed to fund work in progress and debtors.
However, bodyshop net profits have been falling as a percentage of sales and now average less than 3%. As a consequence of falling profits, and the ever greater need for investment, return on investment is now less than 10%. At these levels, investors are running for the nearest building society.
This has meant slow consolidation, with few companies benefiting from economies of scale. A group can command huge discounts on everything it buys – parts, paint and materials, equipment.
And when it comes to management, bodyshops in a group can share the necessary expertise and afford to employ the very best.
Of course, small to medium-sized standalone bodyshops could see consolidation as a real threat. Many of these mainly independent bodyshops are struggling to make a living, and the last thing they need is competition from groups with massive purchasing power and well-equipped and efficient sites.
Or do they? In the USA, consolidators buy ‘Mom and Pop’ bodyshops if the business can be developed. This has proved a godsend when ‘Mom and Pop’ decide to retire, because they get a nice pension.
If work providers want an effective body repair sector, they must do more to understand how bodyshops work financially and act to improve return on investment.
In the medium term, this could increase the cost of repairs. But if this encourages bodyshop groups, it could be a price worth paying. And in turn, bodyshops have to embrace consolidation rather than deride its failures.