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Dealers “vulnerable" as market declines

Dealers who have been failing to sales prospect in the record new car market of the last few years are at their most economically vulnerable now - just as the market is starting to fall away.

According to research by Pinewood, the dealer management systems provider, dealers who have enjoyed strong sales often divert resources away from prospecting when times are good – but pay the price when the market cycle hits a downward curve.

Neville Briggs, managing director, says: “What we find again and again is that dealers who are enjoying strong footfall in an upward market often stop prospecting almost completely because they are so busy dealing with the enquiries from customers who come to them.

“However, when strong sales drop away in the motor industry, it usually happens quickly, as has been seen in January.

"These dealers have effectively set themselves up for a fall. Even if they start prospecting in a professional manner again right now, it will be some weeks or months before leads start to feed through again - that leaves a period when they have neither a strong market nor the results of their prospecting to provide sales leads. They are very vulnerable. Dealers in this position can be found in any major town or city.

"However, the dealers - roughly a third - who have employed prospecting all through good and bad times in the new car market are in a much stronger position and, commercially, are not suffering to anything like the same extent."

Briggs said that for some dealers, the new car market had been strong for so long that they had stopped prospecting.

“We have come across a few dealerships where prospecting is something that hasn’t really been undertaken properly for a number of years. Indeed, it is questionable whether some of these dealerships have adequate prospecting skills available. It’s a potentially dangerous situation.”

Pinewood research consistently shows that two in three dealers use outdated prospecting techniques or fail to prospect at all – and that these dealers also usually fail to see any growth in profitability during the preceding 12 months.

This study is carried out by Pinewood on a rolling basis and covers a database of 1,040 dealers contacted over 12 months.

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