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Insight: Autoretailing Conference - Extended conference report

This year’s Autoretailing conference, organised by AM and the National Franchised Dealers Association, proved to be a mine of information, inspiration and innovation.

Attending dealers, manufacturers and repairers were presented with best practice ideas on contemporary issues, such as changing dealer-manufacturer relationships, online marketing, customer service demands and business start-ups.

The Road Ahead - James Bellini

Inflation, debt and rising house prices are placing the UK economy under pressure, and as we enter the first post-carbon century the factors shaping our future are already in place, according to analyst James Bellini.

The credit crunch follows a string of seven financial crises since 1987, and Bellini said consumers never learn from their mistakes, adding that in two to three years they will be back to the same mistakes.

Treasury predictions for GDP growth have been way out of line for the last two years, with around half of the economy taken up by retail and finance industries.

At the same time, house prices have grown dramatically, tying up two thirds of consumers’ financial assets, £3.9 trillion, in their home. The UK also has a much higher ratio of mortgage debt compared to GDP compared to other European countries.

This is starting to turn around, with a 68% drop in mortgage availability in April 2008 and predictions of a 30% fall in house prices on the horizon.

“For the first time personal debt is bigger than the economy, we’re borrowing our way into an affluent lifestyle,” he said.

The UK also has a rapidly ageing population, with centenarians expected to grow from 9,000 to 40,000 by 2020. This will push down savings ratios, and cause a $30 trillion drop in financial wealth by 2024 pushing the US and Europe down to a second level power by GDP.

“Affluence grew 600% in the twentieth century,” he said. “We’re nowhere near a recession, but we’re due a bumpy ride until confidence picks up.”

The Block Exemption Regulation - John Clark, European Commission

The European Commission is committed to reducing the complexity of European legislation and is considering dropping the motor industry Block Exemption Regulation 1400/2002 or at least simplifying it when it expires in May 2010.

John Clark outlined points from the recent evaluation report, which suggested that the Commission regarded a number of elements of the BER to be redundant, as they are covered by other aspects of EU law.

When the regulation was determined, ahead of its introduction in 2002, there was still significant price variance between the markets in individual European Union member states, carmakers were obstructing consumers from buying abroad, and the concern was that there was no level playing field to create competition and a better deal for consumers.

Now the Commission believes that competition has improved in a number of areas.

There are more new car brands on sale, the spare parts market has improved and independent repairers are competing better thanks to access to technical information.

“When we regulate we respond to market conditions so when the market is doing better that corresponds to less regulation,” said Clark. “Where there’s scope for simplification we must simplify.”

Some of the improvements have been driven by market demands, rather than the regulation.

In addition, the Commission believes elements of the BER have not been acted upon, such as standalone sales points with sub-contracted repairers, and so could be redundant.

Clark said the Commission is also concerned that BER led to carmakers increasing their standards, and dealers’ costs, to protect their brands.

“We see the Block Exemption Regulation as being over-strict and over-prescriptive and this has led to some sub-optimal results,” added Clark. #AM_ART_SPLIT# Analysis of the BER Report - Miles Trower, Osborne Clarke

Failure to give the motor industry another specific Block Exemption Regulation in 2010 could lead to uncertainty and conflict among manufacturers and retailers.

Miles Trower, competition lawyer and adviser to the National Franchised Dealers Association, suspects that if the industry is left to rely on the General Block Exemption Regulation (GBER), vehicle manufacturers may be able to exert more pressure on their franchised networks.

Trower said the evaluation report indicates the Commission sees no need for a number of clauses in the current motor industry BER, and what will remain will be covered by other regulations.

But he is concerned that the changes would not protect dealers’ interests.

“I believe it is risky to attribute the improvements in the market to non sector-specific Block Exemption entirely,” he said.

“Competition is working. The question is, if competition is working do you get rid of the regulation under which it is working. Is getting rid of the Block Exemption like taking away the sledgehammer that cracks several nuts?”

Trower said reliance on the GBER and a patchwork of legislation might make dealers reluctant to invest in their franchises as they could be less certainty of their rights. It could also make it costly for dealers to fight their corner.

He suspected an issue for the Commission is its lack of resources. The team working on the motor trade Block Exemption is small, and other matters such as cartels and major investigations are a higher priority.

He urged motor retailers and repairers to share their concerns with Brussels. “The European Commission is only likely to change its mind if there are compelling reasons for it to do so,” he added.

Customer loyalty - Mark Lavery, Cambria Automobiles

Mark Lavery, CEO at Cambria Automobiles, believes having the right staff that are correctly trained leads to world class customer loyalty.

Cambria Automobiles was catapulted into the spotlight when it acquired both Summit Auto Group and 14 sites from Caledonia Motors in January.

In 10 days, the move took the company’s turnover from £40 million to £300m.

Cambria inherited a lot of dealers in the expansion and it was Lavery’s job to analyse these new businesses and lead by example.

He used Grange Jaguar Swindon - a loss making business in the year before its acquisition by Cambria - as the case study.

Lavery’s “guest delight” programme was introduced which included mentoring staff with corporate philosophy meetings and developing a one to one customer relationship strategy.

He said: “Celebrate success, but when things are wrong you have to admit it and find a way to figure out what you need to do to turn things around.

“If you do go wrong all you have to ask if for one chance to get it right. The single biggest restriction to our own growth is ourselves and what we except.”

Grange Jaguar was taken from a 4.5% net profit loss to a 4.1% profit gain under Cambria’s first year of ownership.

Lavery, who started out as a service receptionist, believes businesses should be a data driven meritocracy, where everyone deserves a chance at promotion.

He calls staff his associates and customers his guests and the business operates without a head office and doesn’t have tiers of management.

Lavery said: “Each associate should have the autonomy to make decisions that affect the running of the business and it’s important employers make it possible for their associates to achieve their ambitions.

“If your associates feel empowered they will be happy to go that one step further for you in providing world class service to customers and willing to exceed expectations.” #AM_ART_SPLIT# Internet - Adrian Joseph, Google Automotive

Potential car-buyers are twice as likely to research cars on the internet than go into a dealership, said Adrian Joseph, Google automotive director.

While searches for used cars on the internet are more common than new cars, most purchases across both sectors are initially researched online.

The perception that dealers hold the power has changed because of the internet, said Joseph – consumers now feel they have much more control.

By going online, customers discover and are receptive to new brands, unlocking the marketplace. It also means, often, buyers have decided the car they want before they enter a dealership – They no longer need to be given the hard-sell from sales executives.

Consumers are making decisions much faster, perhaps fuelled by all the information about cars online. Half of potential buyers have decided and purchased a car within a four week period.

Over two-thirds of online researchers use a search engine, rather than going direct to a dealer website or through email links.

Forty per cent of those using a search engine will discover new brands this way.

Joseph added that despite the online world being consider a virtual reality, “very real decisions” were being made on the internet.

Online advertising is now ahead of classified adverts in conventional press – The automotive sector of Google is the second biggest in the company.

However, while consumers research online, they do not take the next step, for example, test drives, online, preferring to telephone a dealership.

As buyers grow their trust in the internet, this may change which would be money and time-efficient for dealerships.

Customers and the internet - Annette Sykora, chairman of America’s National Automobile Dealers Association (NADA)

Dealers in the USA are facing similar issues to those in the UK, such as a rapidly changing new car market and more demanding customers.

New car sales across the Atlantic are at their lowest since the late 1990s, and motorists are shifting fast towards more fuel efficient vehicles.

In a tough market it is essential for dealerships to work harder at winning and keeping custom.

NADA helps its members identify new revenue streams and reduce their costs, even offering a consulting service which has helped more than 400 dealers so far.

From working with US dealers, NADA’s Annette Sykora has identified one area for attention at many motor retailers - their website.

The majority of customers do their new car research online before visiting dealers.

However, when Sykora, the third generation head of her family business, Smith Ford Mercury, asked her staff who their nearest competitor was, very few said it was the dealer one click away on the internet.

All dealers keep a regular check on their own premises to ensure everything is in place to maximise the sales opportunities.

However, Sykora asked whether all motor retailers’ do the same with their websites.

Simple principles should be followed – is it appealing, welcoming, and does it meet the customers’ needs.

Sykora recommended setting an e-business strategy, with input from all departments of the dealership, which ensures it is regularly updated.

Customer testimonials praising the products and business can be useful. Sykora said dealers could learn much from online retailers such as Amazon.

Other marketing should be maximised too, such as discounts for loyal customers and events.

Sykora gets involved in her local community, sitting on a committee which runs a project encouraging students into mechanical engineering.

As well as developing technicians of the future, Sykora has sold cars to fellow committee members.

She added: “If there’s a magic button to find and keep customers I’ve not found it yet. But we all know there are plenty of things we can do badly that keep the customer away.” #AM_ART_SPLIT# Turning ideas into reality - Michelle Mone, MJM International

“Business is the same whether its cars or bras,” said Michelle Mone, MJM International founder.

Ultimo, one of MJM’s brands, is the UK’s largest lingerie brand, and initially earned notoriety with its patented gel bras.

Since starting MJM 12 years ago, Mone has been called names by Rod Stewart, hung up on Saks Fifth Avenue because she thought it was a friend joking and lost £1million to a distributor fraudster.

Her latest coup is a range with Mel B, which has resulted in pictures of the scantily-clad former Spice Girl on front covers worldwide.

At 12 years old, Mone had a group of teenagers working for her delivering papers.

The work ethic continued, and when she was made redundant at 24, she decided to invent a brand and Ultimo was born.

Since then she has hired and fired Penny Lancaster, Rod Stewart’s wife, as a model, before employing his ex Rachel Hunter and two daughters Ruby and Kimberley in a similar role.

She has given £1m and a lot of stock to a supposedly reputable US distributor, so see it run away with everything – a matter she is still sorting out in the Canadian court system.

And she has appeared on The Apprentice, GMTV and Coleen’s Real Women.

Mone believes “if you have the focus and determination to look outside the box, you can achieve anything”.

She said that she is never happy with what she has got, and pushes herself to the limit: “When you launch a product, you have to be thinking what’s next.”

Working alongside her husband, Mone added that if she ever woke up without a smile on her face, then she would “hang up her bra and move on”.

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