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The big picture: Be flexible on investment

Should manufacturers be a bit smarter in their approach to the marketplace?

In an industry as complex as motor retail and in a country with as varied a landscape as the UK, it doesn’t make sense for carmakers to operate just one franchise standard and bonus structure without taking into account personal circumstances – i.e. location.

A business in a rural area should not be asked to make the same level of investment in its premises as a city showroom where the number of chimney pots (to use old parlance) is far higher.

Not only would the returns on that investment take far longer to realise due to much lower sales volumes, even with the lower cost of land, but customers simply don’t expect to see a gin palace in small towns.

They expect to find friendly, helpful staff and clean, presentable premises.

“There have to be different standards for flagship dealers and rural dealers,” one retail boss told me.

“Manufacturer standards should be rational and appropriate to the area that the site is in.”

That sounds like a call for a return to the retail dealer strategy employed in the past by the likes of Ford and Vauxhall, but taken one step further.

Whereas Ford’s retail dealer strategy consists of appointing independent dealers that act as sub-outlets to a main franchise, sourcing their cars and parts from them, the call is for retail-standard dealers sourcing direct from the manufacturer.

The flip side to downgrading investment requirements in rural areas is offering dealers in high-cost city locations more margin potential. It’s something that HR Owen boss Nick Lancaster has called for in the past.

Target a rural location and the investment is lower, but the returns are also lower; invest in a city site and the cost is higher, but the potential returns are far greater.

The issue with these scenarios is that carmakers tend to like the simplicity of a one-size-fits-all approach.

But in today’s complex market, flexibility on dealer-specific investment and action plans, and individual reward schemes is more likely to yield results.

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