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Insight: Putting a gloss on profits

By Debbie Kirlew

 Need to know
- Customer appetite is improving as they look to preserve their car’s finish
- Margins of £200 per sale available to dealers
- Bundling products can create a value package
- Sales may count towards a vehicle manufacturer’s accessory target

In these days of cash conscious buyers and cheaper online options you would be forgiven for thinking paint and fabric protection products have had their day.

On the contrary, according to Lexus Edgware Road’s general manager Diana Mackinnon: car care protection products are essential for dealers as margins are increasingly squeezed in a highly competitive market place.

Selling Supagard products, which also count towards manufacturer accessory targets, Mackinnon said: “Car care products are a good earner for us and a fairly easy sell. Supagard is an exceptionally good product so the sales team are upselling something of merit.”

Supagard’s fabric protection retails at £399 + VAT at the dealership and Mackinnon thinks they have the pricing exactly right, having first given it a price tag of £500.

She said: “We’re not making a killing with add-on products; they are simply enabling us to claw something back from squeezed margins helping to replace what used to be through the metal profit.”

To further boost add-on sales Mackinnon has combined Supagard with GAP insurance and tyre and wheel insurance Complete Wheel Protection for a total price of £1,100, saving £100, which has proved to be a “winner”.

Sales targets

Sales executives at Lexus Edgware Road, part of the Jemca Group which represents Lexus and Toyota in and around London, are tasked with a 40% penetration on all add-on products. As standalone products, Supagard and GAP would achieve around 35-40% for the team while Complete Wheel Protection, a relatively new offering, achieves 18-20%. The combo package is already performing well at 32% and Mackinnon expects this to improve.

Mackinnon thinks the products’ growing popularity is literally a ‘sign of the times’. Customers are demanding quality products and are attracted to offers like the combo package as well as being more open to protecting their investment while sales teams need to exploit other avenues to boost both the bottom line and their own commission.

This position is backed up by Christina Ewbank, general manager at Mercedes-Benz Eastbourne and Brighton: “Without a doubt paint and fabric protection provides a valuable revenue stream to the retailer and offers the customer genuine protection for an expensive asset.

“Customers are spending a lot of their money on our cars so are eager to do everything they can to protect their vehicles and as a business we need to make sure every revenue opportunity is exploited. We are not only creating more revenue for the business and additional commission for the sales executive, but the customer is purchasing a high quality product that’s well worth the money.

“For us, it is an excellent revenue booster which we can’t afford to lose.”

One of the newest players in the field is Paintseal Europe (PSE) whose G-3 Glasscoat paint protection product has already established itself as a serious contender, impressive considering the company launched in 2008 just as the recession began to bite. The glass-based product is formulated differently – a ceramic hardened glass finish which bonds and cross-links to the paint surface to provide a protective hard coating – to traditional paint protection products.

Controlled access to product

PSE ensured the product is only available via the manufacturer, although a licensing structure now means it can also be sourced through Car Care Plan. Essentially, this controlled access – dealers can approach PSE direct, but distribution comes through the manufacturer in most cases – means the brand is somewhat protected from practices which are plaguing many other providers that are grappling with the appearances of their products on eBay at reduced prices.

Even without the eBay issue, PSE director Rob Collins admits it’s not all plain sailing.

“It’s very important during difficult times that dealers sell more of these types of products, but there can be a reluctance to upsell.

“Some sales staff can be so fearful of losing the deal that they shy away from trying to sell additional products. In fact, they are seeing fewer customers so they should be maximising every deal.

“Customers want to keep their new cars looking as new as possible for as long as possible so it makes sense to highlight these products and no one can afford to lose a £200 margin which is typically what these products offer.”

According to Collins, dealers using G-3 Glasscoat are experiencing an 80-84% repurchase rate while he says dealers are enjoying a penetration rate of 50-60% for new and 30-40% for used. One of Collins’ latest and most successful examples is Snows Group; having made the decision three months ago to use the product across its portfolio of franchises which includes BMW, Volvo and Toyota along the South Coast, it is already achieving a 70% penetration, up from its previous rate of around 30%.

Basingstoke-based multi-franchise business Alan Gibson’s experience is even better and general sales manager Ian Ainge said: “It has been phenomenal for us. With Fiat alone we’re up to 85% penetration on G-3 Glasscoat.

Customers see the xbenefit, there is fabulous margin in it and we see the benefit on cars coming back with it three years later. Most people who bought it once will buy it again.”

For Lance Boseley, UK sales and marketing director for Jewelultra, the company behind the Diamondbrite paint protection product, many of his dealer clients are taking advantage of the combination of margins and customer value.

He said: “We are finding dealers are becoming more focused on paint and fabric protection because they want to make more profit and improve customer satisfaction levels.

“Some of our dealers are making in excess of £200 per vehicle and obtaining penetrations of 50% on new cars and 30% on used. Sales people are seeing fewer customers so want to make the most out of the customers they do see.”

Black market demand

Diamondbrite is among several P&F protection products available online and, while prosecutions have ensued, it’s a headache for Boseley: “Unfortunately, there is a big incentive for people, particularly car valeters, within the dealers to steal the product and sell it on eBay. Like other companies, we have clamped down on that and over the past three months alone we have seen at least three valeters sacked as a result.”

Despite the eBay worries, the UK market has grown massively for Jewelultra and is currently worth about £2.5 million, equating to around 100,000 packs sold, up from around £2m and 75,000 packs in 2005. This year’s sales have increased by around 7% over 2011’s while export markets have also developed dramatically.

Chris Elvidge, group finance director at Drive Retail, who also heads up the Vauxhall Buying Group which includes six groups representing 60 dealer sites, has used Diamondbrite since 2003, while the rest of the buying group, which includes Pentagon, Thurlby Motors and Thurlow Nunn moved to the product in January 2011.

He said: “At Drive, we have had a long and profitable relationship with Diamondbrite and with its help have grown the penetration and income earned on this product to become a significant part of our overall F&I earnings.

“Diamondbrite is an excellent product that fulfils a growing requirement among customers who want to protect their car and preserve the resale value of their vehicle.”

For many dealers, then, these products can literally make all the difference to overall performance, customer satisfaction and sales executives’ earnings. 

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