Pendragon decision shows difficulty for franchises versus independents

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This week’s news that Pendragon is closing 22 of its Car Store supermarkets has put a sharp focus on the challenges facing large franchised dealer groups. One of those challenges is trying to win a larger part of the used car market from independents to compensate for dropping new sales.

It is to shut 17 ex-franchise conversions and five small-format locations which average stock of 30 cars. The shrinkage policy means that 22 of its 34 sites and one prep centre will be shut over the coming months as it deals with the twin problem of having too many cars for sale and some Car Store websites not delivering the profits needed to justify the cost of opening their doors.

It has also taken the axe to used cars at its franchised dealerships. At the end of the last financial year it had £375 million in used cars but by the end of H1 this year that had dropped to £236m, a cut of £140m.

However, it is confident that going forward the Car Stores should have a strong and healthy future, ideally targeting cars and vans between two and seven years old which is a market it says has an annual sales volume of around 3m units. Pendragon further says that Car Store is aiming to deal primarily in two to seven years old vehicles.

Short-term actions to improve performance

In a statement released on Wednesday, it said:

“The Board initiated a detailed strategic and market review of the Car Store business and the challenges it has faced. This review confirmed that there continues to be a significant and attractive market opportunity for Car Store, however, a number of short-term actions are required to improve performance, including a number of site closures.”

Chris Chambers, Non-Executive Chairman, added:

“Whilst market conditions have been challenging in the first half of 2019 with headwinds in both the used and new car markets the Group has continued to deliver like-for-like revenue growth. However, there has been a material decline in the Group’s profitability principally as a result of the actions taken to address excess used car stock. We made significant progress reducing this exposure in the latter period of the first-half and we remain committed to the strategy of growth in the Group’s used car proposition. The business is fully focussed on maximising performance, but we expect the market to continue to be challenging during the second half of 2019.”

For information on Click Dealer’s services please contact the Clickers either via [email protected] or 01782 478 220.

 

How to buckle up and thrive in the declining automotive market

High Customer Service Demand
When the motorway is clear everyone gets to where they want to go. But all of a sudden, there’s some roadworks, a broken-down vehicle, an oil spill… and the motorway grinds to a halt. Anyone who knows how to sell cars benefits when things are going well, but knowing how to navigate when traffic slows down is the key to success.

Those dealers who understand the importance of customer relationship management using a controlled CRM – driven by accurate and valid data – allows them to stand head and shoulders above the rest and continue to grow by keeping their retention rates high.

By sticking to strict processes and principles, you can nurture your customer data and vastly increase your retention rates. The most difficult sale you can make is to a new customer. It’s also likely going to be the least profitable initially – minus your marketing costs, the possibility of paying for things such as a referral fee or doing a really good deal to get them to sign. These customers are also unreliable, most likely to cancel, and likely to expect a flawless customer journey.

Do I Have Your Retention?

The answer to selling in times like these is simple – your CRM. If you can maintain a strong retention rate from your customers, then you won’t ever have to worry if new enquires dry up slightly. Make sure you keep track of when customers have finance expiring, warranty expiring, services due, and target them with a simple text message, a more formal email or letter, maybe even follow up with a phone call. By doing this, you’re maintaining that customer relationship, and you’re hopefully reminding these people before they start thinking about competitors.

Year on year, you can keep adding to your CRM, and if your retention and customer care is the best it possibly can be, you’ll grow into a very successful business. Always ask yourself if a customer is unhappy – how much would it cost me to replace this customer? If this customer buys a car every three years, has his servicing and MOT done with your dealership, you could be losing thousands of pounds in income. It’s easy to think, another customer will walk in to replace them, but who knows if they will be as loyal, have their servicing done with you or maybe at their mate’s garage.

It’s worth doing what you can, within reason, to persuade a customer to stay. If they’re unhappy with the condition their car was returned in after a service, give them a free valet, and leave them a nice present in the car as well when they come to pick it up. By being memorable and caring about your customers, you can build the perfect sales machine that you’re guaranteed to keep selling to year after year.

For information on Click Dealer’s services please contact the Clickers either via [email protected] or 01782 478 220.