Welcome back to the Improve My Dealership blog brought to you by eTag, the dealer key management systems provider. We’ve decided to focus Improve My Dealership posts on exploring avenues to efficiencies and higher profitability for dealerships.

Stock levels may have risen too fast in last 6 months

After a record year for new car registrations in 2013, many have poured cold water on 2014’s prospects. The statisticians have been fretting about the rise of stock investment by UK dealers which rose 13% last year, tying up an additional £60,000 in an average dealership according to profitability specialist ASE.

The size of used car stocks increased by nearly 10% in 2013. ASE is watching carefully how this additional stock of cars translates into profit over the next six months. There is a real risk that the over-supply of used cars that has been building up in recent months will start to suppress prices which are currently commanding average gross profit margins of a healthy 12%.

Overall the average dealer made net profit as percentage of total sales of 1.4% last year, up from 1.02% in 2012. But the longer term picture, as outlined by ICDP in its 2013 edition of the European Car Distribution Handbook, is that both aftersales volume and value across Europe as a whole are declining, according to ICDP’s latest predictions:  https://www.icdp.net/our-services/publications/publication.aspx?pub=10052.

How will dealers buck this aftersales decline and where else will they be able to find sales and profit margin?

Business manager looks like a good investment

We believe the increase in sales over the last year now needs to translate into an increase in the sale of service plans for used and new cars to insulate dealers from potential falls in used car margins.

To this end, dealers need to look to hire a good business manager if they have not done so already. Trend Tracker points out that dealers employing a business manager have a finance penetration 5% higher than those that don’t. The fact that nearly three-quarters (74.2%) of all private new car registrations in the 12-months to September 2013, were sold with finance or leasing arrangements, says it all. PCPs and other personal lease products had a particularly strong year.

The signs are positive, as car parcs swelled last year so did absorption levels as more service plans were sold and after sales received a significant shot in the arm – increasing by several percentage points through 2013, boosted by marketing initiatives such as vehicle health check promotions; better tracking and retention of customers post-sale through use of CRM systems; as well as promotions of new car service plans and MoTs.

There has been widespread frustration about manufacturers’ wider application of fixed pricing for maintenance packages but dealers still found themselves able to vary servicing packages according to the age of the vehicle and cost of labour and workshop loading. There will need to be more of the same in 2014.

Interactive mobile revolution

The other big area of investment this year will surely be in improving the online buying experience. AM carried a piece last month on augmented reality which offers an easier way for prospective customers to look at the specification of cars and really get ‘under the bonnet’ of a potential new car online.

Augmented reality apps use the camera of a smartphone or tablet to overlay information, images, video and web links on top of static images or printed pages. Now that sales of tablet have exceeded 20m in the UK and mobile internet usage is set to surpass PC-based access this year, 2014 is surely the time to start planning for improving your online stores’ mobile browsing experience.

Website visitors are increasingly expecting to be able to click into 2D images and hypertext links to more information. In this context augmented reality views of cars displayed on dealer websites makes absolute sense so that the engaged customer can view specification details or upgrade options by hovering over the area of interest on the car and then clicking in at will.  It is also important to consider the customer journey from there so that, for example, once a car and series of upgrade specifics have been selected, the visitor can be taken through to an online order sheet to analyse the resulting impact on the total cost and monthly payments. Building up the online customer journey; by making it more visual, entertaining and joined up; will surely be a key goal for DPs this year.

Summary

Industry analysts predict that there are tougher times ahead for main dealers particularly in after sales volume and value Europe-wide. UK dealers will have to work harder than ever to stop customers moving their servicing to the independents.

As well as investment in engineers and equipment for their workshops; they will also need to look to hire business managers to focus more heavily on F&I; while also investing in improving the experience for online visitors, especially these coming in from mobile devices. It’s important to recognise that more than three-quarters of pre-sale research by car buyers is now happening online and the number of visits to dealerships per car sale continues to fall – now sitting at 1.4 down from 4.5 visits per sale in 2005. Customer buying habits are changing fast and dealers need to get with the online retail revolution fast or risk losing out.

What else do you think is important for UK dealers to focus on to avoid after sales volume and value declines which ICDP predicts? Do let us know.

Welcome back to the Improve My Dealership blog brought to you by eTag, the dealer key management systems provider. We’ve decided to focus Improve My Dealership posts (which we will issue every three weeks) on exploring avenues to efficiencies and higher profitability for dealerships.

During the last few weeks there has been a good deal of media attention given to National Franchise Dealers Association (NFDA) Trusted Dealers ‘10 Points of Difference’ for used car sales operations: http://www.trusteddealers.co.uk/10-points#point-9 which is gaining support across the dealership world ahead of a potential backing of the code by Which? (previously known as the Consumers’ Association) and Trading Standards.

The 10 points of difference are a great start. To summarise quickly, all franchised dealers that want to be in the Trusted Dealer scheme must prove the following:

1.       Nothing to hide: All cars must be background checked to avoid inadvertent trading of cars that have been stolen, involved in serious accidents etc.

2.       No nasty surprises: All cars must be bought legitimately and every vehicle is checked to make sure there is no outstanding finance on it. The dealer must own the vehicle the customer is buying off them

3.       Every inch. Every car: All cars must be subject to a full mechanical inspection and faults rectified before it is delivered to the customer

4.       The clock never lies: No ‘clocking’ of cars will be done. This is effectively theft as it is misrepresentation of the car by giving it a lower mileage than the reality. The result is often that servicing is not done at the right time and serious maintenance changes like cam belt replacement will be done late and put the whole engine at risk

5.       Try before you buy: All Trusted Dealers need to offer a proper test drive of the car they are planning to buy

6.       Passed with flying colours: All Trusted Dealers will make sure there is a minimum of 3 months MOT on a used car, many offer a full year’s MOT today.

7.       Not a care in the world: Trusted Dealers offer a warranty or guarantee with used cars so that if there is a problem shortly after delivery it can be taken back and rectified free of charge

8.       Trade in and trade up: Trusted Dealers must welcome part exchange and use that as a contribution to the purchase of your new car.

9.       See yourself in it: Every used car from a Trusted Dealer comes with a full professional valet inside and out

10.   No need to stretch: Trusted Dealers must offer you finance to purchase your car. All Trusted Dealers must also offer service plans which mean that you can budget your servicing costs monthly or even pay upfront as you purchase your car.

There are no doubts that the NFDA’s Trusted Dealers 10 Points of Difference scheme - if it is promoted well and the consumer is educated to look out for its badge - offers a great benchmark for best practice when selling used cars in the UK.

We liked it so much, we decided to take the concept of standards into our area of specialism – key management in dealerships - and apply them to see what high standards in dealerships’ handling of customer keys might look like.

We came up with the following, which we believe constitutes Best Practice Key Security:

1.       Remove all personal keys and give them back to the customer before taking your vehicle keys

2.       Label your key (ideally with your name and registration) so that it can be found if misplaced

3.       Replace your key free of charge if we lose it

4.       Store your keys in a secure cabinet whilst not in use

5.       Keep a secure audit trail of when and who used your key whilst with us

6.       Never keep your key with your vehicle unless someone is working on it

7.       Only allow authorised users to access to your keys

8.       Offer the ability to review the usage of your keys on request, in a fast and simple-to-understand way

9.       Return your key and vehicle to you in a timely manner

10.   Treat your key as if it was one of our own.

Once we had drawn up this 10 Point Plan for Best Practice in Key Management we were acutely conscious that for it to work we would have to persuade dealers of its value - as many of them may not immediately be able to offer all 10 assurances and might need to invest in training and equipment to achieve it. We also knew we needed a system for monitoring standards, awarding certificates and stripping dealerships of these certificates if they failed regular audits of their key management standards and policies.

In short, we realised fairly quickly that the sort of charter mark we were looking to launch only works if it is backed, enforced and marketed by a relevant standards body with a strong following just as the Trusted Dealers scheme is by the NFDA.

Do you think key management should have its own Standards Charter?  Would conformity to an agreed set of principles and processes help your dealership to stand out from the crowd?  Please feel free to post your comments – if there’s a positive reaction, we will set up and promote an official Key Standards Charter on your behalf. At the very least, what this exercise illustrates is that every interface with the customer in a dealership is valuable. Procedures and standards for all of these interactions need to be set with a view to meeting or exceeding customer expectations. And they need to be backed by an organisation the customer can place their faith and trust in.

That is why I was really encouraged to read in MTN a couple of weeks ago about how Jaguar dealers have come out top of the JD Powers Dealer Satisfaction Survey for the second year running: http://motortradenews.com/mtnb/050/#4/z , largely because they understand as Jeremy Hicks, Jaguar Land Rover UK MD said that their “dealer network is the most important point of contact we have with our customers”. The Survey recognises dealers for good service including friendly and efficient and value for money service. Dealers that want to sell more and hold onto more after-sales business could do a lot worse than drawing up and living buy a standards charter of their own for all aspects of interaction with customers.

We believe setting standards, living by them and communicating them effectively to staff and customers alike, is the bedrock of any customer service improvement drive in dealerships. More power to NFDA for its Trusted Dealers scheme. Let’s hope used car dealers nationwide continue to sign up and promote it.

We will return to many of these themes in more detail in future posts so please sign up for our blog or check back to this site or www.etagsolutions.com   for the latest thoughts and tips on finding routes to increased profitability.