Resumption of normal service
Having said a few weeks ago that I was shocked that a month had passed since my last blog, I find myself another three weeks on in a similar situation. That does not mean that nothing has caught my attention recently, just that what has demanded my attention has unfortunately pushed the blogs down my ‘to do’ list. As most readers of the blog will be aware, I have been wearing two hats for the last several months, moonlighting as a wannabe dealer group head, whilst also keeping on top of my ICDP responsibilities. The two actually fit together remarkably well in terms of blending theory and practice, although I hope that nobody has ever felt that ICDP took an overly-theoretical approach – we are always very aware of the need for effective implementation of any great new idea in order to derive benefit.
However, as we now enter the summer period, things quieten down before the September registration peak in the UK car market and the resumption of our ICDP webinar and meetings programme. It gives a chance to reflect on the last few months and the period ahead, and this week, I will focus on the question that is most often on the lips of friends and colleagues when they see me – how’s the dealership business going? Next week, I’ll look at the other side of the coin in a blog with links to Archbishop Desmond Tutu. I will be sending a bottle of something nice to anyone who manages to work that link out! Please respond by email or in comments.
Setting up our first dealership, Auto West London Omoda Jaecoo, on the way to building a significant UK dealer group on behalf of our shareholder, Çetaş Otomotiv, has been a great experience so far, and I’m pleased to say is performing more in line with our Year 2 business plan, than Year 1. Clearly there are specific challenges in trying to establish a dealership with no previous trading history, but I think what is more interesting to readers of this blog are a few more general lessons learned for someone who has been closely involved in the dealer business and distribution more generally over many years, but is now ‘hands on’.
In today’s economic climate, there are clearly many more sellers than buyers. Being a relatively high profile start-up in an attractive market location brings out opportunities that would not otherwise be on anyone’s radar screen, at least until the deal is done. We have found that there are multiple established businesses looking for an exit, and the challenge for a prospective buyer is to determine what we can do differently that will yield a better result, or at least one with a lower future risk profile than the incumbent sees. In isolation, it is relatively easy to imagine a different future for a site, but the reality is that you do not have a free choice of franchises, either because of existing network plans or self-imposed constraints by some brands that they will not share with certain other brands or will only partner in sites that meet some pre-defined criteria. We therefore find ourselves with opportunities that don’t have an obvious positive solution and a showroom five miles from Hyde Park Corner that we will probably operate as a used car site because it won’t comply with a CI standard that real customers don’t care about. (Extensive ICDP research to support that). We’ll probably make more money that way as well, but that’s another story.
The second general point that hits home hard is the criticality of scale. We are fortunate that we have a wealthy local market with millions of people, many of whom still want to own cars. The British have also long since abandoned any preference for ‘home’ brands so the prospect of a great value product with a wide powertrain choice and attractive deals is creating a huge amount of customer interest. Omoda Jaecoo has been the most successful brand launch ever in the UK market, reaching 2% market share in just 9 months. Even as a single franchise point, that gives us the freedom to invest in good quality people, now with a total sales team of seven after less than five months of trading – and they’re all busy. I’m also able to hire specialists in other areas who are justified by the needs we face now, but will bring huge dividends as we add more brands and sites. I know how many hours I work, and cannot imagine how a smaller owner-operator can cope with the demands and opportunities from OEMs, F&I providers and marketing channels. That must be a lonely and stressful place, and it is no wonder that so many smaller dealers face succession challenges. Scale at a site level and with the near term prospects of further growth, give us the opportunity to create a structure that can manage the complexity and allow me to focus on developing and managing, rather than doing.
Complexity also relates to my third general lesson learned. Our used car and aftersales businesses are still in launch and pre-launch stages, yet there is still a huge amount of bureaucracy in the background that will not feature in any conceptual dealer business model. We often focus on unequal power relationships between dealers and manufacturers, but I have spent more time trying to meet the demands of financial institutions than I have on current and potential OEM partners. For organisations who turn a profit by taking a risk (or should do) they seem determined to remove risk in every form, but still turn a profit. I do not want to think about the hours that I have spent producing models and writing policies and procedures that are in my view academic, for banks, insurers, card processors and lenders. We want to sell and service cars (something that the manufacturers understand), we want happy customers, and we do not want to go to jail. We will ensure that we do that by hiring good people and managing them appropriately. If we ever have to turn to a policy in order to determine whether we have done right or wrong, then I will have failed.
Taking stock at this stage, am I happy to be at the sharp end? Absolutely! Will I be able to demonstrate that I can walk the talk? I’ll let history (and our shareholders) be the judge of that. Next week – Desmond Tutu…