Considering the scale of investment now required for new or upgraded dealerships, there must be unshakeable confidence that showrooms will remain the principal channel through which consumers source their vehicles. For along with the decline in the number of franchised agreements, an increase in manufacturer involvement through ownership and, not least, a flurry of takeover activity, the relocation of outlets from city centres and other congested hotspots to out-of-town and edge-of-town sites has been a defining characteristic of the recent vehicle distribution scene.
It helps, of course, to have deep pockets or a rich parent. Sytner – acquired in 2002 by United Auto Group, one of America’s leading dealer groups – has been one of the biggest spenders. In April of last year it continued its ‘super site’ strategy by consolidating two medium-sized BMW outlets into one development on the outskirts of High Wycombe at a cost of nearly £20m. Construction has just started on a similar facility in Bristol for Mercedes-Benz.
For other dealer groups, the attractions of ‘critical mass’ come with sites which are multi-franchised. Charles Hurst’s 20-acre operation in Boucher Road, Belfast, is reported to be the biggest single-owned multi-franchised site in Europe and represents no fewer than 13 marques, most of which have a dedicated showroom and workshop. What is shared by all parts of the business is centralised accounting.
The site has become the focal point of the group’s distribution operations in the region and is reported to be within a reasonable drive-time for 70% of Northern Ireland’s population.
Marshall Motor Group is one of the pioneers of today’s preference for multi-brand selling from a single location. Its Cambridge centre, opened in 1995, features 11 marques, with a similar operation in Peterborough accommodating seven marques.
Consolidation of outlets is one outcome of the succession of takeovers, which poses a challenge for the new owners: will loyal customers be happy with a new name on the signage, or will they want the ‘comfort factor’ engendered by the old name? City Motor Holdings in Basingstoke has gone for a compromise, with Honda going under City’s name, while Citroen and Peugeot trade as Viking and Ford retains the Gowrings’ moniker.
Another permutation of the autopark theme is to be seen at Perth’s ‘Motor Mile’, where 15 brands are on sale through three dealer groups – Arnold Clark, Cameron Group and Pendragon – along with three independent businesses.
Although competitors, Motor Mile’s occupants co-operate in a number of ways. For example, they advertise together on television and there is a joint website (www.perthmotormile.com) with links to each dealer’s website. And, like the Charles Hurst autopark, they reap substantial economies of scale through central buying of commodities and services such as power and telephones.Though the population of Perth and its environs is far too small to support an operation of this size, the depth and range of vehicles on offer appeals to a much wider area and it is reported that 90% of people in Scotland are within a 90-minute drive. Camerons Audi reports that 70% of its customers come from outside the area, with some from as far afield as the south of England.
There are three main factors generating these supersites. First, central and local government planning policy is resisting the redevelopment of existing dealerships in towns and cities – let alone the establishment of new ones – because of issues related to space, parking and traffic. Councils are much more in favour of dealerships being relocated to retail parks and the fringes of urban areas, thereby freeing up land for more appropriate uses such as ‘affordable’ and retirement housing.
Second, many dealerships are on prime land capable of commanding a hefty premium from property developers. This is all the more attractive for long-established family-owned operations – particularly those which own the freehold – where the second or third generation would like to realise assets rather than struggle on with a low margin business.
Third, most vehicle manufacturers are pushing for plush new dealerships since they view this as crucial for the maintenance of brand values and hence for the long-term future of their market presence. Customers of upmarket brands such as BMW, Jaguar and Mercedes-Benz have come to expect a range of feel-good and added-value features including a grand entrance bedecked in chrome, marble, mirrors and potted plants, satellite TV, ‘free’ coffee and refreshments, leather seating and so on.
Even on a more practical level, supersites offer the attractions of easier parking and, in the case of multi franchises, the ability to view a wider range of products.
But with new-build dealerships typically costing anything between £1.5-£4m, it’s unlikely that the small and medium-sized retailers will have the wherewithal to keep pace with changes in distribution. It’s yet one more reason to expect continuing consolidation.