Many dealerships and unbiased service centres have been discovering it laborious to make a revenue lengthy earlier than the COVID-19 pandemic hit, on account of their low margin, excessive quantity working fashions.
They relied on the effectivity of their distribution networks to maintain the forecourt shifting and switch round jobs as shortly as doable.
Now, because the post-lockdown pipeline begins to refill, there’s nonetheless time to do issues in a different way.
With most dealerships and unbiased service centres again up and working and working at close to regular capability in some areas, the main focus of the administration workforce is understandably on pushing by jobs, assembly buyer expectations and offering a COVID-secure office.
Nevertheless, there’s nonetheless time to place in place a enterprise restoration technique and make important operational and structural modifications, so long as they can act on choices shortly.
Implementing a well-considered rightsizing technique for instance, may assist them to spice up earnings and enhance their resilience by the restoration section and past.
Previous to the pandemic, many garages and repair centres had resorted to chasing quantity in a market that had slowed significantly, primarily on account of Brexit uncertainty and a dip in shopper confidence, which was affecting new automobile gross sales.
The rise in OEM recollects was eroding capability and making it tougher to service longer-term prospects.
Whereas nationwide service centres and dealerships might need anticipated to realize from the rise in recall exercise, the truth was considerably completely different.
Unpredictable demand was placing stress on the availability chain, undermining its potential to ship elements on a just-in-time or just-in-sequence foundation and this was slowing exercise down.
Simply two months after showrooms have been allowed to re-open, used car sales have come back strongly and demand for used inside combustion engine (ICE) autos particularly is outstripping provide.
In July, the worth of used vehicles rose to its highest degree since August 2018, and this pattern is affecting wholesale costs and elements availability too.
Pent-up demand for brand spanking new vehicles can also be including some buoyancy to the market and whereas this case is certain to profit some companies greater than others, enhancing revenues have not less than allowed slightly extra respiratory house to plan the best way forward.
There isn’t a time to waste nevertheless.
To emerge from the pandemic with a extra strong and resilient enterprise mannequin, dealerships and unbiased service centres might want to deal with some long-standing structural weaknesses similtaneously adapting to fulfill future market calls for.
Earlier than remodelling their enterprise for the long run, it is smart to give attention to lowering prices and enhancing operational effectivity.
That is significantly vital as many companies are predicting that rising volumes might be pegged by a discount in demand for servicing and repairs, as a result of affect of fewer automobile journeys being made throughout lockdown.
A variety of main dealerships, including Pendragon, have just lately introduced plans to shut a part of their retail networks.
It will assist them to cut back their fastened prices and modify to a shift in shopper shopping for habits, as extra transactions transfer on-line.
In some circumstances, a radical rethink of an organization’s actual property technique may end in service centres being relocated to well-connected brownfield websites, somewhat than taking on prime retail house alongside showrooms.
An in depth examination of third-party spend in areas resembling cleansing contracts, catering providers, service provider modifications and gas may establish alternatives to cut back prices additional, delivering revenue to the underside line.
Relying on the operational construction of the enterprise, it might even be doable to centralise third-party prices and realise economies of scale.
Investing in integrating vendor/knowledge administration methods with financing knowledge/methods and manufacturer-specific software program for customising buyer necessities would convey important advantages.
In addition to serving to dealerships to enhance lead era and buyer expertise, it could even be doable to cut back the price of buyer acquisition/service.
Curiously, one of the best knowledge is commonly held by finance firms. Greater than 85% of latest vehicles and over 35% of used vehicles use a finance product for buy.
Capturing the shopper knowledge is due to this fact regulated, which suggests it is top quality. Nevertheless, this knowledge tends to be transactional in nature, whereas the vendor is aiming for a longer-term relationship for elements and providers, and sometimes repairs.
Guaranteeing vendor methods are joined up and include related high-quality buyer knowledge can assist them to retain and appeal to prospects for longer-term relationships, in addition to future transactions.
That is significantly vital as new services come onto market resembling electrical autos, subscription fashions and, power services.
A big variety of autos additionally go to public sale after their first proprietor, sometimes following a 3 or four-year PCP deal.
Bettering knowledge seize and linking up methods would allow dealerships to maintain monitor of the shopper and ageing autos over an extended time interval.
This is able to permit them to retain and develop worthwhile buyer spend on aftermarket servicing, elements and repairs.
Sellers and carmakers have bundled a number of worth into one-off funds for aftermarket services.
Now is an effective time to start out unbundling providers based on their worth to the shopper and rethink pricing constructions.
For instance, unbundling providers would possibly embrace charging a premium for higher-value providers, resembling house pick-ups and next-day supply.
Experimenting with bundling or unbundling of providers to fulfill particular person buyer necessities to ship a greater buyer expertise, may drive will increase in volumes and profitability.
It’s due to this fact doable for the aftermarket to come back again stronger than it was earlier than the pandemic.
Dealerships and unbiased service centres alike might want to right-size their operations by: lowering prices; shifting extra processes on-line; enhance retention of shoppers although knowledge analytics and buyer expertise; ship versatile service and restore operations to handle unstable demand in capability; and, think about revolutionary pricing approaches to make sure worth is perceived by the shopper.
Writer: Justin Benson is a associate and automotive sector specialist at top-20 UK administration consultancy, Vendigital