Nathan Coe, CFO & CEO designate at Auto Trader Group, the dominant auto vertical in the U.K., told the audience at AutosBuzz that the autos landscape is changing rapidly, and companies have to keep up.

“Auto Trader’s research found that 60% of consumers said they made the purchase at “the point of exhaustion”, said Coe.

The differences between growth drivers for automotive, real estate and recruitment will become more pronounced than they have been for the last 10 years. Growth in auto marketplaces in the last decade has been sustainable because they have offered a better service compared to previously.

Nathan Coe - CEO designate Auto Trader U.K.

Nathan Coe, Auto Trader

But now, the way cars are sold has fundamentally changed. Now comparison of cars is easier, more information is available.

“The aim is to get average customer dealer visits down to below one. It has already gone from five visits down to two,” said Coe.

“Dealers have to be more focused on online retailing because costs haven’t fallen through to bottom line of dealer’s finances.”

Consumers spend most time online but costs are mostly related to other overheads, which is a mismatch with 81% of gross margin eaten up by operating costs.

U.K. progressive dealers can reduce costs and turn cars twice as quickly with little impact on gross margin. Doing this helps progressive dealers double net margin to 2.8%, almost double the U.K. average of 1.5%.

Why will there be change?

There are four reasons:

  • Manufacturers have retained same model for selling cars as has been the case for last 20 years
  • Little competitive reason to change
  • Physical aspect still to be important at least for next 10 years – checking, test drive, visiting dealers, not for all but for a significant percentage
  • When markets are good, retailers don’t feel the need to change.

This will change because of investments in electric vehicles. Dealers must look at how to take costs out and look at retail distribution models because consumers are not spending as much time in dealerships. Why devote so much cost to it?

Online pure plays are coming to market that are credible, professional set-ups backed by big money, such as Cazoo.

Biggest driver of change

Consumers don’t like the current system and are not satisfied. 85% of customers don’t think they purchase the perfect car and 60% said they made the purchase at “the point of exhaustion”.

They key to moving dealer to better profits and consumer to better experience, to challenge the steps dealer take, all of them:-

  • Buying and pricing vehicles – use big data tools
  • Logistics & prep, marketing,
  • Sales
  • Finance and add-ons – This process is very manual and drives a large % of the big labour costs. Consumers can’t self-serve.

Dealers tell consumers “can you come into the dealership for that, can’t do it online” This entail huge costs for retailers and this is what makes consumers find the process exhausting and frustrating.

“If you make these changes, the results can be increased gross margin, lower operating costs and a better end result,” said Coe

This requires a technology capability out of reach of most dealers.

Digitalising the entire retail chain is what we expect marketplaces to do more of in the next few years.




Print Friendly, PDF & Email

Related Articles