Trend Tracker :: Blog Articles about "bodyshop market" http://www.trendtracker.co.uk/blog/ Sun, 30 Jan 2011 17:37:08 +0000 en The Weather Effect http://www.trendtracker.co.uk/blog/2011/01/the-weather-effect Sun, 30 Jan 2011 17:37:08 +0000 office@trendtracker.co.uk (Trend Tracker) It’s difficult to imagine how research can be affected by the weather, but we experienced two serious delays to our schedule in December. Throughout the month we had appointments to analyse service job cards at independent garages and franchised dealerships – working towards the April 2011 edition of the Car Service & Repair Trend Tracker. Quite simply, snow prevented us from driving to workshops and we have now fallen a month behind.

The second project involved researching bodyshops by phone. By phone? How could snow prevent making phone calls from a nice warm office? Well, the snow didn’t prevent making the calls; we made lots of call, but bodyshops were too busy to take part in the survey. For example, one bodyshop manager we contacted said they usually complete thirty jobs per month. The day prior to our call they had towed or estimated 29 damaged cars. In the end we made 460 calls to obtain 100 interviews, which is twice as many as usual and put the project two weeks behind.

Bodyshops have not represented the best of investments in recent years. So will 2010 prove to be better than average thanks to the appalling weather at the start and end of the year? It will be mid-2011 before we have a definitive answer to this question, and it also depends on what you mean by ‘better than average’.

Adjusted for inflation, the value of car body repair market has fallen by more than 15% in the last ten years. This is due to a real-terms fall in average repair cost and a fall in the number of repairs – both driven by a complex mix of market forces. On top of this, the recession hit bodyshops as businesses with closures and bankruptcies reach epidemic proportions in 2008/2009. This increase in closures was in addition to steadily declining numbers over the last decade.

The upside of large numbers of bodyshops going to the wall, even against the background of a dwindling market, is more business for the remainder. Indeed our projections suggest that the average turnover per bodyshop should increase by around 15% in real terms between the pre-recession year of 2007 and 2010.

But this will be thanks to the demise of competitors rather than any improvement in market conditions, prices for work or even the welcome boost of inclement weather. And whether this results in improved profits and return on investment, the real measure of 'better than average', remains to be seen.

Our survey interviewees were clearly pleased with the level of work coming through their doors, but worried in equal measure at the cost of the overtime required to meet insurance company delivery targets, which bodes ill for profitability.

On a positive note, bodyshops told us that a higher than normal proportion of cars had minor damage, below excess thresholds, and will therefore be lucrative retail work rather than insurance.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in January 2011.(See auto-retail.co.uk for subscription details.)

]]> http://www.trendtracker.co.uk/blog/2011/01/the-weather-effect#comments http://www.trendtracker.co.uk/blog/2011/01/the-weather-effect And so it begins http://www.trendtracker.co.uk/blog/2010/09/and-so-it-begins Thu, 16 Sep 2010 19:43:55 +0000 office@trendtracker.co.uk (Trend Tracker) Previously we have explained how the number of cars on the road up to four years old has a knock-on effect to the aftersales market. As new car sales fall the so-called 'four-year car parc' diminishes in size and franchised dealerships, which rely on younger cars for servicing business, start to feel the effects. Then as time passes this dearth of cars becomes a problem for independent garages targeting older cars. What is less well understood is that a falling four-year car parc impacts on the market for car body repairs too, because it is generally newer cars that are repaired after an accident.

Using information taken from our car body repair and car servicing reports we can explore the effects of the falling four-year car parc.

The four-year car parc has been falling since 2004 because new car sales peaked in 2003. However the fall was barely detectable at around four per cent, 2004 to 2007. Then as new car sales fell off the proverbial cliff in the second half of 2008, the pace quickened and we calculate that by the end of 2009 the fall will amount to 15% since 2004; and by 2012 the fall will be 25%.

In the bodyshop market, the number of repairs has fallen eight per cent since 2006 and the falling four-year car parc is a key driver. Clearly there are other factors at work including: car usage, write-offs, recession, weather, vehicle design, used car sales (refurbishment), propensity for motorists to claim, etc. But there is a strong correlation with changes in the four-year car parc.

In the market for car servicing, maintenance and repair, our principal indicators come from a consumer survey we have run continuously since 1993. This survey asks 1,000 motorists every month the simple question: “Where did you last have your car serviced”. The earliest results found that 24% of motorists had their last service at a franchised dealership. This peaked at 30% in 2005 and the trend has been downwards ever since. The latest result for 2009 is 27.8%. Again there is a strong correlation with the four-year car parc.

Of course players in the service market do not have to accept this situation and they can reach out to motorists in other age segments. But in the car body repair market it is insurers that decide which cars are repaired. The number of car body repairs has already fallen by eight per cent in three years and our forecast model suggests a fall of 14% between the recent peak in 2006 and 2014.

Adapting to these 'black holes' in the aftersales markets will be a challenge for players, who need to adopt long-term strategies as these markets will not 'right' themselves any time soon.

Written by Trend Tracker director Chris Oakham, for his column in the subscription monthly Auto Retail Bulletin. (See www.auto-retail.com for subscription details.)

]]> http://www.trendtracker.co.uk/blog/2010/09/and-so-it-begins#comments http://www.trendtracker.co.uk/blog/2010/09/and-so-it-begins Automotive Mark-ups & Margins http://www.trendtracker.co.uk/blog/2010/09/automotive--mark-ups--margins Fri, 10 Sep 2010 09:59:51 +0000 office@trendtracker.co.uk (Trend Tracker) If you buy something for £100, what do you have to sell it for to make a gross profit margin of 33%? The answer is, of course, £150. Certainly every reader of Auto Retail Network’s Bulletin where this article was first published, would have got this simple example of ‘mark-ups and margins’ correct. However, our experience running training courses for sales executives and aftersales personnel is that the mathematical skills of dealer staff are often sadly lacking, and many would come up with £133 as the answer – how would yours fare? Furthermore, our research on gross margins strongly suggests that this lack of knowledge has an impact on profits.

For example, a few years ago we carried out a series of site visits for a dealer group client looking specifically at gross margins in their service departments, and with their permission, we can share one of the findings. The group’s minimum margin for sublet and sundry sales was fifteen per cent. But the actual average across all the sites we visited was just over fourteen per cent. On closer inspection, we found the majority of sites just added 15% to the cost price of sublet and sundry sales, which is a margin of 13%. To achieve a minimum 15% margin they should have added 17.6% to the cost price.

In this case, the difference in gross profit between a 13% and 15% margin is around £2,000 per annum for the average service department, because sublet and sundry sales only make up eight per cent of sales. However this group’s minimum margin on sublet and sundry was too low anyway – between 17.5% and 21.5% is average. At this higher level, more than £3,000 potential profit is lost because of the wrong mark-up.

We have seen similar instances of incorrect mark-ups that cause far larger losses in potential profit in sales, service, bodyshop, and parts. We have also seen evidence that ignorance of this relatively simple maths can affect the ability to negotiate good deals with suppliers and customers.

In the body repair market,for instance, bodyshops invariably have an inflated idea of their margins on refinish paint. When you research the specific question of paint margins, the results usually range from thirty-five to forty-five per cent. Yet the average gross profit margin achieved on paint is a fraction over 30%. In fact body repairers are probably quoting the discount they get from their suppliers – their so called ‘buying discount’. They are not taking into account discounts they give to work providers and customers, the vagaries of computer estimating systems, or any wastage (which can be huge for the more careless).

Going back to the dealer group case study, the upshot of the gross margins audit was a five-hour training course on mark-ups and margins. This extended to all departments across the group, and individual courses included a mixture of departmental delegates. A further audit after twelve months revealed a big improvement, with some of the best results coming from accessory sales through the showroom. Getting the basics right can make all the difference.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in June 2006. (See auto-retail.co.uk
for subscription details.)

]]> http://www.trendtracker.co.uk/blog/2010/09/automotive--mark-ups--margins#comments http://www.trendtracker.co.uk/blog/2010/09/automotive--mark-ups--margins Death and Taxes http://www.trendtracker.co.uk/blog/2010/02/death-and-taxes Tue, 16 Feb 2010 18:56:34 +0000 office@trendtracker.co.uk (Trend Tracker) The saying “Nothing is certain but death and taxes” has been attributed to various authors including Daniel Defoe and Benjamin Franklin. Almost as inevitable as 'death and taxes' is the way the UK's population is ageing. This evolving age profile will be a key factor in car purchases in the future. And it is not even the distant future that politicians baffle us with when they talk about pension provision. Your customers' needs will be changing quite dramatically within ten years.

The chart is our interpretation of data freely available from the Office of National Statistics and shows the age profile of the UK's population now and in five years. Noticeably the two lines are almost identical in shape reflecting the certainty that people who are around now are quite likely to be here in five years - give or take influences like immigration and emigration.

If you look carefully, there is presently a distinct peak at 62 years old, but the largest group by age is between 38 and 47. Looking forward another five years to 2014, the peaks move along five years to 67 and 43 to 52. Clearly in ten years the peaks are 72 and 48 to 57 …. and so on.

This ageing process has implications for car sales and even aftersales. Older customers have different requirements - you don't need us to tell you that - and gradually you will see customer preferences change. Older customers are, for a start, more risk averse, which might see them choose, for example, cars with longer warranties or safer cars. Despite the recession these customers will be wealthier with many perhaps enjoying an inheritance. This could affect point of sale finance volumes. It is believed that older customers tend to be more loyal, but you have to wonder how this loyalty might be challenged by prolonged exposure to the internet in ageing generations who are undoubtedly savvy in this respect.

As these various 'lumps' of population get older their requirements might change when it comes to the style of car they buy. They might only need a small car if their children have left home with some opting for a sports car, perhaps. They might not need more than one car.

Other retailers are obviously already adapting and you can see the results in clothes shops and supermarkets. Clothes are bigger and styles are changing for an older population; supermarkets too are appealing to older customers in smaller households with reduced portion sizes and meals for two.

Our main point is that the UK's ageing population changes your customers and you will have to make a conscious effort to adapt. But how? What will happen and what you must do falls into a category we call 'research we would like to do' because, to the best of our knowledge, nobody has addressed this very important area as it relates to car dealers - unless the vehicle manufacturers are keeping very quiet!

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in August 2009. (See www.auto-retail.com for subscription details.)

]]> http://www.trendtracker.co.uk/blog/2010/02/death-and-taxes#comments http://www.trendtracker.co.uk/blog/2010/02/death-and-taxes Nineteenth Motor Trader Industry Awards 2009 http://www.trendtracker.co.uk/blog/2009/07/nineteenth-motor-trader-industry-awards-2009 Fri, 10 Jul 2009 05:53:30 +0000 office@trendtracker.co.uk (Trend Tracker) Trend Tracker director, Chris Oakham, was amongst 830 people at the Motor Trader Industry Awards 2009 held at the Grosvenor House Hotel, Park Lane, London yesterday evening, 8 July. The 19th Motor Trader Industry Awards celebrated the achievements of companies and individuals challenging the worst recession in the UK retail motor industry since the early 90s - and succeeding. Trend Tracker would like to add their congratulations to the winners of the 18 categories:

Motor Trade Business Management Award
Sponsored by ASE incorporating Trevor Jones
Winner: Julie Oliver, Mitchell North West

Most Improved Business Award
Sponsored by NIG
Winner: L&L Automotive Mercedes-Benz Hertfordshire

Customer Care Award
Sponsored by Car Care Plan
Winner: Ken Jervis (Kia) (Stoke-on-Trent)

Aftermarket Innovation Award
Sponsored by Mobil 1
Winner: Ken Jervis (Kia) (Stoke-on-Trent)

Marketing Award
Sponsored by AutoTrader.co.uk
Winner: The Car Shop (Northampton)

Website of the Year Award
Sponsored by Motors.co.uk
Winner: Sytner Group Ltd (Leicester)
Highly commended: Clive Sutton, Holden Group

Product of her Year Award
Sponsored by Motor Trader
Winner: Castrol Professional - Red Carpet Training
Highly commended: Motor Codes

Used Car Retailer of the Year
Sponsored by Aviva Driveaway Insurance
Winner: Thame Service Station (Oxfordshire)
Highly commended: TC Harrison (Derby)

Bodyshop of the Year
Sponsored by Britannia Accident Assist
Winner: AJC Wilson Bodyshop (Essex)

Garage of the Year Award
Sponsored by Motor Codes
Winner: Academy Group (Manchester)

Car Franchise Of the Year Award
Sponsored by Mondial Assistance
Winner: Kia Motors (UK)

Service Adviser of the Year Award
Sponsored by Castrol Professional
Winner: Michael Allison, Sinclair Volkswagen
Highly commended: Jazz Mann, Chiswick Honda (London)

Sales Team of the Year Award
Sponsored by MAPFRE Abraxas
Winner: L & L Automotive Mercedes-Benz Hertfordshire

Sales Manager of the Year Award
Sponsored by Dealerweb
Winner: Gareth Lloyd Sinclair Volkswagen

Dealer Principal of the Year
Sponsored by eBay Motors Pro
Winner: Amarjit Shokar Romford Mazda (Romford)

Franchised Dealership of the Year Award
Sponsored by Experian
Winner: Now Kingston (Middlesex)

Dealer Group of the Year Award
Sponsored by HPI Finance Gateway
Winner: Sytner Group

Outstanding Achievement Award
Sponsored by Aviva
Winner: Robert Forrester (Vertu Motors)

]]> http://www.trendtracker.co.uk/blog/2009/07/nineteenth-motor-trader-industry-awards-2009#comments http://www.trendtracker.co.uk/blog/2009/07/nineteenth-motor-trader-industry-awards-2009