MT Dealer Insight: Retailing in the pandemic

Dealers have fought hard in the pandemic to maintain sales with showrooms shut for business. Here are some of the steps they took to boost the bottom line.

In recent weeks a raft of dealers have released their 2020 results, highlighting the steps they took to tackle the pandemic and deliver increased profits in the face of declining revenues with showrooms temporarily shut for business in successive lockdowns.

Here we look at how dealers focused on digital to boost their performance, and improved their customer relationship management to drive business. There were also in many cases tough decisions made on staffing levels to try and emerge from the pandemic as more efficient businesses.

For Peter Vardy digital was critically important. It was prepared for the switch to online the pandemic enforced, and as a result saw pre-tax profits in 2020 accelerate 47.6% to £9.3m on turnover down -6.5% to £440.6m.

In 2020 42% of its sales were transacted online, helped by its Silver Bullet online platform.

The dealer further embraced the acceleration in digital with developments that included a Central Retention Sales team and the creation of a transport arm to deliver cars to customers.

In aftersales it rolled out its online service bookings and instore Self-Service Kiosk. Over 600 staff took part in working groups as part of its 2030 strategy, shaping plans for its new leasing business, EV strategy and improved use of technology and customer satisfaction

The used business and digital platform were areas that Peter Vardy targeted early with Carshop and Silver Bullet. More recently it launched its Carz used car supermarket to six new locations across Scotland.

On this, Peter Vardy, CEO of Peter Vardy, said: “We have been running a dedicated used car supermarket since 2013 called CarStore. It has been successful and so that is the pilot for our new model as a division. We can do the same just a little bit bigger.

“What has changed is the percentage of cars sold through our ‘ECommerce’ showroom, now sitting at 42% and our home delivery team now take care of 25% of all vehicles sold. The demand for used cars and the timing of our switch is of course fortunate, but I cannot say I planned that, but it is helped for sure. We just need to keep finding stock now.”

The group also pushed its brand with a number of marketing deals in Scottish sport, including becoming Principle Partner of Scottish Rugby and the official car partner of the Scottish Professional Football Association.

It will be the new front of shirt sponsor for the Scotland national rugby team in a four-year deal commencing in the summer of 2021. The new partnership began in the summer when the 2021/22 season team kit, designed by Macron, was launched. It is the first to feature Peter Vardy Group’s name and logo.

Focusing more on physical retail, Glyn Hopkin Group made its way through the pandemic by adding new dealerships (and losing others). It was a dealer group that increased profit in the pandemic.

The dealer benefited from the first full year with its four new MG dealerships and said it was ‘very positive’ about the franchise with the backing of Chinese parent SAIC Motor Corporation. Its first Kia dealership in Chadwell Heath performed strongly and it wants to expand with the Korean brand to become a strategic partner.

It will lose its two Mitsubishi sites following the decision by Mitsubishi Motors to exit Europe, and it is also exiting Honda as it expands with ‘core brands’ Nissan, Kia, the Stellantis brands, MG and Suzuki.

It sold its Romford Honda to Brayley Cars in May 2020 and leased its Honda facility at Chelmsford to Tesla.

In what it described as an “extraordinarily challenging” year with successive lockdowns and reduced new car sales impacting turnover, Glyn Hopkin turned in a strong performance for the year with pre-tax profits rising 31% to £4.2m on turnover down -18.8% to £368m.

During the year it took advantage of furlough and business rates support but not government sponsored loans. The average number of employees in 2020 was 752 compared to 767 a year earlier.

Donnelly Group Northern Ireland saw room for improvement in its business and made the decision to restructure its operations during the pandemic. The group posted a pre-tax operating profit of £1.5m in 2020 compared to a pre-tax loss of £2.7m in 2019.

The Donnelly Group partners with 16 vehicle manufacturers including Honda, Jaguar, Land Rover, Renault, Vauxhall and Volkswagen, selling both new and used cars, vans and pickups from its nine locations across Northern Ireland.

The group delivering reduced turnover of £252.4m in the pandemic with showrooms temporarily shut for business compared to £311.9m last time.

Dave Sheeran, managing director at Donnelly Group said that 2020 had been an extremely challenging year for the entire motor retail industry, and the pandemic coincided with a wider strategic review of the business, the out-workings of which are beginning to materialise in these results.

He said: “The business is in a positive position following £7.2m of annualised structural cost savings and I expect stronger results as the group’s new strategy is fully implemented.

“Challenges remain throughout 2021, principally due to the ongoing global pandemic, but the group’s trading has been very positive year to date and in line with expected improvements.”

Perrys Motor Sales was able to turn in a ‘resilient’ performance in 2020, as it made some “difficult decisions” when it came to staffing. The company unfortunately made 200 staff redundancies, which cut annual salary costs by approximately £3.2m.

It also made progress on its debts. Its net bank debt at the end of 2020 was £1.2m compared to £7.8m in 2019. Perrys said it is meeting all covenant tests in 2020, and during 2021 has renegotiated bank facilities for a further three years.

It turned in pre-tax profits doubling to £3.2m on reduced turnover, down 19.2% to £491m. It said the results, which were ahead of expectations, despite the impact of COVID-19 with successive lockdowns and temporary showroom closures.

It also made moves to grow its business. During the year it took on three MG franchises in Preston, Huddersfield and Aylesbury and acquired a Kia franchise in Huddersfield.

It also established used car operations, branded as Perrys Used Car Outlets, in Doncaster and Milton Keynes and has plan to open further outlets.

Darren Ardron, MD for Perrys Motor Sales, said: “The group has delivered a resilient set of results in what can only be described as unprecedented times.

“Our thanks go to all our staff for their loyalty and commitment during this period as well as our manufacturer partners for their support and of course all the governmental support.

“The group had to make some difficult decisions in this period however this will now put Perrys in a good position for the years ahead.”

Motorline was also able to perform well through a combination of brand exits, redevelopments and government schemes. It turned in a strong performance in 2020 with pre-tax profits up 118% to £6.1m on turnover down -3% to £695.2m.

During the year Motorline relocated its Audi dealership in Canterbury to a new facility. The results included a full year of trading from its Maidstone Lexus site. Motorline said it had seen its share of Toyota and Lexus grow in a year that saw Renault.

It also redeveloped a vacant site in Crawley and sold it to an investment company for £9.4m, giving a pre-tax profit of £3.7m. In a post balance sheet event, it bought 20% of GGT Estates for £2.75m.

It described pandemic 2020 as an unexpected and unique year and said it was “extremely pleased” with the financials given the difficult background. Like most dealer groups Motorline made use of the Government’s business rate scheme to help with cashflow and the Job Retention scheme to minimise redundancies. The company headcount now stands at 1,614 compared to 1,649 in 2019.

“This supported the company during this difficult time and enabled us to reopen quickly once the lockdown ended and bring our staff back into work as demand increased. The hard work our teams have put in growing our recent new businesses or implementing acquisitions is now paying off as we see those businesses mature and begin to generate the projected returns,” said director Glen Obee.

Motorline said it had seen a strong performance since it reopened for business on 12 April 2021, but it did have concerns on stock availability.

Pendragon recorded an underlying profit before tax of £35.1m in H1 2021. It said that “significant improvements” delivered in digital propositions enabled the group to largely mitigate the impact of the third national lockdown in Q1 and emerge strongly in Q2, out-performing the market in both new and used cars. Revenues increased by 56.9% to £1.67bln over the same period.

The group’s dealerships are now offering click and collect and home delivery, as well as enabling digital finance and insurance sales.

Bill Berman, chief executive officer, said: “Much of this progress has been underpinned by our new strategy, which has resulted in significant improvements to the group’s digital capabilities and cost savings associated with the restructure of our store estate and the improved efficiency of our operating model.

“The work undertaken to advance our online channels last year meant more than 40,000 vehicles were delivered to customers during the lock-down period alone.”

With earlier expansions paying off, Steven Eagell Group saw increases in profit, largely, it said, because of its spending in March 2020 where it bought two Lexus and four Toyota locations in Tamworth, Solihull, Wolverhampton and Birmingham from Vantage Motor group. A third of the group’s profits came from new car sales with used car sales and aftersales the mainstay for the group.

Steven Eagell also made reference to the new warranty introduced for Toyota and Lexus which it said will boost aftersales business in the future.

“In addition, in June 2021 Toyota and Lexus have launched a new warranty proposal where vehicles gain a year’s manufacturer warranty upon being serviced up to the vehicle being 10 years old. We are optimistic of this new scheme and so far, results are promising.”

It now expects greater profitability in 2021. In results at Companies house, it said: “The board considers 2021 to be even more profitable.

“This is attributed to retention measures, such as service plans and finance renewal software, also service capacity has been addressed, by increased technician headcount.”