MT Interview: Mark Mitchell, managing director Cheshire group

When Motor Trader arrived at the Chester home of Mitchell Group on 18 March before the full impact of the coronavirus outbreak hit UK life, managing director, Mark Mitchell, was celebrating early 2020 results that eclipse even the near 14% increase in profits achieved in 2019 – a year that saw the group rise five places to 175th in the Motor Trader Top 200 and record the joint-top return on sales at 4.4%.

Set up 30 years ago with Lexus, Mazda and Skoda franchises on its single five-acre site adjacent to the Cheshire Oaks Designer Outlet Village, Mitchell Group is no ordinary dealership.

A passion for staff and customer care flows from Mark Mitchell throughout the group, which provides bacon sandwiches each morning for service customers and free car washes for life every Saturday morning. The business runs up an annual flower bill of £73,000 and has even purchased a holiday lodge in Snowdonia for complimentary use by the Mitchell Group team.

How have you achieved your 2019 results?

We have engaged in some pre-registration, which can be more profitable than some dealers perhaps think. Of course, it depends on the brand. When supplying a pre-registered car, you don’t have the reconditioning costs, such as tyres and cambelts and purchasing warranties, all of which inevitably squeeze margins on a three-year old plus car.

Mainly however, as we begin our 31st year in business, we continue to get better at what we do. Our service absorption improves year-by-year and we passed the 100% Gold Standard several years ago. With our staff retention so high – of our 95 full-time colleagues, 70 have been with us 10 years or more – people just get better at their jobs.

What recruitment processes do you use?

Because we only need to recruit four or five new team members each year, I ‘second interview’ everyone and we mystery-shop them in their existing place of work before this final interview. It really does filter out those who perform well at interview but in the real world aren’t as good as they say they are.

We have a five-day induction programme for all new recruits, during which they don’t go anywhere near the job they have been appointed to do. They spend half a day in marketing, half a day in finance, the showroom, in valeting and in overalls in the workshop, even if their role is front-of-house reception.

They get a real grounding in every part of the business and by the end of the first week, everyone knows their name, which can surprise some new recruits in a business of more than 100 staff. I have 15 minutes with a new recruit on the first day, and again at the end of the first week, by which time they understand our culture. We are big on integrity, big on values.

I deeply care for our staff. If you work for us you get an extra day’s holiday at the end of three years and another at the end of four and five years.

You get an informal half day in summer and one in winter so that everyone can attend their children’s/grandchildren’s sports days and nativity plays. Those without often borrow an MX5 for a summer ride out and take advantage of some early Christmas shopping.

When one of our team has a baby, my wife Anita and I take them presents – a pair of pink or blue Barbour wellies and a children’s Bible, the best-selling book in the world. We’re up to over 60 so far. It is a great privilege for us to visit colleagues in their home and to have a very special hour with them.

We’ve also bought a holiday lodge in Snowdonia – on a wonderful five-star site. Taking a lead from Timpson Group, we offer weekend and midweek breaks, carving the year into 104 slots. Invariably, 90 or so are taken by the team and the rest made available for local charities.

Describe the Mitchell Group culture and values.

Integrity is very important, plus humour and a passion for delivering extraordinary customer experiences. We have the highest Google reviews in the retail motor industry across Cheshire and we monitor this weekly.

The entire team like to surprise our customers in a way they haven’t experienced before. They all like doing fun and memorable stuff. The Mazda team bought a London taxi last year and we had it wrapped in our corporate livery with a ‘word cloud’ on the bonnet, words chosen by customers describing our values. When someone visits for an annual service, we offer to “call them a cab” and within a couple of minutes, one of the six service drivers has brought it round to the front of the business, to take the customer across to Cheshire Oaks shopping centre. It produces many smiles.

A couple of years ago, one of our housekeepers was serving teas and coffees in our first floor customer lounge and was asked rather cheekily for a bacon sandwich. Always keen to impress, a selection arrived for the dozen or so customers at lightning speed. This has now become a daily discipline and we serve between 20 and 30 each morning before 10am on the best crockery the housekeeping team could find.

We offer free car washes on a Saturday to anyone buying a car from us and continuing an aftersales relationship with us. On a recent Saturday our 10 valeters washed 193 cars while serving coffee and doughnuts to nearly 400 guests in the customer lounges. Every Monday our customer care team work through all the registration numbers and mileages and we invariably book at least 10 services, MOTs, recalls and smart repairs for the following week.

You are clearly happy with your location and brands. Any expansion ambitions?

I adore my current brands – there’s no overlap between Lexus, Mazda and Skoda. With the amount of research a customer does online these days prior to visiting, they are very clear on which brand showroom door they want to enter. We go back a long way with the senior management at each of our motor manufacturer partners. There’s the odd hiccup and disagreement occasionally but we always understand each other’s position.

We have no plans to take over the world. We are rock solid at this location with the benefit of the footfall and traffic that Cheshire Oaks brings. More than eight-million people pass our front door every year. We are immensely grateful for the returns.

How do you go to market?

We adhere to manufacturer requirements in terms of standards but you won’t see us on the back of a bus, in print or hear us on the radio. Gone are the days when we would spend 1% of our turnover or the same as the average dealer’s bottom line on marketing.

My view has always been that our customers are our best marketeers. So much of our business comes by recommendation, word of mouth. We retain staff and if you have familiar faces in any department in an automotive business, you retain customers.

We offer a significant ‘introduction fee’ incentive but people rarely claim it. They are just more than happy to introduce a friend, relative or neighbour to us and our service.

We do send out a lot of gifts to customers. Our flower bill was £73,000 last year. People who introduce customers to us often get a little thank you from one of the sales staff, often afternoon tea at the Chester Grosvenor. This is far more thoughtful (and memorable) than a cheque in the post for £50. We also lend out our Mazda MX5 demonstrator nearly every weekend of the year.

Your used figures are up. What’s the secret?

Firstly, you need talented leaders – Richard Macklin in our Skoda showroom, Brian Blanchard in Mazda and our Lexus director, Neil Crowden, understand used cars inside out.

Depth of stock is a challenge but so many of our own cars come back at the end of a three-year PCP contract. Not surprisingly, they are very familiar to us because we’ve washed many of them every Saturday morning. Each Saturday, the 20 sales staff have opportunities to start conversations with customers whose cars are getting to the 30-month mark. Part exchanges always present tremendous remarketing opportunities and they are nearly always at much higher standards than those on offer at car supermarkets, which are often ex-rental with less impressive provenances and service histories.

We focus hard on achieving the right margins – our Skoda margins are north of £1,300, Mazda £1,600 and Lexus just under £2,000 and not at the expense of volume. We’ve achieved 100 used Skodas a month so far this year with Mazda and Lexus also up significantly on 2019.

Aftersales remains the bedrock of the business?

Hugely. We have 20 technicians across the three brands and we open every morning with 150 of our 160 available hours pre-sold. This gives us some upsell flexibility and in the current climate we are aware that there will be cancellations due to self-isolation issues. We do find recovery rates stretched. With Skoda in particular they are disappointing as they haven’t moved on in five years, due mainly to national manufacturer pricing policies.

We are extraordinarily strong on service plans and we don’t just offer them with the car at point of purchase. More plans are sold by our aftersales teams than our sales teams.

We now sit on significant bank balances with our prepaid service plan receipts. This is always good for working capital.

We are reluctant to write any trade parts business – why would I supply parts allowing local independents to service my own customers’ cars?

We don’t make it easy for local independents to buy parts from us. There is no bad debt in the business and supplying to independents and bodyshops is where a number of dealers face bad debt issues, or at least absorb a lot of time in chasing late payments.

As franchised networks, we have all made significant investments in our respective brands.

Do you see much change in the industry today?

The franchise network model is as important today as it’s ever been for engaging with and taking care of local customers. Manufacturers were always going to try point-of-sale locations in shopping centres, something too expensive for a retailer to invest in as an experiment. I can’t think of any sustained success in such areas but we do look to manufacturers to keep pushing the boundaries and come up with new ideas, and they have deeper pockets.

What advice do you have for dealers now?

We have to hold firm and remain confident and optimistic. We must lead our teams well. Our bottom line as we speak is a third up on last year but it’s a time to remember what my 112 staff are looking for from me. With the prospect of job losses elsewhere in our teams` families, it’s important to remember the very real issues facing them. At times such as this, knowledge of names of husbands, wives and children underlines one`s genuine interest in them. They are looking to me for an even greater pastoral concern for their wellbeing. I am immensely encouraged so far by the speed and clarity of response to the current crisis from our manufacturer partners. The assurances that they have given us financially have matched our expectations in every sense, on supply, bonuses for cars and parts and accessibility.

Is predicting the rest of 2020 impossible?

Until 16 March we were nearly 30% up on bottom line and on track for a record quarter one. We are over 100 used cars up year-on-year, our labour sales are up and parts sales are steady. I can see our service absorption dropping to 75% or lower in the weeks ahead but many UK dealerships will be absolutely delighted with a break-even performance in 2020.

I can see manufacturers being extraordinarily supportive, perhaps with the introduction of 0% customer offers on new cars, demonstrators and even used cars given the recent base rate drop.

I’m unsure we can market our way through this challenge. I think it remains simply about value and culture, doing things properly every day of the week. This is a much bigger challenge than the recession years of ten years ago – we didn’t close schools and shops then. There will be different lessons for us all from the coronavirus challenge but I think we will each see life differently. It is an opportunity for us to re-evaluate our priorities and focuses, which aren’t always balanced in the way they could be.

Maybe we will strive for a greater work-life balance in the motor industry, a sector not always known for this. I can also see a much greater alignment between manufacturers and their dealer networks, a much greater sense of pulling together and common purpose. This excites me.

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Written for Motor Trader by Andrew Charman