Things change; don’t stay the same

Maybe Vauxhall is fortunate to be refranchising

House of Fraser is now contemplating having to close stores to cut costs and try and stay in business. This is just the latest retail giant to reconsider its position on the high street, with Marks & Spencer doing the same just recently. Maplin and Toys “R” Us simply went bust.

The finger of blame originally pointed at these businesses not stocking the products people wanted to buy. They needed to refresh their ranges to try and garner more interest, they needed to invest in the layout and look of the stores to get people involved with the brand.

But it’s more fundamental than that. These shops simply have too much real estate for the declining number of shoppers walking through their collective doors. The maths is simple; no shoppers, no spend, translates to no rent. House of Fraser is attempting to get its landlords to agree to rent reductions of up to 75%. Understandably the landlords are up in arms, as they watch their own business model fall apart.

Who’s next for the chop? Who knows, but it won’t be long before we find out. More relevantly, who’s going to be first to start cutting outlets in the motor retail market? Looks like Vauxhall could be working through some cutbacks with the refranchising of its dealers – doubtful that the same number of outlets will come out of the other side of the process.

Of course, the reason put forward for the Vauxhall refranchising is the tie up with PSA, the combining of outlets into ‘mother ships’. That holds water to some extent, but there has to have been some discussion about just how many dealerships were required to serve customers actually buying in retail outlets.

The shops mentioned at the top of this piece are not failing due to range malaise – they’re failing because people are buying online. Maybe they go to the store to check on clothes sizes and perfume smells, but then they go home to buy online, usually at a discount that reflects no requirement to have a bricks-and-mortar outlet.

Granted, buying clothes and perfume is a lot different from buying a car, but it won’t be long before the majority of people are comfortable with spending vehicle-levels of money online. Particularly with the switch in focus from total vehicle value to affordable monthly payments. As noted, it’s not inconceivable that dealerships will become try-before-you-buy-online outlets.

That might not be a bad thing, as long as the website the customer uses comes back through the dealership in question. Further, there’s a real need for dealerships to exist, if only to service the cars that are being sold. But will that require the networks we have today? Probably not.

I’m more than a bit fed up with people going on about ‘change’. It’s referred to like it’s something new, something different. Change is the new normal and it has to be managed in a thoughtful, insightful way. Motor retail is changing, the old model will no longer work and to keep trying is to squeeze a square peg into a round hold. Maybe Vauxhall is fortunate to be refranchising. Addressing change in this methodical way will surely create less grief than the short, sharp shock that’s coming if change is ignored.

Julian Buckley, Editor, Motor Trader