Magazine article Management Today

Goodbye Arthur Daley

Magazine article Management Today

Goodbye Arthur Daley

Article excerpt

Arthur Daley was alive and well in the used car industry at the end of the '80s, according to research carried out by Vauxhall. To combat this widespread public perception of the used car business, Vauxhall is leading a trend among car manufacturers to raise their involvment in franchised dealers' second-hand car sales operations.

Its high-profile Network Q is much the best-known of manufacturers' used car brands, just a year after its launch while, behind the scenes, Vauxhall is supporting dealers with new training and business management programmes to improve the profitability of their second-hand sales.

'We are breaking the mould in the retailing of used cars,' says John Butterfield, Vauxhall's marketing services director. Around 45,000 used cars were sold under the Network Q banner in the first 12 months and that figure should rise to at least 80,000, he adds. He has 210 of Vauxhall's 360 dealers in the scheme now, and another 40 joining soon. By identifying itself strongly with Network Q dealers, Vauxhall aims to make the 'peace of mind' factor, which is prevent when customers buy new, work in the used car market. The scheme applies to cars up to five years/60,000 miles and includes all makes of car, although Vauxhall's predominate. Minimum standards are guaranteed, such as accurate mileage and an option to change the car for a similar model within 14 days.

Vauxhall says it spent 5 million pound sterling on the scheme, up to and including the national launch on 1 March, 1991. Some went on on one year's test-marketing in the Midlands, and another 1.5 million pound sterling was spent on a launch campaign on national television. It has followed through with more television advertising last autumn, and again in recent weeks. Participating dealers contribute 20 pound sterling towards the advertising costs, for each used car sold.

Vauxhall has still to evaluate the effect of the national-promotions but they are starting, it seems, to change the expectations of used car buyers. For example, BMW's long-established used car scheme has been little advertised over the past 18 months, yet MD Tom Purves says his franchised dealers are finding more used car buyers asking for Network Q-style manufacturer's back-up since the Vauxhall launch. Women have responded most positively to Network Q, but dealers have strong hopes that executives will come to them for good, low-mileage models following the Budget, which moved the focus of tax levels away from engine size towards the value of the car.

While Network Q is working for the customers, dealer profits are going up, too. Analysing dealers' performance in the early part of 1992, Butterfield found that those within the Network Q system had 13% higher gross margins, overall, than those selling used cars independently. 'Network Q is part of our overall quest for leadership in the 1990s,' he says. The emphasis is on improving the quality of service, both perceived and actual, because Vauxhall believes the public will demand higher standards from car dealers generally.

Manufacturers have, however, other good reasons for getting involved in the car market. Strategically, they need to maintain the profitability of their dealers, so that they can go on selling cars at reasonable prices. Volume manufacturers' priority has been to 'ram new production down dealers' throats, whether they want them or not', to quote one dealer. That approach is no longer sees as adequate.

Dealers face a long-term 'double whammy' on profit margins in new car sales. …

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