8:36 am, October 7, 2022
Vertu Motors boss Robert Forrester is embracing agency sales and is glad they’ve helped the motor trade give up pre-registrations.
During a Car Dealer Live interview following news of the firm’s half year results, Forrester said pre registrations were ‘deeply depressing’ and an ‘exercise in how not to make money’.
He explained that he’s glad a combination of low new car supply since Covid and forthcoming agency sales have killed them off.
Car dealers would often describe pre-registrations as a ‘drug’ that were nearly impossible to give up as they were offered knock-down-priced new cars from manufacturers to sell as ‘nearly new’ models.
The problem was rife before the pandemic when car manufacturers would fight for market position by forcing stock into car dealer hands.
Car dealers were then forced to sell these off before new cars as they burnt a whole in their balance sheets.
‘I’m delighted that it is not part of my life now, because that was deeply depressing and an exercise in how not to make money,’ explained Forrester.
Forrester said he didn’t think agency sales – which begin for his dealership group with Mercedes in January – are not too dissimilar to how he does business now.
He said he thinks Mercedes has done a ‘great job’ of getting agency sales organised and that he was impressed with how both sides engaged.
‘The proof is in the eating, but I think everyone is putting their best foot forward,’ said Forrester on the Mercedes plan.
‘The fundamental thing is the dealers will be selling the bulk of the cars, and they’ll be some online activity, but online activity is not in any way large. The bulk of the activity is still dealer led.
‘Everything is the same [with agency sales] apart from the manufacturer invoices, is my brief story.’
Forrester said car manufacturers should not underestimate the importance of customer walk-ins as leads – at Vertu these are ‘massively up’ this year and internet enquiries ‘massively down’.
He added: ‘I don’t see [agency sales] as that much of a radical change.
‘The important thing for retailers is “what is the economic proposition? How much money do we get?” I mean, we are legendary mercenaries, aren’t we?
‘Let’s face it, manufacturers control today, under the traditional block exemption, wholesale way of working, our new car margin.
‘They can flood the market, stand targets too high, then we have to race to get customers and sell cars at a loss to get a volume bonus, and then pre reg, and then use a volume bonus to subsidise the pre reg.
‘I’m delighted that it is not part of my life now, because that was deeply depressing as an exercise in how not to make money.
‘Agency takes all that away. You’ve got none of that.
‘What you do have is a handling fee. And the question is how high is the handling fee versus how much cost are we not going to have because we’ve got no stock, no storage charges, no marketing.
‘I’m not saying that agency will be a smooth run. I think it puts a lot of responsibility on the manufacturers to get things right.
‘But conceptually, it is not something I am lying awake in bed at night worrying about. It’s just not.’
Robust conversations
Forrester said conversations he was having with other manufacturers about agency sales schemes were ‘robust’.
‘Some manufacturers are going early, and some are going late,’ he explained in the video you can watch above.
‘Some are going late because they want to see how it goes. Who knows if it’s the right thing to do or not?
‘I mean, I think it’s the right thing to do, which is normally indicative that it isn’t.’
The Vertu Motors boss said he was also looking carefully at each agreement and wouldn’t rule out ditching a manufacturer that introduced a scheme he wasn’t happy with.
Asked if he would end an agreement on the basis of a bad agency agreement, he said: ‘Oh, yes, it’s a free market.
‘Obviously, if somebody came to me and said “we’re going to take no cost out, and you’ve got a one per cent handling fee, make all your money out of used cars and after sales”, I’d be going, “hmm, what are the re-franchising opportunities?”
‘I haven’t been presented with that scenario yet, because actually, the manufacturers realise that physical capability and bricks and mortar are vitally important, because online is, currently – and I suspect for a long time, if not forever – not relevant.’
Forrester said instead he is focusing on a blended approach to selling cars online – allowing customers to reserve online and then finishing the deal in a showroom.
‘We sold 500 used cars purely online – it’s like tiddlywinks versus the Premier League,’ he added.
‘We haven’t lost any manufacturers due to agency and I am not envisaging that that’s a likely scenario. You can’t do it without physical bricks.’
