Former Global Sales Director at Jaguar Land Rover
Andy Goss has worked on four different continents for French, German, British, and Japanese automotive companies since the early 1980's. Goss was European Sales Director at Toyota from 1992-99 where he helped bring the Carina E and Corolla to market. He then held the position of CEO of Porsche Cars, UK for 12 years before moving to President of JLR North America in 2011 where he was respo nsible for all of the US operations. Goss was then appointed as Global Sales Operations Director in 2013 where he was responsible for global sales and customer service reporting directly to JLR CEO Dr Ralf Speth.Read moreView Profile Page
Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.
Andy, can you share a bit of history or context to what has been driving the consolidation of the franchised dealer market in the UK, over the last five years or so?
Things are changing quite a lot at the moment. I think, if you go back five years and you look at the situation, it was still business as usual, to a large degree. What that meant was that manufacturers, generally, didn’t want to overexpose themselves to any particular retailer, particularly the large public groups. So there was this unwritten rule that nobody could have more than 10%, either by count of the network or by volume of the network. At that particular point, you were really into developing what you thought was a long-term relationship, on a bricks and mortar model, with a particular retailer. Some of the smaller volumes of the large company brands – let’s take Toyota as an example – were quite averse to getting involved with the public companies. They wanted local heroes. Whereas some of the larger brands, such as Vauxhall, Peugeot, Ford and so on, had no choice but to get involved with the public companies, from a large-scale perspective.
I think one thing that’s been driving it from that point, five years ago to relatively recently, was also the fact that the OEMs required a large capex to be spent on creating brand environments. Of course, for some of the local hero, owner-operators, it was expensive, but for the larger PLCs, it was possible.
It’s been moving to a bit of a consolidation till, I would say, about 18 months ago. But now we are at the point where that is really accelerating beyond belief and are in a very different situation than we were then, or even two years ago.
Historically, how would OEM’s define the retail environment they would want for their brand?
To start with, you had a sales planning volume because they knew what they wanted out of the territory. That then dictated a certain size of operation, in terms of showroom space, work bays, used car display, parts area and so forth. But they wanted it very much bespoke to their brand. There was an overall design of the brand, particularly with the premium brands. That dictated the situation, to a certain degree. That was quite a traditional way, for a long period of time.
Some people have come to the party relatively recently, with those brand environments; some people established it much earlier. I was at Porsche for 12 years and we established a brand-new environment in 2004, pre-Cayenne, which is still there to this day. Latterly, when I was with Jaguar Land Rover, we brought two brands together, in the same environment and created, globally, a brand concept for the first time. That’s how it’s been so far but, to answer your question, it’s been based on territory potential plus brand environment; a quantitative aspect and a qualitative aspect.
They would say, I want to sell 100,000 vehicles in this region and then you have to build me the facilities to serve that territory?
Let’s use Guildford as a random example location. Somebody would say, this is what we want in Guildford and, five years ago, that would probably have been the conversation. That has then migrated, increasingly, into actually, Guildford is not enough. We want a market area approach so we want Surrey. We want you to cover Surrey. You, Mr Dealer X, we want one in Guildford, we want one in Weybridge, we want one in Epsom. This is our plan for the territory. In certain metropolitan areas, it may have been that that also included boutique type facilities where it wasn’t a full facility but it was a boutique showroom environment or it could have a been a bespoke aftersales center only. But effectively, it migrated into this approach of what the facilities required in the area to do the job. So it started up at one particular point and then went to a market area approach. Not for everybody, but increasingly, that was the trend.
Would they say that you needed to spend a certain amount of money on the showroom?
For the facility itself, the OEM would have gone through a lot of procurement activity, in terms of preferred suppliers for things such as signage, flooring, desks and workshop equipment. Effectively, you were working on menu pricing, by and large, and that dictated the price. You had the land cost and facility cost, in terms of the shell, but all the interior fittings were very bespoke to the manufacturer and, to a large extent, they were dictating who the supplier of those individual elements were, as well.
You, literally, had very little say over what goes in the showroom? You just had to purchase the products and build it?
OEMs are not retailers so you’re actually applying your expertise, in terms of how the logistics of the business would work properly and how you saw that. You would be working with them, but with a palate of their brand facility, their brand requirements and their particular style and feel.
How is that changing today?
To start with, it’s affected both bricks and mortar and the online element. In terms of bricks and mortar, I mentioned before this unwritten rule that nobody gets more than 10%; that’s gone out of the window. Quite frankly, it wasn’t legally applicable anyway but it was still there. That has disappeared because, in reality – especially post-Covid – it’s now recognized that a lot of the smaller retailers can either not afford some of these large investments or do not want to afford them. That has led to a certain degree of consolidation anyway. Increasingly, you’ve got a large number of public companies with a disproportionate amount of facilities, nationwide, with one particular brand. 10 minutes ago, the market was 2.3 million in the UK and then it was 1.6 million last year, so the opportunity becomes a lot less for anybody. I think we are all envisaging the fact that taxes will rise and disposable income will fall so the market might take some time to get back to where it was. Therefore, there is a consolidation just because the opportunity is less and, frankly, the profitability was also under threat, anyway.
In the bricks and mortar world, you’ve got an increasing move towards fewer franchisees, who have got multiple sites, on multiple brands, throughout the UK, either on a regional basis, or nationally. Then when you look at the online situation, that’s very interesting, because that was there as a trend but, I would say, at a relatively low level. When I was talking about omnichannel 18 months ago I often had to describe, to people in the industry, what omnichannel even meant. They were nowhere near it. The car industry has been one of the last to get involved with online activity. That has really accelerated during the Covid period. That is partly needs must because, suddenly, people are into delivery at home like never before. And partly because there have been some disruptors in the marketplace who provided new competition. The online situation is a whole subject in itself, outside that question.
How is the OEM approaching online for new car sales?
That’s a really good question because, historically, you are operating with a franchise agreement which gave you a margin, it gave you a set of standards and it gave you a certain contract period whereby you had to perform. That was either a five-year fixed period or it was a period in perpetuity, with a two-year termination clause.
What’s happened now, because of the online activity, is that the OEMs have realized that digitization gives them an opportunity that they never really had before. That opportunity is to get a bit closer to the customer, in terms of pricing and dealing. Formally, the franchise agreement with many brands, is starting to be replaced by what we call an agency agreement. That means that, effectively, the manufacturer will be responsible for vehicle pricing and supply and will own the stock of new vehicles. The retailer’s job is fulfilment. Clearly, it’s a bit more complicated than that but, fundamentally, the onus is increasingly being taken by the manufacturer and electrification, to a large degree, has accelerated this too. So the manufacturer has a more direct responsibility in trading their websites; price, specification, volume, customer relationship management and so on.