According to an MFBI study, the number of used car superstores in the UK has increased by 29% since 1999. The number of franchised dealer outlets has correspondingly declined by 5% over the same period. Used car superstores include privately owned single-outlet operations and small chains, plus superstores operated independently by franchised dealer groups. The number of superstores operated by dealer groups has also grown and rose to 28 outlets in 2002.
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Rationalisation encourages bigger groups
A used car superstore is defined as being a single outlet stocking over 200 cars and on this basis, the number of used car superstores that were operating in Britain in mid-2002 stood at 90 which was 29% more than were in operation in mid-1998 when the number in operation was 70 sites in total. Since 1998 there has been a rationalisation in the structure and ownership of used car superstore outlets. While the overall number of outlets has increased, there has also been an increase in outlet concentration. The demise of the Car Group in 1998 and Maxcar in 1999, provided the opportunity for the remaining successful superstores to acquire new outlets.
The former Car Group’s two outlets in south Wales were purchased by Carcraft with the newly opened Manchester site acquired by Motor World and the Northampton site acquired by the dealer group Camden Motors. The Surrey based Concept Automotive used car superstore operation purchased the Carland operation at Thurrock in 1999, which made Concept Automotive the UK’s largest independent used car retailer selling 20,000 cars per annum with a turnover of £130 million in 1999. Concept Automotive Services was then acquired by GMAC (General Motors Acceptance Corporation) And Concept’s superstore outlets were all subsequently operated under the Carland brand and the number of outlets operated under the Carland brand grew to eight.
Other chains of independent used car superstores include Autolink, a wholly owned subsidiary of Automotive Group Limited, the holding company for which is Itochu Corporation which is also the ultimate parent of MCL Group Limited, the former distributor of Mazda cars in the UK. Autolink was operating three used car superstore outlets in mid-2001. in Maidstone, Chingford and Southampton, with a fourth outlet in Leicester opened in mid-2002. ABC Car Supermarkets operates a total of three used car supermarkets in Andover, Salisbury and Bournemouth. Ignition Car Supermarkets which was formerly Central Car Sales, is part of Haydock Finance Limited, an independent finance and vehicle management company. The company operates three used car superstores in the north of England with an outlet in Accrington, Burnley and Manchester.
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By GlobalDataThe majority of the remaining superstore operations are single-site businesses, and the two largest of these are The Great Trade Centre in west London and Trade Sales in Slough. Each of these operations sell an estimated 25,000 imported, nearly-new and used cars per annum from effectively just one location each. The next largest superstore operations are the Carcraft Group which operates outlets in Sheffield, Wednesbury in the West Midlands and Newport in South Wales with combined sales of 18,000 units; followed by Motorpoint with outlets in Derby and Burnley; and Fords of Winsford with one outlet. Fords of Winsford is owned by the Graham Bell Ltd group of companies which also includes Available Car Ltd, which opened a new ten acre superstore outlet near Castle Donnington in June 2002, with plans to open five more outlets in the UK. For the year ending 31 March 2001, Graham Bell Ltd had a turnover of 69.1million with an operating profit of 0.63 million.
In addition to used car superstores which are defined as outlets that stock 200 or more cars, there are a large number of independent and franchised dealer used car outlets that stock between 100 and up to 200 used cars at one location. These outlets are often also marketed or publicised in the consumer press as used car superstores although they are smaller than the definition used in this report, but can represent significant competition to the larger superstores. Some of the smaller “superstores” can benefit from being located in the same area as a larger superstore due to the high number of potential car buyers that are attracted to an area by the larger superstores’ local and national advertising.
Finance companies and car manufacturers becoming involved
MFBI’s analysis shows that finance companies and car manufacturers are becoming more involved and will operate a larger number of used car superstores themselves in future. For finance companies the opportunity from owning a used car superstore is the increase in the penetration of finance on captive used car sales. For car manufacturers, a rapid increase in new car registrations since 1999, means that the number of cars being returned to car manufacturers for remarketing as used cars is growing.
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With dealer numbers falling and the inability of dealers to sell used cars in large volumes without causing a corresponding collapse in residual values, car manufacturers will increasingly resort to opening used car superstores themselves either as wholly-owned operations or as joint ventures with dealer groups, to market a growing number of used cars. Used car superstores sold 485,000 used cars in 2001 giving an average sales volume of nearly 5,400 units per outlet, compared with an average of just 290 sales per outlet for franchised dealers in 2001.
Although the major urban population areas of London, Birmingham, Leeds and Greater Manchester have a high concentration of used car superstores, MFBI’s research shows that there are still open points for establishing used car superstores close to major population areas.
MFBI’s report shows that sales of used cars grew by 7% between 1998 and 2001 to 6.91 million units, but used car sales by franchised dealers fell between 1998 and 2001 by 5% to 1.73 million units. Used car sales this year are expected to rise by 5% to 7.28 million units buoyed by low interest rates and low cost credit finance. Over the next five years, MFBI forecasts that used car sales will fall slightly to 7.10 million units by 2007as interest rates rise and consumer disposable incomes are reduced.
Although MFBI expects the number of used car superstores will increase, the research company forecasts that the total number of used car outlets will fall by 16% to 9,850 outlets by 2007. MFBI forecasts that the number of franchised dealer outlets will fall by 21% to 4,700 outlets by 2007, as manufacturers continue to reduce the size of their dealer networks and as dealer profitability continues to fall as a result of declining aftersales profitability, despite recent increases in new registrations. MFBI says that the number of independent used car dealers will also fall, but at a slower rate of 11% to 5,150 outlets by 2007.
MFBI’s research shows that the main opportunity for franchised dealers to maintain their profitability and viability in future, is to increase their service and aftersales retention from used car sales. Recent research carried out by Castrol shows that franchised dealers retain the servicing on just 22% of the used cars they sell, compared with 56% retained servicing on all new cars sold by franchised dealers.
