If you've ever walked into a glitzy, marble-floored car showroom and wondered why they spent so much money on stuff that doesn't sell cars, you're not alone.
One in three new car dealers is considering cutting loose from unprofitable manufacturer relationships, according to the latest research from the National Franchised Dealers Association (NFDA), part of the Retail Motor Industry Federation (RMIF).
The findings of the NFDA Standards Survey, conducted this autumn, highlight the severe effects of overbearing manufacturer standards requirements on the UK’s franchised network.
High investment requirements have forced almost a quarter of retailers to reduce the number of staff they employ, while eight per cent have terminated a franchise and the same number sold a dealership.
"Dealers told us that they are required to spend phenomenal sums on implementing standards that do not deliver profit back to the business, with one in ten spending in excess of £1 million in the last four years," said Sue Robinson, director of the NFDA.
Non-profit-generating cosmetic features take up a substantial proportion of this investment, with most dealers having been required to spend money on furniture, signage and redecoration. Many add that they have paid over the odds for such items after being pressured into sourcing them through their manufacturer.
They complain that their manufacturers’ demands have diverted investment away from other areas of the business, and one in three dealers has needed to raise additional finance to fund standards implementation.
"In a new car market down by more than three per cent on last year, it is vital that these findings are acknowledged as soon as possible," said Robinson.
"While dealers accept the need for showroom standards, they do question the logic of pretty signs and sofas that incur massive expense with no return. With the average dealer currently making just 0.8 per cent profit on every unit sold, every penny spent is critical. To make a financial outlay without any prospect of a return on investment would be considered commercial suicide in any business, and motor retail is no different."
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