- John O’Hanlon of Waylands (pictured above) reflects on his experience of agency agreements
- Requirement to sell more to stay profitable
- Agency needs excellent systems to work well
- Waylands retails Volvo and Polestar under agency
REDUCED profitability per unit under agency agreements means retailers will need to sell more cars in order to simply stand still on profitability.
That was the message from John O’Hanlon, founder of Waylands, a dealer group based along the M4 corridor, speaking at the recent Vehicle Remarketing Association conference.
While O’Hanlon was keen to point out the figures applied to his business, he said:
“We need to sell over 23% extra cars just to stand still under the agency model.”
Waylands operates MG and Kia under the franchised system, and Volvo and Polestar under agency agreements. O’Hanlon was also one of the retailers that worked with Volvo to set up the agency agreement.
“We worked incredibly hard to try and get the best outcome for the OEM, for the dealer and for the customer because if all three are winning, we are in a great place,” said O’Hanlon. “If you’re a dealer who’s traditionally been strong in retail, who’s actually had great processes, you will feel you’ll earn less per car from an agency model.
“As we move to pounds per car rather than a margin, as prices have gone up, we don’t benefit from that in terms of an increased margin. So again, there’s two areas where we’re beginning to feel the pinch. The only way we can overcome some of the increased costs is to sell more cars.”
“Agency is predicated on selling more cars and every manufacturer can't sell more cars. So we know there's going to be winners and there's going to be losers.”
O’Hanlon added that for agency to work it needs “fantastic systems” that mean the customer enjoys the experience and buys a car and becomes a repeat customer. This is something that’s core to franchised retailers.
He added that some manufacturers don’t have that capability yet.
“Whether it’s a Mercedes, whether it’s a Volvo, you’re beginning to see some of that pain come in for them. How quickly they get through the learning curve will be the interesting question.
“Agency does work in terms of inventory, in terms of speed and in terms of slickness [but] right now, we’re in a difficult position.
“So my only advice would be to anybody involved in it is just make sure the systems are right, you’ve got people and resources right, you’ve got the offers and the speed to offer from day one and not something you grow into, because that gives the customer experience problems and the manufacturer will spend more.”
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Tristan Young is an award winning journalist with more than 25 years’ experience reporting on the automotive industry focussing predominantly on fleet and retail. As a self-confessed petrol-head, Tristan has a weakness for car classifieds. When he’s not writing about the automotive industry, he can usually be found outdoors with a small pack of border collies.
