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GMAP Anticipates a New Entrant to Reshape Car Retailing Following Changes to Block Exemption Regulations

18 August 2003

New analysis sets out optimal network locations GMAP Consulting, a leading supplier of market intelligence and predictive modelling solutions, forecasts that a large retail group - such as a bank or supermarket - could enter the car retail market following changes to the Block Exemption Regulations that come into force on October 1, 2003.

A new entrant could quickly improve on today's channel structures by setting up a multi-brand two-tier network of as few as 60 sales points and 337 separate service outlets, according to new 'optimal location planning' analysis conducted using GMAP's MICROVISION software.

These numbers are significantly lower than the current dealer networks for the major automotive companies and could completely change the UK car retailing landscape. The existing retail networks are legacy systems which will be difficult to re-engineer. Starting afresh, a new entrant could design a solution that would be much more efficient than the current networks; with just 60 sales points it could cover 90 percent of the UK market within a 30 minute drive-time.

GMAP's qualitative market research shows that consumers are willing to travel up to 30 minutes from home to buy a car, especially if this provides them with more choice. With service however, they favour convenience and want to travel no more than 15 minutes from home.

Professor Martin Clarke, managing director at the company says, "Car retailing has changed less than any other retail sector over the last 50 years. Our own studies show that eventually all retail markets change to respond to consumer demands. A new entrant from another retail sector is the most radical scenario, but one that we believe will happen, the question is just when."

Under the revised Block Exemption Regulations, it should become easier for a new entrant to become a manufacturer-approved provider of new car sales or servicing in the UK, so long as they meet manufacturers' pre-defined standards. Dealers will be able to sell or service multiple brands from a common site. From October, the manufacturer will be obliged to provide these businesses with product and to support them.

To succeed, a new entrant would need access to the capital to invest in a sales and service network, probably have an existing customer base to which it could cross-sell, and experience of managing multiple, trusted, brands. Banks and supermarkets, amongst others, match this profile.

"In many sectors it's the retailers that call the shots, not the manufacturers," adds Clarke. "The automotive sector needs to think more about consumer demand and territory planning, there are clear lessons in innovation that can be learned from parallel retail sectors."

GMAP's advice to manufacturers and dealer groups is to be prepared for market change and plan optimal networks based on customer preference and market data. A white paper that discusses the potential impact of the Block Exemption Regulations in more detail is available. Please click on the link below.

'Optimising Dealer & Service Networks in the UK Automotive Industry'

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