Coronavirus planning

  15 March 2020

Calculating the cost of Covid-19

In a week where the Sunday papers’ first NINE pages are dedicated to Covid-19, and having spoken to a lot of retailers about Coronavirus this week, it’s clear planning and preparation for outbreaks at sites, or Government-dictated lock-downs, is becoming a serious drain on management resources.

The backdrop is that this is happening in March, one of the most important months of the year in terms of new car sales.

There have been lots of rumours flying around about dealerships and dealer groups closing, but these do seem to be just rumours at this stage.

No sane dealer group is going to shut up shop in March when, as every retailer I’ve spoken to says, customers are still coming into showrooms and buying 20-plate cars.

Even Ford, which announced it was sending all white-collar staff home to work, said the social distancing rules didn’t apply to staff in its manufacturer-owned dealerships.

However, all that management planning time not only includes procedures for staff and customer care, but also financial planning, should the worst happen and customers stop buying in showrooms.

With margins so narrow in automotive retail, financial planning is only prudent.

In a typical £100 million-plus turnover group, costs are typically 10%, while gross profit is typically between 10-12%. The difference is your return-on-sales figure. With the vast majority of costs, such as staff, rates, energy and rent being fixed, any slowdown in sales can have a marked impact.

If cash doesn’t keep coming in, financial reserves get eaten up very fast.

That’s why voluntarily closing dealerships would be corporate suicide.

This isn’t an issue only retailers are worrying about. Auto Retail Agenda understands that at least four manufacturers are making plans for more financially secure groups to rescue (i.e. buy) any less-secure franchises.

It’s far too early to tell exactly how the Covid-19 outbreak will impact auto retail. Advice about, and the spread of, Coronavirus is moving very rapidly.

However, if there’s one thing that’s sure about the auto retail industry; it’s tough, adaptable and no stranger to fluctuations.

Tristan Young

Editorial Director

Auto Retail Network

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