Expansion and diversity key to survival and success

  23 June 2019

Reading through various 2018 accounts this week one theme becomes abundantly clear which is that as margins fall and uncertainties grow the bigger fish are looking to gobble up the smaller ones.

The reasoning is clear and the business logic unarguable. Buying more of anything brings better bargaining power with the supplier and economies of scale to the cost of doing business. Spreading the variety of what and where you sell provides protection against one supplier’s products under-performing or a regional market slowdown.

It all adds up to the message so clearly espoused by Professor Richard Parry-Jones, recently appointed chairman of the Marshall Motor Group, who wrote of the need for `targeted acquisitions’ and the belief that `those automotive retailers with both scale and a diverse portfolio will be best placed to succeed in a changing market.’

Hendy Automotive said it aims to `diversify as widely as possible within the sector so its operations embrace as many brands, products and activities as possible, including non-franchised operations. Consequently, as certain brands, products and activities in the portfolio struggle, others are likely to strengthen providing some stability in financial performance.’

In the Drive Motor Retail accounts is the line – `the group is in a good position to grow the future business footprint through strategic acquisitions.’

In other words we will be seeing in retail what we have seen in manufacturing where in 99% of cases you make the money from volume rather than margin.

It is hardly a unique observation but over the next 12 months and who knows what in the global and domestic economies, there will surely be a lot of smaller, perhaps family-run retailers, who are made an offer they can’t refuse.

John Swift

Editor

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