What’s the cost of ego?

  09 July 2012

When Glasgow Audi opened in 2004 it was the largest Audi dealership in the world and cost an estimated £15 million. Not surprisingly, experts in auto retail questioned whether it could ever deliver a return on investment.

With the sale of Lomond Motors to Lookers last week, we learnt the business (now expanded to take in other Audi dealerships) had a 2011 turnover of £170m and a pre-tax profit of £0.7m. That’s not great return on capital employed.

Since then we’ve seen other Audi brand centres open and Mercedes Benz build its ‘World’ visitor destination at Brooklands, near Weybridge at a cost reported to be nearer £40m.

Premium carmakers can argue that it’s all about making a brand statement but, with over half their new car sales coming from fleet, that’s hard to justify. And evidence suggests older car owners looking for servicing are put off, rather than attracted by, expensive premises.

But what about volume brands? This week Peugeot told us it’s going to invest £6m in a new Robins & Day dealership in Chingford, north-east London. Maybe that’s not big money by premium brand standards but the suggestion is that other Peugeot franchise holders will be expected to up their game.

So, how does that sit with latest figures from Google, revealed at our Web Workshop last week, that suggest a typical customer has pretty well decided what car he wants before he arrives at the door – and now averages just 1.3 dealership visits during the sales process?

Yes, this is an old argument but it’s made topical by current economics and changing customer behaviour. If customers are not visiting stores, what’s the point? Why spend all that money on a physical presence when it could be better spent online?

As of next year, and the new pan-European legal framework, carmakers will have the upper hand in enforcing corporate identities; retailers who choose to argue will be exposed. So, the auto retail industry needs to have a serious and constructive debate on the issue – and it needs to have it fast.

Rupert Saunders

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