Automotive Blog

What role do permanent micro-outlets have in the future of automotive retailing?

Citroen Pop Up

At the beginning of November, the first Citroen micro-outlet opened in Hameln Germany, in a shopping centre. Hameln is a rather small city, with around 56,000 inhabitants – so, not the typical metropolitan area where you would expect to find such an outlet. It suggests there is an continuing growth of this trend across different urban areas.

This sort of retail environment is now a go to destination, covering as a rule a large catchment area and provides shopping and leisure facilities to potential customers, thus encouraging those customers to spend many hours there. For OEMs and dealer groups, the massive number of annual visitors (there are up to 48 million per year to the Bluewater Shopping Centre, Dartford, UK) is a clear opportunity to showcase cars to customers whilst at the same time passively gathering information.  Why wouldn’t I walk in if there was a modern micro-outlet in the retail mall or shopping centre where I live, with a brand-new car, transparency on price, a welcoming atmosphere with maybe a coffee on offer? From my own experience, I know that one will reflect on this moment and eventually start thinking about buying a car, or one might even be influenced in some way on brand choice.

But is there a role for similar types of micro-outlet formats? So far, some act as brand interest catalysts or are considered as an opportunity to close an open point in the dealer network, whilst other formats such as Rockar are clearly aiming at selling products and services – which needs special consideration in relation to the sales network as a whole, including staff competence, good processes and systems. Also the type of physical format is important – from a short-term and movable format to a permanent outlet type in permanent retail locations.

The reason why micro-outlets are still rare is most likely linked to high costs, this is particularly relevant to smaller dealer groups such as Fischer in Hameln rather than the larger and international ones such as AVAG – the operator (in conjunction with a local dealer) of the Opel CAYU format in a shopping centre in Stuttgart, Germany. Our financial modelling for operational costs of a typical micro-outlet, based on real data, includes a variety of assumptions such as revenues from used cars and aftersales within the dealer business. However, the base scenario suggests a medium one-digit percentage loss. Rental costs (typically above several thousand euros per square meter per annum) and staff costs (which have to reflect the longer opening hours of shopping centres/retail malls) have a modest impact on profitability, which is still slightly higher than the generally common high OEM contribution to the costs for refurb and IT implementation and maintenance – both requiring upfront investment. The main driver to profitability is new car sales volume, which may well be influenced by the other variables stated. It is interesting to reflect about what might happen when reducing the psychological barrier of the transaction value, so that the car is offered for instance at €150 per month compared to a €75 per month smartphone offer. Would that have a significant influence on the willingness of customers to buy new cars at micro-outlets?

Among other parameters, we included our financial modelling an annual new car sales volume of 450 cars – which is clearly ambitious – and the case has not yet been proven that a micro-outlet can be self-sustaining on the basis of its own new car sales.  Taking their role into consideration, we think that it would be inappropriate to set micro-outlets similar sales targets to those of the traditional dealerships. Instead, micro-outlets should be viewed as a contribution to the total brand marketing for the network, and also assisting their lead generation for sales made at traditional dealerships, which are often located nearby. Management, back-office administration, sales staff flexibility plus used car and aftersales functions can all be provided by a hub dealer which improves viability.

As a customer walking through Bluewater or any other retail location, some would clearly welcome new formats offering an alternative atmosphere when compared to a traditional dealership. OEMs and dealer groups should take advantage of changing customer behaviour and adapt the mix of formats and channels accordingly, with the objective of keeping direct customer contact and providing a real omni-channel environment. Consequently, thanks to their role, micro-outlets can be considered as complementing traditional dealerships rather than replacing them.



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