Top numbers from the Top 50
Following my post at the end of last week, it was good to see a number of readers of this blog joining our webinar on Tuesday alongside ICDP members and some representatives from the press. The webinar was for the formal publication of our Top 50 European dealer group ranking that we produce annually, and the presentation slides are available to download from the ICDP website here.
We are pleased the story has been picked up in a number of publications across Europe and that we have had good feedback from some of the groups who are featured. I'm not going to try and summarise the whole of the webinar and all of the detail around the winners and losers within the European Top 50, but want to pick up on a few numbers related to the changes over the decade that we have been producing this table, and which struck me as particularly significant when preparing the slides.
The first thing is that although we often refer to the European industry and ICDP runs a European research programme, there are still significant variations between markets which are evident in a number of areas. Ten years ago, UK based dealer groups made-up almost half of the Top 50, now it is less than one fifth. The Top 10 in the Netherlands and UK each had a combined national market share of around 30%, but that share has hardly changed in the UK, whereas in the Netherlands the top ten groups now have almost 50% of the market. The French groups have consolidated quickly as well and it looks likely but they will overtake the UK within one or two years in terms of market share concentration. French groups now represent a fifth of the Top 50, pushing UK-owned groups down into second place, albeit in part because three of the large UK groups have been acquired by North American players. Meanwhile, whilst consolidation is also going on in Germany and Italy, it is among smaller regional groups who are not yet achieving the scale to make it into the upper reaches of our super league.
The second striking point for me was how the international focus of the large groups has changed from the situation in 2013 when 80% of the constituent groups were only active in a single European market to the situation now where that is barely over half and I suspect next year they will become a minority. Although cross-border synergies are limited, particularly if you're based in the UK with right hand drive and mph, there are opportunities to trade used cars across markets and get scale in regional parts distribution for example if you're lucky enough to be sat in the single market. Some players such as Emil Frey, Hedin and Van Mossel are now genuinely pan-European businesses, but even across the whole Top 50 the average is for each player to be in 2.3 markets compared to 1.7 ten years ago.
Risk management and diversification have been an important driver for many groups who perhaps in the past have been firmly rooted in relationships with just one brand or one brand family. Their growth, whether through taking on new territories or acquiring existing businesses, has been both with existing OEM partners and new partners including, but not limited to, Chinese newcomers. The average number of brands per group has gone up by over 50% and the number of franchise points has more than doubled, meaning that the average number of franchise points per brand is up by over a third. From the OEM perspective the groups are less dependent on single relationships, but they have generally deepened their commitment to their original partners as well as building strong positions with those they have added over the last few years. Behind the numbers, they have also created organisational structures and introduced roles that allow each brand to have strong and dedicated representation within the group.
The numbers tell us a few things. The consolidation process is affecting dealers across Europe, and those who are not growing organically or through consolidation are slipping back. The process varies between markets for a variety of reasons in terms of pace and scope, but no market is unaffected. Groups at least in continental Europe are much more willing to go cross-border, even if that is very regional like Germany to Switzerland. Whilst this opens up additional revenue growth opportunities, securing synergies will be more restricted as long as OEMs operate within national borders. Consolidation is creating stronger, more capable partners for the OEMs. The groups can then absorb a lean period with one brand whilst another is over-performing, in the knowledge that the tables will quite likely be turned as product cycles develop. They are also rarely abandoning existing partners, but strengthening those whilst adding and quickly building others.
What we don’t see when looking at dealers in terms of markets and franchise points is the parallel process of digitalisation. When we talk about numbers – or digits – then these are probably the most important. Physical presence is important to support car sales and essential in some form for aftersales, but dealers need to be casting a digital net out within their target markets to capture the attention of prospective buyers. They need to be exploiting that data to create better campaigns, better offers and deliver more services. The larger groups have the scale to make the required investments in people and technology – quite how we’ll measure that in future editions of the Top 50, we’ve not quite figured out…