What can 300 people do?

The image on this weeks blog shows 300 figures in a space of 100 square metres, so less than half the space defined for each brand in a new Stellantis House, less than a tenth the size of a more typical dealership.  As another benchmark, the size of a tennis court is just over 260 square metres.  They would all fit on four London double decker buses or easily onto two short haul Airbus 320 or Boeing 737 airliners.  Before you read on, you might want to think about what the significance is of that number in terms of automotive retail?

The answer is that just 300 European independent dealer groups handle a third of the new car sales in Europe.  You could easily fit all the dealer group heads into one typical car showroom.  If you went for one of the larger flagship dealerships that many operate, then you could give each of them a desk and chair.  They operate over 28% of all the franchise points in Europe and their combined turnover is similar to that of the Volkswagen Group.  These are the rather startling facts that emerge from the latest analysis by ICDP of the European top 300 dealer groups.  Because of the delay in data being published our analysis reflects 2022 or the financial year most closely aligned with that, and as we all know there was a market recovery in 2023 which boosted turnover, if not profits.  However, this is the second year that we have produced this ranking, and it has been quite stable in terms of the member companies, although consolidation has resulted in some formerly independent members now being combined.

The ranking is dominated as you would expect by groups from the UK, France, Germany and Italy in that order but the top five also includes Emil Frey from Switzerland, Penske from the US and Hedin from Sweden.  10% of the groups operate in more than one market in Europe, 5% act as distributors for at least one brand in one market.  They are relatively sophisticated used car operators with an average used to new ratio of 0.9:1, not far short of the generally accepted benchmark of 1:1.  They all handle more than one brand, almost 80% handle five or more and the average across the whole ranking is a portfolio of ten brands.

So apart from yielding some interesting statistics, what is the significance of this concentration of power in such a relatively small number of groups?  Perhaps starting at the opposite end of the spectrum, it does not mean that there is no future for individual owner-operators.  We don't have data on the total number of dealer investors across Europe, but I would guess the number of single site owner operators is well over ten times that of this elite group.  As long as they can remain viable serving their local communities and supporting the investment required to cope with changing technology in the product, the showroom and the workshop, then I see little point in eliminating this type of operator simply to get a smaller number on some management reporting KPI at a manufacturer.

The turnover required to be in the top 300 in 2022 was just under €230 million, and the combined turnover was over €260 billion.  For any vendor – whether that be for tyres, consumables, remarketing services or IT – these companies represent a very focused part of the retail sector.  It is easy to be a ‘busy fool’ reacting to all opportunities, whether they be from large or small players in your sector, but long term growth has to be driven by being with the largest players.  A total of 300 targets with a good geographical and brand spread seems like a good place to start, and an effective account management strategy can be built around 300 targets across Europe with a relatively small team.

But it is the manufacturers who need to focus on this select group – whether they are established brands or newcomers.  A critical presence can be built in Europe as a whole through working with these investors.  I am confident that whilst operating performance and management model will vary across these 300 companies, they have not grown to their current scale by accident.  They will all have capable management and an interest in growing or at least defending their position.  Many will be looking to add brands as a way of managing risk, because within their current portfolio, most will have brands that cause concern about their long term competitiveness.  When planning new distribution models, these are the investors that need to be won over – if a few of these abandon your franchise because they do not value the relationship, that matters.  On the other hand, if they commit and invest in your brand, that sends a strong signal to other investors, and makes life easier for you as a manufacturer as they take on some of the load.

So who will be the first to fill that showroom or tennis court with the top dealer investors in Europe?  The race is on!

Image from Prof. Dr. G Keith Still