The dealers' view: Outsourcing

An automotive retailer’s decision to outsource invariably comes down to one key area – is the business opportunity big enough to support the dealer group having its own department and full-time staff to support it?

Many large dealer groups have the scale and funds available to establish their own digital marketing, financial compliance or bodyshop operations, while small- to medium-sized groups often look to outsource.

AM spoke to four dealer groups to find out what they choose to outsource and why.

Birchwood Group

Birchwood Group is a medium-sized group with eight dealerships in the south of England, and its operations managing director Pete  Parker outsources digital marketing, FCA compliance, health and safety and dealership security.

Birchwood takes a mixed approach with some areas, such as SMART repair.

The group has two mobile SMART repair vans and a dedicated site that handles about 35% of its minor scratch repairs and alloy scuffs. These teams are dedicated to preparing part-exchanges for sale and will also be used to target retail customers for SMART repair work.

More serious and specialised “bend and dent” work is outsourced to a specialist.

Parker said: “We’re spread out across three counties and for us to invest in that sort of specialised equipment and manpower wouldn’t make sense for us.”

While Birchwood doesn’t have rules about contract lengths, Parker said “results speak for themselves”, with companies held to account if what they’re doing isn’t working.

Brayleys

Paul Brayley, managing director of Brayleys, a nine-dealership group, outsources digital marketing, FCA compliance, training, legal advice, valeting and cleaning.

One factor for Brayley, beyond just the question of scale, is the difficulty involved in having something in-house. This was the case with valeting.

He said: “We did use to employ our own valeting team, but we found it very tricky to manage, particularly on the staffing side.

“It was difficult to motivate people to get out to work and clean cars and so we found that when we employed a company to manage that, we were never caught short when we had cars waiting to be valeted.”

One area Brayley would like to take in-house is training for sales staff. The business currently hires a sales trainer to help bed in new executives.

However, he said while it would be possible to employ someone full-time as part of the company, there is always a potential risk in doing so.

He said: “We could quite easily have in-house training, but the problem you have is that if you set someone up in that capacity to start training sales staff, in my experience they tend to leave and set up on their own and charge you more, so it has stopped us from doing it.”

“Loyalty is more important to me than switching suppliers every one or two years and getting a deal just to save me a few extra pounds”
Paul Brayley, Brayleys

Brayley said outsourcing areas such as FCA compliance allows dealerships to concentrate on retailing vehicles and keeping customers happy, knowing there is an expert making sure the business is compliant.

Brayley switched digital marketing suppliers after growing unhappy with his previous set-up.

“We knew we wanted to outsource our email marketing and social media and liked what another dealer group was doing and so got in touch with their supplier.”

While value for money is the top priority for many, loyalty means a lot to Brayley.

He doesn’t consistently switch suppliers if a good relationship has been established. The benefits are that the suppliers understand the dealer group and a level of trust is built between the two companies.

Brayley said: “Loyalty is more important to me than switching suppliers every one or two years and getting a deal just to save me a few extra pounds.

“There are some suppliers we work with, like the facilities team at one dealership, that had been there for years before we acquired it. We got to know them and we’re still with them to this day.”

Phoenix Car Company

John McGuire, Phoenix Car Company chief executive and chairman, outsourced valeting because the dealer group was experiencing high staff churn.

McGuire said outsourcing valeting also means the business can be more flexible with how many staff are employed during peaks and troughs throughout the year, particularly around busy times such as the plate-change months.

While valeting and dealership cleaning are outsourced, McGuire said dealers should look carefully at the costs involved, as in his experience, quotes from suppliers can be more expensive than keeping things in-house, particularly in areas for which employees already in the business may have an affinity, such as digital marketing.

Phoenix has worked with its  valeting company for 14 years and there have only been two “off-book” meetings in that time.

McGuire said: “It’s so important to be able to have a long-term relationship with a company you trust and a company that understands your values.”

Harwoods Group

Harwoods Group outsourced its service plans to Emac after facing troubles with administering them.

Archie Harwood, Harwoods Group director, said: “The big problem we had with service plans was with dealer management system (DMS) integration with what we had in place, so it became very difficult for us to even work out something as simple as knowing if a customer was on a plan with us or not.

“It got to the point where it was affecting the level of customer service we need to be delivering as a group. There was a trade-off there between cost and customer service and we felt it was better to have it managed by a specialist.

“You really need to look at what’s important for your business and what you want to concentrate on and you have to be careful not to stretch the business too far in what it can handle.”

FCA compliance is a popular area for dealer groups to outsource as it’s a specialised knowledge area and having an expert on call can add a layer of accountability. Harwood said it can help having someone from outside the business to deliver a perspective on a dealer’s processes.

Harwoods puts one-year contracts in place as a rule of thumb and closely monitors service levels. If a company isn’t delivering, it triggers a review and a potential tender process.

Harwood said dealers must be particularly careful when outsourcing an area that is customer-facing.

He said: “Any supplier speaking directly with your customers has to represent you, it’s got to feel like a customer is talking to your own business.”

Harwoods holds regular mystery shops and records calls to make sure suppliers are representing the group the right way.

Harwood takes a blended approach to digital marketing and while it is outsourced, he said the dealer group still led strategy and then trusted the supplier to implement those plans: “We are still planning out the strategy and budgets at a high level and we keep control of that.”