Face to face: HR Owen

Walking past supermodels on the way to a dealer interview is not a regular occurrence on AM. The fact Kate Moss was out shopping 50 paces from HR Owen’s Jack Barclay showroom highlights how different this group is from any other in the UK.

It has access to one of the largest (high net worth) customer databases in the world, has to manage considerable costs with a largely central London-based operation and has been trying to stabilise the business after the recession.

Profits have been on a roller-coaster ride in the past 10 years and previous chief executive Andy Duncan left the business after just 12 months in the role.

Its collection of high-luxury franchises brings with them high expectations, but, after 13 months in the job, CEO Joe Doyle has steadied the ship and is ready to take his plans for HR Owen forward following a positive first year.

In its last interim statement for the six months ended June 30, 2012, revenue was up 37.9% to £128.4 million and profit before tax was up by 23.5% to £2.1m. Other than consignment and used car stock, the business is without debt.

The group is made up of arguably the strongest brands in the world, from super luxury specialist sports cars with Bugatti, to Aston Martin, Lamborghini and Bentley (see AM's in depth Bentley franchise analysis here). It also has service franchise agreements with BMW, Audi and Mini.

The businesses rebranded in September 2012 and this was the ignition switch for all the developments it had been working on. Doyle told AM: “The rebrand was the stepping- off point to create a consistent identity across the group across all dealerships.

“One of the things I felt when I joined was that people within the group more or less felt like they worked for the franchise and not for HR Owen. We’ve tried to create an identity which reflects our heritage, but it was also giving us something to unite behind.”

Doyle admits that before the rebrand, customers were unlikely to identify their experience with the group, seeing only the brand above the door.

He said: “It used to be hard to identify that you were in an HR Owen showroom before we made the changes. It was very rare that you would find the logo above the door or even find it represented in a consistent way.”

This led to the group looking to redefine what the culture of the business was all about. To decide what you want your brand values to be, you have to understand your customers’ expectations.

For Doyle, it was straightforward. He said: “If you think about it, you don’t need any of our cars to get from A to B. Our customers are absolute petrol-heads and that determines the kind of expectations they have of us. Our customers should feel like part of the family and be able to come in just to have a chat about the cars.”

It wasn’t just the culture of the businesses which needed attention. HR Owen was also in need of a systems overhaul.

Doyle joined the business from HPI. His background in software and IT led the business to review the way it handles data and ultimately to a new customer relationship management (CRM) system.

Doyle went outside the industry to find the right CRM and decided on Salesforce which is used by brands like Burberry, O2, Boots, Dell and Spotify.

He said: “Salesforce is based in the cloud, but it’s bespoke to HR Owen’s specific requirements. They were quite keen to get into the motor sector and so we got a competitive advantage in being their first automotive customer.

“We are now capable of complete transparency and tracking. Everything we do now is feeding into the new
CRM system.”

Doyle is an advocate of cloud-based IT systems because it eliminates hosting costs or disaster recovery, with all computer resources based on the internet. As long as the business has good links to the internet, HR Owen’s systems can be accessed from anywhere and on almost any platform, including tablets and smartphones.

He said: “For a business of our size I find it to be cost effective. It means you can also add modules as you go in a fairly inexpensive way.”

HR Owen now outsources the management of its IT, with one company handling desktop support and another handling communications and bandwidth.

HR Owen factfile:

Turnover: £128.4 million (for the six months ended June 30, 2012)

Franchises: 14 sales franchises and 15 aftersales franchises for Aston Martin, Audi, Bentley, BMW, Bugatti, Ferrari, Lamborghini, Lotus, Maserati, Mini, Pagani and Rolls-Royce.

Annual sales volumes: new/used 2011 – 572/576. 10% increase for both estimated for 2012

Properties: All leasehold

Customer relationship management

HR Owen is still using the ADP dealer management system for all of its transactional data, but its Salesforce system handles all of the group’s customer management.

One of the key advantages to using the new system is the ability to bolt on additional items. HR Owen’s telephony is run through Salesforce. When a customer calls, the screen displays all of the customer’s details to the sales executive before the phone is even answered.

The group now has all of its systems in one place and can draw from a centralised database.

Doyle said: “You could have been a very good customer of Bentley in our group, walked into a Ferrari dealership and we wouldn’t know you.

“We’ve got one of the UK’s best high net worth customer databases and the power of being able to pull that all together for future prospecting and customer management is significant.”

There is also a campaign module which manages email and postal campaigns, as well as event management.

Everything is captured and traced, making it easier for the group to identify prospects and communicate with them correctly. This allows Doyle to develop a formula for the many  leads it needs to turn into prospects, that turn into test drives which generate sales.

He said: “We’ve now properly worked that funnel out across the business and I can now divide that information by franchise, account manager, dealership and division. It helps the sales guys and sales managers day to day.

"It helps me to direct the marketing spend more effectively across the business too.”

HR Owen's Mayfair showroom was turned into a pop up nightclub last year for the launch of the Bentley Continental GT V8:

 

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Management team restructure

Another major change since Doyle’s arrival is the structure of management teams.

There were separate managers for each franchise for both sales and aftersales and it was creating “unnecessary tensions” within each franchise and across the group.

Doyle said: “Let’s say sales took in a used 18-month-old Bentley Continental GT and go to aftersales, which would be a different profit centre with separate management, and ask how much it would be to prep. The answer would be £10,000 and then sales would say there is £10,000 in it, so trade it. That’s the kind of behaviour that would manifest itself. So now we have one person managing each franchise.”

Culturally, Doyle is trying to move the business on with investments in training, appraisals, employee surveys, and benefits.

There was a pay rise across the business in 2012 which hadn’t been done “in a long time”. New incentive schemes were introduced. There was a review of basic pay and alignments where required.

Doyle said: “My fervent desire is that I open a set of accounts one day and the highest-paid person in the company is a sales executive.”
There was a mix of internal promotions in 2012 and going outside the business to find new talent.

The group takes on apprentices every year, which Doyle describes as a long-term commitment for the brand. He said: “It takes a lot of time and effort to get the technicians up to the standard we expect here.”

The London bubble

It is difficult to benchmark HR Owen against other groups and plcs due to its current mix of high-end brands and high-cost locations.

The majority of its customers are located either in or around London. The group still has a lot of customers from the City, but not in the numbers it used to. Those numbers have been made up by international customers.

Doyle said: “There is a different economic climate here in London and I can see that when I look at the dealerships I have outside of London versus the performance of those that are in the capital.”

HR Owen has an Aston Martin and Bentley business in the wealthy Cotswolds town of Cheltenham and a Lamborghini site in Manchester. Doyle assures his businesses outside London have had a good year.

In terms of Doyle’s long-term plans for the business, it has to be focused on the highest concentrations of wealth.

He said: “We’re looking at London, the south-east, west of London, south Birmingham and south Manchester. If someone gave me a choice, I would always pick London ahead of anywhere else.

“The costs of operating here are significantly higher.

“It costs you more in terms of logistics with vehicle movements. It costs more in terms of people, with the wage that London brings with it. It creates space issues for us as well. It creates efficiency issues in terms of travelling just five miles across London, which can take 45 minutes. However, the opportunity is here to support that.”

HR Owen’s position as a predominant player for its luxury brands mean it is likely to have a good balance of power with its partnerships. Doyle confirms that relationships are strong across the group.

He said: “While the returns are there, we don’t mind having to make the capital investments required to keep up the standards.

“In fairness to our manufacturer partners, it’s not an every five minutes request. There’s at least a five- to seven-year cycle for corporate identity changes and they always appreciate when profitability is under pressure. As long as we work together through it, it’s OK.”

Most of HR Owen’s locations are standalone, which protects the business from any incoming demands for separations under a general block exemption regulation.

Doyle said: “I think outside London it would be difficult to operate these franchises as a standalone business on a sustainable basis. The requirement to have to have two or more brands on one site will be a reality to make it work. Any discussions I’ve had about growth with our partners have been quite accepting on that.”

Doyle would look to multi-brand showrooms outside of London should the opportunity arise. He would not confirm which brands the group would move forward with, but likely new car franchise targets are Porsche, Range Rover, Audi and BMW. These brands fit with HR Owen’s premium history, but would also give it a much wider service parc as a base to strengthen the business.

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Double the return

HR Owen’s return on sales has not been where it needs to be, sitting at under 1% ROS in 2011. The group is making progress towards a more profitable business. Doyle is confident the group can double its profitability before 2014.

The momentum HR Owen generated during the first half of 2012 has continued into Q3 and Doyle is confident for the year ahead.

The business is heavily weighted towards new car sales, with more than 50% of its profitability coming from that area. While new car sales were up 10% over the first half of 2012, the business needs to boost used volumes and service hours to help it reach its profit goal.

Doyle said: “We’ve had a look at 2013 and there will be some elements that are going to make it tough for us. All the new product launches for our brands will be in the second half of the year so it’s really important for us to get our operations in order and our used car sales up to full potential. We also need to make sure we’re pursuing additional revenue streams.”

HR Owen is expecting to boost used car sales up by 10% due to a change in process to act as a group, rather than separate businesses.

The group has broadened its stock profile moving from only stocking nearly new to cars up to six years old. The business has also invested in more resource with its specialist buying team growing from two to three full-time employees to help source stock.

There are now also used car managers and specialists to create more of a focus on used car sales.

HR Owen’s website redesign means used car stock can be pushed out online and the time it takes to upload each vehicle has been cut from 15 minutes to three minutes.

The group will also be looking to make more from finance by introducing a larger range of products, as well as an added value mobility package and potential leasing business.

The mobility package will be available to HR Owen customers as part of their purchase to keep customers mobile.
The leasing business could launch this year.

Doyle said: “Some of our customers might have a Bentley or Ferrari which they drive, but they might need a Volkswagen Polo for the nanny on the weekend or something for the son.

“It’s all about how we fulfil our customers’ requirements. How do we make them feel like part of the family and take care of their problems? We will be able to satisfy a need for customers and make some incremental revenue from it too.”

Social media is on the radar for 2013, but it’s an area HR Owen has pursued only on an ad-hoc basis, with Doyle highlighting the importance of getting the business in order and the basics right first.

The aftersales business will be boosted due to more control over customer data and the sophistication of the marketing process handled by the new CRM.

This will help to pull in more customers for servicing in addition to HR Owen’s specialist classic restoration business and its role of maintaining the Queen’s fleet of Bentleys at its Jack Barclay business.

No quick fix for 2013

Doyle admits there will be no quick fixes this year for the automotive industry.

He said: “I think there will be some growth in 2013, probably around 1% on GDP. I don’t think we’re going to get to any one year and see a sudden take up.

“We’ve been working pretty hard for the last four years getting ourselves out of the recession and I can see it continuing that way for another four years to come.

“For the brands we represent, I know 2014 will be an incredibly strong year for us due to the product cycle in that period.”

The group is currently considering opportunities for expansion and one option will be resolved in Q1.

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Bugatti is a work of art

At £840,000 to £1.5 million a piece, it’s not surprising the average Bugatti sales executive sells just two cars a year.

HR Owen’s Bugatti UK sales specialist Anita Krizsan sold 10 in 2012, which puts her clearly in the lead for global sales. It’s the best performance for Bugatti in HR Owen’s history and demonstrates how well insulated the super-rich are from the economic woes of the world.

Krizsan explains that the key to success is her absolute enthusiasm for the product.

She said: “Getting to show people this work of art is exciting. The key is sharing that enthusiasm and expert knowledge about the car, but also making things as easy as possible for the customer.”

The majority of communication is by text message and test drives are rarely requested. If the customer does not already have a car collection, Krizsan knows they’re unlikely to buy. She will only deal with the customer directly – no brokers or fixers.

Krizsan said: “These customers want the absolute minimum of fuss and they want you to be completely straight with them at all times.

“I have answered texts at 3am because they might be in a different time zone.”

Due to the rarity of the product, there can often be multiple people interested in the same model.

An invitation to a three-day factory tour in Molseim, France where customers can spec their Bugatti in the atelier, which is surrounded by rolling hills and prancing deer, usually convinces billionaire customers to sign on the dotted line. Luckily HR Owen allows payments in three large instalments, rather than the full £1.5m in one go.