Face to face: Milcars puts used car sales first

The Mazda brand has been struggling in the UK with a lack of product to compete with mainstream rivals in recent years, but it didn’t stop specialist Milcars Mazda from walking away with two AM Awards this year.

The single site operation in Watford is one of the largest for Mazda in Europe and beat top dealerships in the UK to win Excellence in Aftersales and Best Used Car Performance at the AM Awards 2013. The awards are the result of its tight focus on retaining long-term customers.

The family-owned business is led by Chris Ward, who trained on a BMW management programme in the business his father owned. An MBA with an automotive bias at Cardiff Business School under Professor Garel Rhys provided a further underpinning for what was to come.

Ward worked within the family business before breaking out on his own in 2005 to open his own site with Mazda.

Tony Thomas has worked for the family business for more than 30 years and until very recently was general manager at Milcars Mazda. He is now retired but comes in on an ad hoc basis to work with Ward to assist with managing the business.

Like the majority of UK dealerships, Milcars reacted to the financial downturn in 2008 and restructured the business. This coincided with Mazda’s gradual downturn in volumes. Ward said: “I looked at the business and believed we needed to shift our reliance on new car sales. We were already very strong with aftersales.”

And it was used cars which provided the biggest opportunity. This focus led to the doubling of its used car sales figures without sacrificing margin.

Ward removed the role of sales manager and employed new and used car managers to make sure each area of the business had dedicated focus.

He said: “Used car manager Phil Marks understands the profiling of the local market. He doesn’t chase to get stock; he’ll get it well priced.”

The business has an average stock holding of 45 used cars with a typical turnover within 35 days, achieving strong profit and ensuring cash is ready to buy replacements.

Milcars’s ratio of used to new sales was already strong in 2011, but improved in the second half of 2012 to 2.2 used to every one new.

Finding stock has been challenging. It is sourced through a variety of channels. A primary source is customers’ own cars which Milcars will pay a premium for. It offers cash purchases to customers towards the end of their finance agreements.

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Thomas said: “There’s no doubt the industry had a poor start to this year because of the weather. It was deterring people coming out for a test drive, which is of particular importance for used car sales.

“As soon as the weather picked up so did the sales. As long as we can get the right supply, we will hit 500 used car sales this year. That’s a lot for Mazda.”

Sources for stock include Mazda UK, auctions, Motability and a network of franchised dealers and agents.

Milcars has established itself as being a UK specialist for used Mazdas and, as Thomas explains, once you have a reputation, the potential sources for stock over the country increase as customers and trade get in contact to sell.

Ward said: “With the trade, they want the best price for the stock, but they also want the speed that goes with that and our used car manager strikes that balance brilliantly.

“The money will go through to the seller quickly and it’s done very smoothly.”

Marks oversees sourcing, preparation and the customer experience from the point of sale to the delivery. All cars are prepared to retail standards within three days of arrival which means in the majority of cases customers can drive away when they view a car they have shown interest in online.

Milcars sets the target of having nine high quality images for each of its used cars in stock. It tried personalised videos for customers who had posted an enquiry, but it didn’t gain traction.

Used cars online

The internet plays a big part in Milcars’ used car success.
Ward said: “The internet is where the customer is at the moment and that’s here to stay, so it’s important that we embrace that as a channel too.

“We price very well on the internet so customers are getting value when they’re looking around online. We’re very quick at dealing with enquiries and getting that process moving quickly.”

Milcars isn’t a high pressure selling environment and Ward believes customers respond to that. He said: “There’s only a limited number of customers out there and we want to make sure we retain every one of them.”

Marketing spend is split between a variety of online classified sites, but Auto Trader is a significant partner.
Thomas said: “The development of our own website and pay-per-click is just as important now too.

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“The increase in our business last year was from the amount of effort we put in to our own website with used cars. We’re still selling used cars locally, but we’re attracting business from around the country with 30% outside our area due to the strength of our pricing and our website.”

Milcars is managing to retain about 50% of customers that have bought from outside the Watford area for servicing.

Thomas said: “Used car buyer mileage tends to be lower, so in a lot of cases it will only be one service a year and they’re happy to come down on that one day a year and do a bit of work on the free wi-fi while they wait.”

Milcars’s website is Mazda’s own dealer website offering which is operated by GForces.

All email enquiries are CC’d to Ward and Thomas to make sure all opportunities are followed up quickly.

Thomas said: “Selling used cars is a bit of a state of mind. You have got to want to sell used cars and enjoy that world, because they are all unique.”

Ward sums up Milcars’s used car success down to how confident sales executives feel when selling. He said: “They know the cars are well priced and prepped, they have the confidence to look the customer in the eye and know it’s a good deal.”

Aftersales

A superbly competent, well-rounded approach to aftersales is what set Milcars Mazda apart from the rest of the field in this year’s AM Awards.

Internal labour sales had faced a challenge, being dependent to some level on Mazda’s new car volumes, which dropped by almost a quarter in 2012.

Warranty work has reduced too. However, Milcars has offset this through increased volumes of used cars, leading to an actual increase in internal sales. Overall service labour turnover has held up from the previous year, a good result in the circumstances.

The business’ efficiency means the dealership has almost 100% overhead absorption. Milcars targets annual retail labour sales growth. Ward sees this as a clear sign that it is retaining its existing customers as well as gaining new ones.

Another key performance indicator is the volume of MoTs carried out. Cars older than three years can’t put off their MoT and this focus brings customers into the business. It ensures that a focus remains on servicing and testing cars after the crucial third year.

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Tyres were also highlighted as an incremental growth opportunity. It’s a tough market, with Milcars having to compete with local fast-fits, but combined with MoT it’s worth it in order to retain customers for servicing.

Ward said: “As the standard repair times for routine servicing are dropping, we need to see more vehicles through our workshop to maintain the status quo.”

One way Milcars has been keeping on top of that problem is by contacting customers in advance to reconfirm their service booking through phone initially, or text.

As Ward says, it’s quite a normal thing to do in retail, but he doesn’t think it happens much in automotive retail. Small details like these can mean the difference between success and failure, or fully absorbing overhead costs.

The aftersales department at Milcars operates under the philosophy that if it can retain a customer for the third service, there’s a chance of retaining that customer for life.

Relationship with Mazda

The success with used cars and aftersales is built around Milcars’ relationship with its sole franchise, Mazda.

Ward and Thomas both admit the brand has been under pressure, but are confident it can recover with new products.

As one of the largest Mazda dealers in Europe, Milcars gets visited by engineers and executives from the company in Japan when they’re here on trips to the UK. The staff at the business find it uplifting to be held as an example for the brand here.

Thomas said: “Mazda’s senior guys want to know our feedback on the retail side and they’ll go into the nitty gritty on models on areas like handling and build quality.”

As a franchise, Mazda is going through a change with the arrival of its Skyactiv technologies and new models will be filtering through to UK dealers.

It’s been tough as a lack of new product over the past couple of years has made it difficult to compete with other brands, with market share dropping. The Japanese brand posted UK registrations of 49,858 in 2008 and it registered 26,183 last year. That’s a big drop.

Ward is confident the model line-up will help deliver the volume Milcars needs. The new Mazda3 in the autumn will help. If that is as well received as the Mazda6, Thomas is sure an increase in volumes will come naturally in 2014.

By 2015, Mazda will have a fully refreshed model line-up with a new Mazda2 and the next MX-5.

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Thomas would like to see another halo car like the RX-8, although he admits the numbers would be small.

He added: “We’re getting excited about the next generation of Skyactiv and I think the natural path after that is to look at hybrid. We’re looking forward to the future with Mazda with confidence because it is a brand we are pleased to be involved with.”

Milcars will continue working with Mazda and Ward is focused on making his single site business as good as it can be before looking beyond with regional group ambitions.

He said: “We just want to build the business for the size it is.

“We want to see Mazda get back to selling 50,000 vehicles and that would be good for new, used and the aftersales business to make sure we’re fully utilising the size of this site.

“After winning awards for aftersales and used cars we want to be in the position to win the retailer of the year award. It might take a couple of years to get to that, but that’s the aspiration.”