Has a second lockdown altered dealer plans in England?

Despite an unpredictable and turbulent year, there were many reasons for dealers to feel confident in the lead up to Christmas.

Since the first wave of restrictions was lifted in the summer, the UK economy has seen a massive bounce-back from the recession with the Office for National Statistics (ONS) recently announcing a record 15.5% growth for the third quarter.

In the automotive sector, dealers in the UK have experienced high consumer demand since showrooms re-opened on 1st June. With strong sales from June to October and with the usually busy festive period on the way, there has been a real sense of optimism in the air.

In fact, 71% of dealers in NextGear Capital’s latest sentiment survey—taken just before the official announcement of a second lockdown in England—said they anticipated to be profitable in the final quarter of the year. Just 5% thought there was no chance of being profitable – quite remarkable when you reflect back on how we all felt in the spring.

How then, does the announcement of a second lockdown affect this positivity?

To begin with, it's important to view the survey results in context. While lockdown will likely temper some ambition for the remainder of the year, dealers were already putting measures in place to help minimise the impact of any future restrictions.

30% of those surveyed said they had prioritised consolidation to minimise their exposure to future knockbacks and 36% were focused on maintaining profitability from the summer. With regional measures already in place at the time of asking and anticipation of national measures high, this focus places dealers in a stronger position to navigate a second lockdown compared to the first.

Plans for dealers to consolidate their assets are well-founded. In his recent blog, Liam Quegan, Managing Director of NextGear Capital and Manheim Auction Services, spoke of the need for caution in order to be set up for success in the future. This advice has proven timely.

Keeping on top of costs is the number one thing dealers can currently do. This means analysing their operations in fine detail, finding waste, and doubling-down on what’s working. No stone should be left unturned. Dealers should use this time to look at their buying, collections, preparation, and marketing processes to eke out any increases in efficiency there are to be had. All this will lead to a more effective and agile business that can hit the ground running once showroom doors re-open.

Another priority that’s unlikely to change is the focus on online retailing. As Pam Halliday, our Sales and Marketing Director, recently pointed out, successful dealers used the first lockdown to get serious about e-commerce by investing time and money in their websites, imagery capabilities, and online marketing activities. Consumer buying behaviours have accelerated towards online retailing in automotive during the pandemic and old habits are unlikely to ever fully return.

The outlook

With the unpredictability of the market, it’s no surprise to see just 5% of dealers surveyed prioritising growth in Q4. However, it’s encouraging to see just 5% looking to reduce stocking levels, indicating that strong demand in the run-up to Christmas is still anticipated.

While some of the fourth-quarter priorities dealers had planned will inevitably shift or be deferred now a second lockdown in England is in place, maintaining current sales and profitability levels will remain a priority for most.

How the economy will be impacted by this second lockdown remains to be seen, but dealers will hope that the length of restrictions will be less, and the economic impact reduced. Regardless, dealers are much better placed this time around. The measures they have put in place—consolidation of assets and the embrace of online retailing tools—in addition to anticipated demand over Christmas, should allow them to ride the wave and remain profitable into 2021.