European dealer networks are slowly but surely becoming more efficient, according to new research.
The latest European Car Distribution Handbook, the annual review of dealer population by analysts Harbour Wade Brown, shows that manufacturers are eliminating large numbers of sub-dealers across Europe. They are being replaced by a 'hub and spoke' system of main dealers with satellite points within enlarged territories.
In the past, European car retailing was dominated by a two-tier system of main dealers and sub-dealers, also known as second-tier or retail dealers.
The main dealers had direct franchise agreements with the manufacturers or importers, but the sub-dealers were appointed by the main dealers. They had to buy their cars wholesale from the main dealers, retaining a small margin (usually one or two percent) on sales.
Moves away from the two-tier system have been spurred largely by manufacturers' desires to control their networks more tightly. It is far easier to manage a network of 100 main dealers operating 300 sites on a 'hub and spoke' basis than 400 individual businesses.
Germany still has more than 20,000 main dealerships - 31 percent of Europe's total - but with an average new car throughput of a miserable 176 cars, fewer than four sales a week.
Germany lost 1,695 dealers last year, more than any other European country. These were mainly second-tier dealers within domestic networks, particularly VW and Audi.
Germany's problems will be harder to resolve than in countries such as Spain, Italy and France, where the large overall dealer population is a result of huge second-tier networks of small, mainly service-oriented operations in rural areas. Germany has relatively few of these - only 7,500.
The real problem is enormous main dealer networks.
Britain's dealer population fell by 525, or 7 percent, during 1997 to 6,908 franchise points. This included 334 main dealers and 191 second-tier dealers. Only Ford and Renault still operate significant second-tier networks, and these are in rapid decline.
Ford's network restructuring - by no means complete - is starting to look impressive. At the start of the 1990s, the UK market-leader had more than 1,000 dealers - about 400 main and 600 retail. Now it has just 290 main dealers and 341 retail dealers, though overall it still boasts 797 outlets due to the rapid growth of satellite operations owned by the main dealers. Satellites now account for 20 percent of the total Ford UK network.
Across all networks, there are now 561 satellite dealers in the UK - more than the number of sub-dealers (544).
Like France and Spain, Italy has relatively few main dealers (6,004) but huge numbers of sub-dealers - more than 14,000. But this is starting to change. The market saw a net loss of 1,035 sub-dealers in 1997, the largest reduction in any market - though this was partly offset by a net increase in main dealer numbers, mainly at Renault and Ford.
Seat did away with its second-tier sales dealers, keeping a small group of service-only sub-dealers. This network restructure resulted in a doubling of average throughput from 165 to 360 cars a year - the third-highest behind Fiat and Rover.
France has a relatively small number of main dealers (6,699) but has the second-largest second-tier network in Europe (16,246 outlets). More than 13,000 of these represent the three main domestic brands and are in many cases little more than village garages.
Renault, Citroen and Peugeot claim all their sub-dealers are full-facility operations, and this depresses the average throughput for these franchises to just 79 cars a year. The average domestic-brand main dealer in France sells close to 1,000 cars a year. The process of replacing many of these operations with satellites has begun - but slowly.
SPAIN HAS has probably changed the most. The number of main dealer points has increased by 231 - almost exclusively because of 212 new satellite points within existing dealer territories. This was at the expense of 638 second-tier dealers.
Skoda lost all its second-tier dealers last year, and Citroen shed 155 - 14 percent of its chain of service garages. Audi, Renault, Rover and VW all lost sub-dealers, adding satellites in may cases.
The result of the changes was an increase in main dealer throughput from 299 to 316 cars a year.