PARIS - Renault is moving ahead with a radical restructuring of its dealer network that will result in just 600 main dealer hubs covering the entire western European market by 2005.
By 2002, the new structure will have been fully implemented in France. Begun in 1997 when Renault had 300 independent dealers covering France, the revamp will result in 80 main dealers, each covering a carefully worked out geographical area called a 'slab' or 'hub.'
However, the number of customer-facing outlets is increasing - from 460 in 1997 to 530 in 2000. Within each area, the central dealer operates smaller outlets to ensure the market is covered.
Simultaneously, Renault's factory-owned dealer division, Renault France Automobile (RFA), created in 1998, will add to its own network of 15 branches, mainly in big cities like Paris or Lyon.
The restructuring goes beyond French borders. Renault has been following a similar strategy in the UK for several years - with up to 20 percent of total sales coming from factory-owned urban dealerships. The strategy is now being launched in Belgium, and will soon be applied in Germany and Spain.
'In Italy it will be more difficult (to implement),' said Patrick Blain, vice president for Renault sales in France. Blain was general manager for Renault Italy until 1999.
Renault wants 600 'hubs' covering western Europe by 2005. According to Blain, an average dealer in France will sell from 2,000 new cars a year in a rural area (like Massif Central in France), to 8,000 units in main urban areas. Dealer revenues vary from FF300 million to over FF1 billion (A46 million-A154 million).
'The situation will differ from one region to another. We still have small dealers in southwestern France, while big operators, like the Zodo or Gueudet groups, are already operating in several areas in northern France and Paris,' said Blain.
Independent dealers make up two-thirds of Renault's French sales, while Renault's own sites make up the remainder. In 1999 Renault sold 730,000 cars and light commercial vehicles in France.
Family-owned dealer groups make up most of the 80 new dealer operators in France.
Blain said: 'Economic strength grows with size. (The new structure) allows us to optimize the management of things like logistics, spare parts, human resources, repair shops and sub-dealers. We want mature entrepreneurs for this. We do not want to do what Ford is doing in the USA and taking over its dealers.'
Blain said Renault started the process by dismissing dealers with 'no continuity.'
'We brought local dealers face-to-face so they could discuss (the business) together,' said Blain. 'In some cases, they have exchanged stakes in their respective businesses, in others mergers simply happened.'
Renault will also encourage its French dealers to take over Nissan dealers. Today about one-third of Renault dealers sell only Renaults, while the other two-thirds are multi-branded.
But in other European countries, where Nissan is stronger than it is in France - like the UK or Sweden - Nissan dealers may take over Renault dealers.
According to Renault executives, the consolidation will end up saving a figure equal to 2 percent of dealers' total revenues. But dealer margins will also come down in France by around 2 percent from 12-15 percent.
'In some European countries dealers have margins around 7 percent and are profitable. The problem is not the margin the dealer has,' Blain said, 'but his overall profitability.'