Dispatches From Down Under: Dealers Hungry For Insights

It’s easy to teach when your students want to learn.

That’s a primary take-away from my meetings with dealers in Sydney and Brisbane—the first two stops on my three-city tour here in Australia.

In many ways, the car business in Australia is much like it was in the United States nearly a decade ago. The Internet is heralding unprecedented levels of market efficiency and transparency, both of which combine to put the squeeze on dealer margins. Several dealers mentioned that their average front-end gross profit in used vehicles now runs about $2,000/car, compared to $2,500 to $2,700 a few years ago.

I remember the early days of sharing the Velocity Method of Management with dealers in the United States. Some dealers were all ears. They listened intently as I shared how today’s more efficient and margin-compressed market requires dealers to do things differently in used vehicles—to make their money by selling more vehicles faster, which enables them to drive more “total gross” in all departments.

Many dealers, however, initially dismissed what I was saying. They believed they knew better, or they simply didn’t want to consider doing business any differently than they’d done for years.

That’s the opposite of the vibe I’m getting here. The dealers I’ve met in Australia seem to sense they are confronting significant, game-changing market forces. They are hungry for ideas and insights that might help them be more successful.

Based on the conversations I’ve had so far, I suspect several dealers will go back to their stores and look to implement a “retail-back” approach to appraising and acquiring vehicles, and pay greater attention to metrics like Market Days Supply as they make key used vehicle lifecycle and pricing decisions.

Of course, when you’re engaging with bright and forward-thinking dealers, it’s also impossible not to pick up a few nuggets.

I was impressed by a dealer whose sales associates are essentially independent contractors, and whose pay plans are geared to help them secure a higher percentage of trade-ins (in a market where most vehicle owners sell to private parties rather than dealers). I also wondered if we might see dealer groups in the United States giving away mechanical and collision insurance coverage to used vehicle customers, which a public dealer group does here.

All in all, it’s been an eye-opening and gratifying trip. I can’t help but think that part of the energy and spirit I sense among Australian dealers owes to the beauty and vibrancy of place. Everyone seems to be fully aware that they are blessed to be living here.

I owe a heartfelt thanks to John Bailey, President of Cox Automotive, International, Gary Martin, CEO of Cox Automotive Australia, and their teams for bringing me here and being such superb hosts. It’s clear we’ve assembled a just-right group of people, products and perspectives to help our dealer clients become more successful. I share their view that the future for Cox Automotive Australia offers a lot of bright, positive potential.

My time so far hasn’t all been work. During a bit of downtime over the weekend, we took a ferry to Manly, a northern suburb of Sydney that sits right on the ocean. The number of people carrying surfboards on/off the ferry seemed odd—until we walked to Manly Beach, where the boards (and smiling faces) were as ubiquitous as people.

The next stop on my itinerary is Melbourne, which has earned the distinction as the world’s most livable city for several years running. I can’t wait to get there.