A new report looking at best practice in remarketing
aims to open a debate on the most cost-efficient and practical ways
to dispose of ex-fleet vehicles, says Jo Tacon.
An independent report into the remarketing arena,
commissioned by grs, a remarketing company, has looked into this
highly complex area in order to address several burning issues for
fleets: namely, how could the vehicle disposal process be made more
efficient, and more cost-effective?
Go deeper with GlobalData
The report’s focus is on how to improve processes,
taking into account whole-life costs and “hidden” costs such as
vehicle funding, refurbishment and depreciation, says Kerry Finnon,
managing director of grs. In all, 20 senior decision makers from
leading fleet operators were interviewed on their remarketing
strategies, with an independent research firm, Echo, assembling and
compiling the data.
A multi-channel route to market is essential,
Finion believes, a finding borne out by the report’s research,
whereas today, fleet companies “focus their efforts on auction
sales [while] apart from some sales direct to employees, there is
very limited use of additional channels to market,” the report
says, adding that this overall strategy has “changed little over
the past five years, suggesting the industry has been slow to adopt
strategic change and is not genuinely exploring all the remarketing
options available to it”.
While value for money and rapid stock disposal are
seen as benefits of an auction-focused approach, the report
highlights that respondents feel that price uncertainty is a major
drawback – with the damage that fluctuating residual values have
caused to fleets’ P&L accounts over the past year speaking for
itself.
Interestingly, 30 percent of respondents listed
“stock turn days” as the single biggest benefit of their current
disposal strategy, compared with only 10 percent citing “good value
for money” as the major advantage of current practices.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataSophistication in disposal
strategies
The UK is arguably home to the most sophisticated
fleet industry in Europe, yet the report found a large degree of
similarity in respondents’ disposal strategies (see table).
“Auctions have become the de facto standard channel
to market and there appears to be only limited interest in
exploring the benefits of additional channels. It could be argued
the focus is on ‘disposal’ rather than ‘remarketing’,” the report
states, posing the question: “Is this the ‘path of least
resistance’ or is a fully developed business strategy in
place?”
But for respondents, the auction-heavy disposal
strategy does at least deliver several benefits in addition to the
perceived value for money and rapidity of stock turnaround
mentioned above; “saving management time” and “reducing hassle”
were also noted as important factors. But whether or not these add
up to a compelling argument to stick with current processes is
another question.
Furthermore, relatively few respondents are looking
to expand the number of channels they use in vehicle disposal, with
only 35 percent of respondents reporting that they have adopted
online sales in the past five years.
“While many business processes have changed
radically over the last five years [particularly driven by the
internet], there appears to be little evidence here of significant
change,” the report concludes.
The potential drawbacks of a dominant auction
disposal strategy were also listed by respondents, with volatility
in prices achieved for ex-lease stock the single biggest drawback
cited by 45 percent of participants in the research; the fact that
“success is often dependent on what other cars are being sold that
day” was the second most commonly-listed drawback, chosen by 20
percent of respondents.
However: “[Only] a small percentage [of
respondents] are using additional channels which might mitigate the
negative aspects of an auction-only strategy,” the report
states.
Measuring performance
When it comes to keeping tabs on the
success of a remarketing department’s performance, one yardstick
dominates: The percentage of book value that a vehicle achieves
(cited by 50 percent of respondents as the “most important” factor,
and measured by 100 percent of research participants). Stock turn
days was second-placed in the “most important” stakes, selected by
25 percent of respondents.
But are fleets focused on the right
metrics?
The report notes: “These two measures are the most
volatile in an auction environment and are also the measures over
which management has least control, especially in a rapidly
changing market.” A full quarter of respondents did not measure
remarketing cost per vehicle, with an even more surprising 35
percent failing to keep track of refurbishment costs.
Moreover, over the past year, 45 percent and 40
percent of respondents respectively said that stock turn and
percentage of book value achieved had become more important; and
these are “two factors over which auctions as a sole remarketing
route offer little control,” the report observes.
It is the factors which fleets’ remarketing
departments can exert some measure of control over – such as
remarketing and refurbishment costs per vehicle – which should be
focused on, it was found, while using percentage of book value
achieved in order to evaluate the performance of fleet managers
(used by 55 percent of respondents) could be said to be rather
unfair.
“The percentage of book value achieved remains the
most widely used measure [to evaluate performance of fleet
managers] despite the fact that fleet managers have little or no
control over the auction sale,” the report said.
The report also casts doubt on whether the right
metrics are being tracked and evaluated by fleet operators, and
highlights that more could be done to oversee factors which are
within a fleet operator’s power to control.
A follow-up article, looking at the report’s
suggestions on best practice in remarketing, will appear in
January’s Motor Finance
|
Regularly use |
Main channel |
|
|
Auctions |
100% |
75% |
|
Direct to driver |
45% |
– |
|
Internet sales |
35% |
5% |
|
Affinity schemes |
25% |
– |
|
Trade sales |
25% |
10% |
|
Retail |
25% |
5% |
|
Car supermarkets |
15% |
5% |
|
Remarketing |
15% |
– |
|
Employee sales |
5% |
– |
|
Source: Best practice in fleet |
||
