Retailers have to change their approach to aftersales if they want to drive overhead absorption rates back up towards 80%, according to Coachworks Consulting.
Improving aftersales is the key to raising absorption rates, says automotive business improvement specialist Coachworks Consulting – and it has published a White Paper to help franchises do better.
The latest dealer profitability statistics from ASE show that overhead absorption rates stood at 64% in March 2012. That is down from benchmarks of first 100% a decade ago and then 80% during the past five years.
Over the past 12 months absorption has fallen five percentage points, and by the end of this year they are expected to stand at just 55%.
Now Coachworks has published Exceptional Aftersales: the most effective way to increase overhead absorption.
The White Paper is based on research carried out by Coachworks to assess sales and aftersales performance in one of the UK’s largest networks.
It lists five approaches retailers can take to improve absorption, and it reveals practical steps that will immediately increase aftersales revenues.
Karl Davis, Coachworks Consulting Managing Director, said: “Overhead absorption rates are falling sharply, driven by a ‘perfect storm’ of factors.
“Firstly, the squeeze on consumer spending and volatile oil prices mean cars are being used less.
“Secondly, warranty hours are being hit because of improving product quality. And finally, there is ever-increasing competition from the aftermarket – especially the national chains.
“We hope our White Paper will help business leaders overcome these issues and increase aftersales revenues.”
Mr Davis said the outlook for new car registrations for the next two to three years, combined with the fact that most retailers had already made significant cost reductions, mean that growing revenues in aftersales is the only realistic way of improving absorption rates and net profitability.
The White Paper, which is available free from www.coachworks-consulting.com, includes advice on selling service plans and improving red and amber work conversion.
Mr Davis added: “Ten years ago, retailers could break even without a single car sale, but that is no longer the case.
“If they want to push overhead absorption rates back up to the 80 per cent mark, they need to get serious about aftersales.”
Coachworks has a 10-year track record of helping retail operators transform aftersales through its intensive Race for Growth programme.
For more information: www.coachworks-consulting.com