TORONTO — Pressure is mounting for single-point dealers to either expand their investments into larger dealer groups themselves or sell to those who are willing to do so, according to industry experts.
“A standalone store is proving to be very difficult to remain profitable,” said Farid Ahmad, president and chief executive officer of Dealer Solutions North America, a Canadian mergers and acquisitions company.
Ahmad addressed attendees at the Automotive News Canada Congress on Thursday as part of a panel titled “Retail Reimagined,” along with Mike Stollery, president of Ontario-based dealer network AutoIQ.
The number of single-point dealerships in Canada is falling according to Ahmad, who said that an eight-per-cent decline has been observed annually: 1,311 in 2016; 1,226 in 2017; and 1,102 in 2018.
Various factors influence a decision to sell, including fear of technology, manufacturers applying too much expenditure pressure, a planned retirement without a successor, and a desire to walk away with the profits.
Stollery said that those deciding whether to move forward or get out should ask themselves if they really can and want to change how they do business, and if they’re willing to invest enough to benefit from economies of scale and to acquire the facilities and technology needed to stay relevant.
One potential risk the panel discussed is that as large dealer groups expand into smaller towns with which they’re not familiar, they sometimes have a hard time connecting with and gaining the trust of the local community.
Stollery said that his group’s solution has been to push less change on the individual stores in those smaller markets and leave key personnel in place.
“We have a Ford store in Wawa, Ont., and (residents) don’t even know we’re involved,” Stollery said. “The owner, who was always there and his family was always there, is still there and still an owner.
“We want it to be same. We want it to be in that Christmas parade, and we want it to be helping out the sports teams.”