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Glenn Mercer presenting at The Road Ahead for Automotive Retail event 2025.
As part of our The Road Ahead for Automotive Retail event series, this year saw us commission an all-new research project with leading automotive researcher, Glenn Mercer into what is the new normal for automotive retail. Glenn studied over 80 retailers and industry stakeholders to uncover where the key to better profits lies in operational and retailing excellence.
The research found that traditional solutions to driving profitability, such as more aggressive pricing, are no longer possible in today’s highly informed and competitive market where volumes are unlikely to grow significantly, and this limits the opportunity to increase profit by selling more.
So, retailers need to excel in areas they can control within their walls, focusing on retention, cost reduction, measuring what matters, optimising scale and unlocking the full potential of technology, which they identified as the biggest lever to margin growth. In short, the road ahead requires retailers to think about how in the operations they can ‘out retail’ and not ‘out deal’.
Out retail through measuring
The ability to ‘out retail’ competitors, and ultimately drive profitability, relies heavily on effectively measuring performance. However, Glenn’s research identified around 40 different Key Performance Indicators (KPIs) that are being used by UK retailers, highlighting the lack of clarity on what should be measured.
Separate analysis of over a million data points1 from over 2,500 international retailers conducted by Autotrader’s data scientists revealed that even the most common KPIs in isolation have little impact on gross profit margin. Instead, understanding the inter-relationships between different metrics can provide a better guide to departmental profitability.
It found an important relationship between volumes, people (sales and non-sales) and revenue in determining profit per salesperson per unit, which despite not being mentioned in any of the retailer interviews, was found to be a far stronger guide to overall gross profit margin than any other metric, including the number of sales per salesperson. Indeed, the highest sales per salesperson within the data was identified as also one of the lowest in Gross Profit Margin – the more units sold per salesperson, it found, the lower the margin.
Making each salesperson profitable, and measuring that, will have far more impact on overall profitability than sales volumes. As the data highlighted, salespeople need support to be profitable, so looking at how the whole used car department - which Mercer’s retailer interviews identified as the best opportunity to recover lost new car profits - operates is key.
Duncan McPhee, COO of Hendy Group, will discuss how they are using measurement to improve profitability in the first The Road Ahead video episode.
How are retailers measuring performance now?
We’ll be discussing how retailers can best measure their performance in the first of our all-new video series “The Road Ahead”.
This monthly video series will see us speaking with some of the leading lights in our industry, discussing the forces of change and what retailers need to focus on to drive success. Each episode will be a direct, in-depth discussion over 30 minutes, delivering actionable insights to the audience.
The first episode of the series, Discover KPIs that drive profit, will feature Duncan McPhee, COO of Hendy Group discussing what success beyond profits looks like and how they are rethinking measurement with Ian Plummer. You can listen in to their candid conversation on 18th June at 10am where you will hear:
How smarter metrics can reduce cost and improve margins
Ways to improve customer retention and loyalty
The role of technology in scaling profitably
