A bicycle made for who? Coronavirus, or to be more precise, the reaction to measures designed to mitigate it, is having a major impact on vast areas of life and business. Ideas that seemed far-fetched or at best niche this time last year are now just another fact of life.
Garages have seen the way they deal with customers transformed over the last few months as a result of COVID-19, and the pandemic is affecting the way people shop, work, travel and live. Lockdown led to changes in commuting habits, and a pull away from public transport which has so far benefitted garages. However, with high-end folding bicycle manufacturer Brompton launching a new subscription service in September, are we seeing yet another sign of an oft-discussed idea? Will increasingly tech-savvy consumers begin to veer away from car ownership?
Brompton’s subscription service enables customers to hire bikes from the company on a monthly or annual basis. Cycling has seen a surge in popularity in the UK in 2020, with riding levels up by 300% on some days according to the Department for Transport.
Users will be able to take on an annual subscription, when the scheme begins, at the cost of £30 a month, or a rolling month-on-month contract for £42 a month. A new Brompton can cost £1,000 to buy outright. The new subscription service is an extension to its existing bike hire programme, through which people rent a Brompton for £6.50 a day, or £3.50 if they pay a £25 annual fee.
Julian Scriven, Managing Director of Brompton Bike Hire, told the Daily Express: “This new subscription service will revolutionise the way people own a bike, giving them a premium product without the upfront price tag. It’s an option to make everyone’s life easier, whether you’re a commuter, student, family or just want to cycle on the weekends but don’t want to commit or have the space to own a bike forever."
Mobility
Revolutions have a habit of continuing to spin and spin far longer than anyone expects, with often surprising results. Before you rush off to find your old Che Guevara t-shirt though, ask yourself this – Will the current shift in buying and business patterns lead to a major drop in car ownership?
Vehicle subscription services already exist, and are often referred to as ‘mobility services’.
Providers, who can be a VM or a third-party, are paid a monthly fee for on-demand access to vehicles. The fee includes insurance, maintenance and roadside assistance. In the same vein as music or on-demand TV, the subscription can be turned off at any time. VMs already employing these models worldwide include BMW, Volvo, Jaguar Land Rover, Lexus, Mercedes-Benz and Audi.
Where does this leave independent garages, for whom the business model depends largely on owner-drivers who are responsible for sourcing their own servicing and repairs?
John Phillips, General Manager at subscriptions-focused software company Zuora commented: “Mobility-as-a Service (MaaS) has been hailed as a trend which could integrate and revolutionise the way city dwellers navigate their passenger journeys from one form of transport to another. Deloitte has claimed that, in dense urban environments, MaaS would offer such an improved journey and passenger experience that it could replace the need for many consumers to own private forms of transportation.
“In recent years, consumer appetite has demonstrated a shift from ‘ownership to usership.’ A recent mobility study published by Cox Automotive highlights that the desire to own vehicles is dropping steeply among younger consumers. Enticed by the relatively small fee needed up-front and the convenience offered, many consumers in cities do not now see the need to own a mode of transport.
“Many consumers are already used to a subscription-based consumption model. Zuora’s most recent bi-annual Subscription Economy Index (SEI) found that the subscription economy has grown more than 350% in the past seven and a half year, an era marked by a broad consumer shift towards on-demand services.”
John said VMs may look to make cars specifically for the subscriptions market: “To prepare for this shift in how people access transport, manufacturers should consider whether the vehicles of the future may need to be built with a subscription based payment model in mind. By developing unique, customised subscription offerings, they will enable customers to select the service which best suits them.
“It’s time for the mobility industry to take action,” concluded John. “Many notable technology companies including Spotify, Uber, Apple and even Google have changed their business models to adapt to evolving customer demand – moving from a static and linear product offering to a subscription-based model to encourage recurring, predictable and stable revenue. The mobility industry should follow suit.”
Questions
That’s the theory. What about on the ground with the garages? The IMI’s Head of Business Development Steve Scofield observed: “There is no question that the last five months have thrown a completely different light on life as we know it – from the transition to home working for many, to the reduced use of vehicles during lockdown. However, the latest data suggests that road usage has returned to almost normal levels; in fact the RAC reported that the August Bank Holiday weekend will have seen even higher numbers on the roads – 1.8 million – than for the break in 2019, no doubt prompted by restrictions on foreign travel and the preference for many to stay in the UK. And I think that highlights the changing dynamics of vehicle usage which is going to present our sector with challenges and opportunities in equal measure.
“The ‘working from home’ culture is here to stay for those that can – but there is also a recognition that people work best when they can interact with others – and not just on Zoom. Work colleagues are therefore likely to look for ways to meet which will still rely on transport – whether public or private. A reaction to the halt on family meetings during lockdown has also, I believe, prompted more visits since lockdown was lifted. And again, the reliance on private transport is key here.
“So what’s the role of the garage in all of this? Well I think first of all garages need to find ways to stay more engaged with their customers than they might have done in the past. For some, reduced vehicle usage could prompt ditching the car altogether, but I think for many with latent concerns about public transport, the car will still be a vital tool for work and family life – maybe just used slightly less often. A good garage should think about how to stay connected with its customers for all the basics – not just the annual service and MOT – and embrace digital solutions where possible. Young talent entering the garage network are well positioned and can add value in helping garages transition to online solutions.
“Garage owners could also benefit and future-proof their business by horizon scanning. For instance, one area which has the potential to grow as some of society moves to an on demand mobility model instead of ownership is the rental and fleet sector. Their maintenance and repair needs will likely grow; therefore engaging in these contracts could offset any personal vehicle ownership losses garages may face.”
Transition
There’s more to think about though according to Steve: “The other factor that I think presents a real opportunity for motor retailers and garages is the increased prevalence of ADAS technology in vehicles, as well as the transition to the road to zero. The latest advances in motoring technology will require experts. The garages that will be the winners in this new world will therefore be those that place the right investment in training for their people. Organisations like the IMI and its approved training centre network will be crucial in providing the essential expertise and support for that training.
“There are some really big challenges facing the automotive sector in the next 10-15 years, not least of which is the proposed ban on the sale of new petrol, diesel and, potentially, hybrid vehicles. The continuing development of autonomous motoring, in all its guises, is another big challenge for the sector.”
Steve concluded: “While these challenges can appear daunting, the IMI is excited to be working with individuals, employers and Training Centres to ensure that motorists are given the confidence that their safety and wellbeing will always be paramount.“
Alternatives
Frank Harvey, Head of Membership Services at the IGA commented: “COVID-19, lockdown and the lifestyle changes this has brought about are something we are all having to get used to. The ways by which we choose travel is also changing for many; with the government asking people to avoid using public transport, we are seeing people seek alternative means for their daily commute.
“Public transport has long been the most popular mode of transport for many city dwellers, meaning they avoided the outlay of owning a private vehicle. As the country edges its way out of lockdown and central government is encouraging people back to work, commuters are considering their mobility options.
“While car sharing between separate households is not currently an option, it is likely we will see a growth in services such as Hiyacar, Zipcar and Enterprisecarclub, all of whom offer a ‘Hire By App’ kerbside pickup/drop off, hourly hire, vehicle mobility solution.”
Downsides
Is there a downside? Frank said there are several: “Experience shows us that due to the nature of the drivers who make use of this type of mobility solution, vehicle care and consideration is not always a priority. Couple this with potentially ‘rusty’ driving skills. Contrary to initial thought, these companies could offer business opportunities for good, local independent garages to keep their vehicles safe, roadworthy and available for hire.
“A government survey published in 2019 showed that, other than cost savings, there was more of a negative attitude towards vehicle and ride sharing than there was a positive one, however recent events may have made this a more attractive option than using public transport.”
Vital
Perhaps we are worrying about nothing though: “Due to the ways in which most of the country has had to adapt to new working and living routines during lockdown, such as working from home and purchasing goods online, we have without doubt seen the number of miles being driven in private cars reduce over recent months, with a low in early April of 22% of pre-lockdown vehicle usage. However, from the beginning of August we have seen this recover to around 91% of the pre-lockdown figure, which would indicate that the private car is still a vital social utility.
“As a nation we have a culture of ‘ownership’ especially when it comes to a private vehicles; with over 38 million licenced vehicles on our roads, of which 27.5 million were registered between 2000 and 2017, it is reasonable to assume that the majority of those vehicles over three years old are privately owned.
“Recent press articles would indicate that the aforementioned city dwellers are beginning to purchase cars at the lower end of the value range, to avoid using public transport. All will need MOTs and undoubtedly repairs and maintenance of some description, which is all good news for independent garages and the aftersales market as a whole.”
Frank added: “There is one key indicator from our recent global experiences, and that is the need for all businesses to have a good online identity and the ability to be able to connect to their customers in a way that reduces face to face contact, but also give the customer confidence in the organisation they are doing business with.”
Final thoughts
Whether or not motorists will embrace subscriptions in large numbers remains to be seen. However, looking at how you run your business from a different perspective will help you to innovate and take advantage of new opportunities.
Remember, often garage owners take some time to realise that they are not in the business of just fixing cars, and that they are instead in the business of running a business. In the same vein, you thought you were in the vehicle repair industry didn’t you? You’re not, you are in the mobility sector. If it is changing, you will need to change too. That might mean completely re-thinking how your businesses is structured. Issues around the price of battery replacement has already helped to accelerate the leasing model in electric vehicles, which was already popular.
One thing COVID-19 has shown us though is that when change comes, you can’t always predict where it will come from, or what the result will be. You just have to roll with it sometimes. Whether or not you own the vehicle that carries you, that’s up to you.
Price versus quality The perennial question of ‘price versus quality’ surfaced at the Aftermarket Roundtable discussions earlier this year. From the business perspective, this is more interesting than the ‘price versus cost’ question, which is much easier to answer. So, what are the details behind the quality element?
Firstly, let’s start by understanding the definitions of what we are considering – what is price? In detail, it is ‘a value that will purchase a finite quantity, weight or other measure of a good or service’. As this is the basis for the exchange or transfer of ownership, price forms the essential basis of commercial transactions. It may be fixed by a contract, left to be determined by an agreed formula at a future date or negotiated during the course of dealings between the parties involved.
Defining price
In commerce, price is determined by what:
• The buyer is willing to pay
• The seller is willing to accept
Competitors allow a seller to charge. With the mix of product, service, promotion and marketing, it is one of the business variables over which organisations can exercise some degree of control. This is then more commonly known as the ‘market price’.
Importantly, it is a criminal offence to give a misleading indication of price, such as charging for items that are reasonably expected to be included in the advertised, listed or quoted price.
Quantifying quality
Secondly, what is quality? This, perhaps, is much more subjective but is something like ‘the non-inferiority or superiority’ of something or is an inherent or distinguishing characteristic or property. It can also be the nature or degree of the grade of excellence.
In manufacturing, for example, a measure of excellence or a state of being free from defects, deficiencies or significant variations. If a vehicle manufacturer reports a defect in one of their vehicles and makes a product recall, customer trust in the quality of the vehicle could be lost.
In your aftermarket business, how does all this apply? Actually, in just about everything you do, both internally and externally. For example, internally, your staff need to be able to provide what you need to deliver to your customers, which will include ‘quality’ elements like the work they do, the time needed to conduct the work and the competence to complete the work without faults (even if they develop in the future). This comes with a cost attached (i.e. the wages you pay) and there is probably a certain acceptance that you pay just enough to employ the level of employee needed – which I am sure will be less than a formula one team, who pay the most to get the best – obviously there is a balance.
When you start to consider more expensive elements like workshop equipment, price should not be the first consideration. Capability, reliability and longevity are just as important. These workshop items are acquired to earn you money, so they need to do the job and be reliable.
Image counts
In the direct ‘customer facing’ side of your business, the fixtures and fittings of your premises should not be the cheapest. Look after the design details of your public areas, the quality of the furniture, even something as simple as the coffee or the wi-fi you may provide, should be subject to the price versus quality. It might be provided free of charge but the quality still needs to be acceptable. The perceptions that your customers form will lead to how they perceive the overall quality of your business and, in turn, how your business will treat them and their car. A simple example is how much time, effort and money is spent on the detailed design of many of the vehicle manufacturer’s franchised dealers. They need to portray a certain image of quality.
So, externally, the same considerations should apply to your business, including signs that are clear and easy to read, parking that is safe and clean, well lit public areas and the list goes on.
When it comes down to the service that you provide to your customers, recent research from the Institute of the Motor Industry (The IMI) showed that although cost remains high on the agenda, with 52% citing it as a key factor, quality of work came in a close second at 44% and rising to 51% amongst women. This was further reinforced by 66% of all respondents and 71% of women feeling that a recognised quality standard was very important when selecting a service provider.
Memorable experience
Customers are also worried about the quality of work but a good overall customer experience will also have a knock-on effect to your business’s reputation and affect how your business is promoted via word of mouth. The value of good customer service is appreciated by most but can be difficult to quantify. Avoid cutting costs if this diminishes the quality of the service you can provide.
What are some other key aspects which support the perception of price versus quality from your customer’s perspective? One of the most important will be the price of the work you are charging against the quality of the service you provide. This is not just your hourly rate or the cost of the work but is the complete ‘package’ of what the customer experiences. This will normally include the work being completed correctly and on time but, will also include the choice of parts, the way that the booking-in and final invoice are handled (i.e. a clear explanation of what will be/has been done), also any additional items that are included. These can be additional costs, such as the environmental disposal requirements, or additional items included free of charge, like a check of DTC’s, washer fluid top-up or even cleaning the vehicle before it is returned.
As long as all of these customer experiences reinforce their perception of a professional business which employs well trained and competent staff and which delivers a good quality of service, then price becomes a secondary issue. However, the higher the price, the higher the customer’s expectation of quality. The challenge is to deliver what your customers expect at the price they are willing to pay.
Want to know more?
Find out how Neil’s consultancy for garage owners can benefit you please visit xenconsultancy.com.
Aftermarket archive: December 2014 Aftermarket | www.aftermarketonline.net
