'Out retailing' competitors key to profitability growth not 'out selling' research finds
7th March 2025 – At a time when margins are under increasing pressure, Auto Trader has released the latest edition of its Road Ahead for Automotive Retailing report, featuring brand-new research and analysis into driving profitability within an increasingly complex retail landscape. With market dynamics and consumer behaviours shifting rapidly, retailers need to focus on ‘out retailing’ their competitors rather than simply trying to ‘out sell’ them.
According to renowned US automotive researcher, Glenn Mercer, who conducted an in-depth study of over 80 retailers and industry stakeholders exclusively for Auto Trader, the key to better profits lies in operational and retailing excellence. 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, limiting the opportunity to increase profit by selling more. Retailers need to excel in areas they can control within their walls, focusing on retention, cost reduction, and unlocking the full potential of technology, which retailers identified as the biggest lever to margin growth.
Profitable salespeople drive margin, not volume.
The ability to ‘out retail’ competitors, and ultimately drive profitability, relies heavily on effectively measuring performance. However, Mercer’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 points[1] from over 2,500 international retailers conducted by Auto Trader’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 be far more impactful 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.
Auto Trader and ASE Automotive Insights partner to enable market-wide benchmarking
Mercer highlighted that benchmarking against peers is crucial to accurately track profitability performance. Unlike in the US and other countries, however, data in the UK is ‘patchy’, limiting retailer benchmarking to others in the same group or brand, rather than a like-for-like competitor cohort across different brands. To bolster retailers’ ability to measure their performance, Auto Trader is partnering with ASE Automotive Insights, enabling retailers to share their data for inter-brand benchmarks. The partnership will provide a clearer picture of retailers’ performance relative to their peers, and help them answer the critical question: is it me, or is it the market?
Retailers face an increasingly challenging market. They not only have to navigate major forces of change, such as electrification, but also fast changing dynamics and stifled growth in market volumes, all of which limits the opportunity to increase profits by traditional means. The research highlights that a new approach is needed, one that requires a focus on retail excellence over ‘dealing’. The ability to reset your basics and concentrate on driving the metrics that can be controlled within your business will be key, and as we look ahead, it’s those capabilities that will differentiate the most profitable retailers in the future.
For more detail, including guidance on how technology and data can unlock more profitability in salespeople, retailers are urged to visit Road Ahead for Automotive Retailing.
[1] Comprising of operating profit, number of units sold, employee numbers, number of salespeople, finance income, finance penetration, gross profit, warranty claims, vehicle service contracts, and service technician hours to name but a few.
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