Lockdown restrictions exposing concerns with dealer targets

The current lockdown restrictions, its impact on consumer spending and the lack of movement of people, are exposing manufacturers’ outdated methods of setting dealer boundaries (AORs) and targets, says Andreas Walker, Managing Partner of UON Global.

Lockdown restrictions exposing concerns with dealer targets

According to Andreas, the division of dealer areas of responsibility (AORs) in South Africa have their origin in the archaic provincial licensing districts, which is not only outdated, but has little relation to the socio-demographic makeup of different regions.

“As an example, the eastern and western sides of Pretoria are worlds apart, when you measure per capita income and spending power, but they often overlap when it comes to the dealer’s prescribed selling AOR and the targets that a brand set for the dealer,” says Andreas.

“This would often mean that the targets are too high, or too low for a specific dealer, which in turn meant that the vehicle manufacturer’s predictions and targets for their overall sales are inaccurate.”

In the past, explains Andreas, these discrepancies were less obvious because dealers would simply widen their net and sell into neighbouring regions or towns. As an example, a dealer in Brits would routinely sell into Rustenburg and Pretoria to make their quarterly sales targets.

“One should also keep in mind that many towns and regions had hugely variable day- and night-time populations. For instance, a town like Krugersdorp in Gauteng would see its daytime population drop significantly, as people commute to Sandton or Pretoria for work, while Pretoria and Sandton would in turn see their night-time population dwindle as people returned to the East or West Rand. This had a serious impact on the number of lunchtime prospects that a dealership would see and the sales they would make,” says Andreas.

According to Andreas, the unprecedented restriction on the movement of people during Level 5 and Level 4 lockdown, as well as many people’s reluctance to travel, have laid bare the inaccurate regional segmentation and the unrealistic dealer sales targets. Recognising the over reliance of dealers on OEM variable margin incentives, the inaccurate setting of dealer targets is severely impacting dealer profitability.

“The current trading environment has given us an unfiltered view of the true market segmentation. By overlapping the last three month’s sales data with de-personalised data on the movement of people, like IMEI cell phone information, one can create much more accurate dealer segmentation and more realistic sales targets,” says Andreas.

More Industry News stories

Toyota is Springboks’ new vehicle partner

Toyota is Springboks’ new vehicle partner

The World Cup Rugby Champions, the Springboks, have a new vehicle partner after a three-year deal between the Boks and Toyota South Africa Motors (TSAM) was announced.

  • 1 July 2022
MBSA aiming for carbon-neutrality

MBSA aiming for carbon-neutrality

Mercedes-Benz South Africa (MBSA) says it has moved one step closer to carbon neutrality with a new photovoltaic (PV) technology pilot project at its plant.

  • 1 July 2022
R2RSA makes progress - CEO

R2RSA makes progress - CEO

Significant progress has been made over the last 12 months since the Guidelines for Competition in the South African Automotive Aftermarket were implemented to make the automotive aftermarket a fairer place to do business, says Right to Repair SA (R2RSA).

  • 1 July 2022