Friday, 27 November 2015

Industry Practice – Retail Sales – 'Virtual Brokering' Creates a Triple Aspect Realm

Although there has been much written in the press and by apparent sector disrupters (ie uber) about the change in western consumer attitudes regards the private car – ostensibly the manner in which the 'millennial' demographic has fallen out of love with cars – the fact is that western nations have seen a return to (or near) pre-2008 new car sales highs; thanks predominantly to the combined availability of cheap and available credit and pent-up new car (and fleet vehicle) demand.

Thus far, by October-end 2015 the USA has seen light vehicle sales of 18.2m units on a SAAR basis, Canada approximately 1m units, the UK with 2.3m units (now seemingly peaking), and Europe (exc UK) with 9.5m (also possibly peaking).

Whilst the oft over-looked used car market, in terms of turnover puts new car turnover in the shade, its national market varying from x3 to x6 the new car volume depending upon region.

Cars Still Reign as Social Symbols -

It is inevitable then that although perceptions regards the high status of the car has altered, with once prestige brands now available,and still 'top of the tree' in the B-segment and the massive increase in volume somewhat diluting past reverence, the fact is that as the most outwardly visible consumer item associated with lifestyle and so self-perception and ego, the private vehicle remains for most (if not all) the most prized new purchase possession.

Yes, for its high price the new car remains largely an idle asset given its limited functional use across a full 24 hours, but the very fact that the counter-point, counter-culture of “car sharing” ventures has not grown in as greater popularity as envisaged by many 21st century forecasters indicates that, even as urbanisation increases in the west, for the most part across the city suburbs and provincial towns, the car maintains its socio-economic role.

The 'Battle of the Brands' is a well known phenomenon amongst car-makers themselves, with (as ex BMW's Wolfgang Reitzle well recognised by the mid 1990s) brand association as great an impetus to the consumer as the rational decision-making. It is the reason the Japanese created their near luxury brands in the early 1990s, and why PSA regenerated the DS brand as something more superior and likewise Hyundai today with Genesis. That impetus not changed in essence and typically relates to the conventions of status, but in more cash-constrained periods such as today, an inverse snobbery also has its place, whereby the likes of Skoda and Dacia – albeit price-point distinct - are seen as intelligent choices compared to their higher cost, mid-stream brand cousins.

Value Driven Purchase Rationale -

As was well noted some years ago, well before 2008, the mid-stream market had slowly begun to fragment and separate into status choices and 'commodity' choices. The mid-stream obviously still accounts for most sales, but the consumption trends toward either 'conspicuous' or 'logical' buys still persist. This becomes far more blurred in the used car market obviously, depending upon brand, model and regional availability, but as the very essence of used car buying continues to evolve, so it seems likely that similar and more distinct trends in purchase prompters become clear.

Car brands are of course very well known given their high profile in society, but what of the distribution channels?

New Car 'Relationship Retailing' -

In the formative Edwardian era the retailer of the car was as important, if not more so, than the vehicle manufacturer, given that one's direct relationship was with the local agent. Those agents located in the prime shopping 'arcadias' of Piccadilly, Knightsbridge and Kensington in London of course had counter-parts in Paris, Amsterdam, Berlin etc, and were often themselves from amongst the buyers' social set. (The story of Rolls-Royce itself that of aristocratic marketeer conjoining with 'middling' engineer to sell to remaining gentry and nouveau-riche).

Even after decades of social change, likewise though to a lesser degree, the importance of locality and bonhomie endured; as seen in the early 1970s with Datsun, Honda and Toyota's progress in the British suburbs. Long established family garages took on these new franchises, the close relationships those family businesses had created the basis of trust for various customer types – old and new. The husband might have been loyal to his Ford Consul-Granada or Rover 2000, but his wife would be keen to 'move-up' from a second-hand Mini into a new school-run Honda Civic, Datsun Cherry or even slightly bigger yet still affordable Toyota Corolla. This pattern simultaneously seen in North America.

Thus, unlike the power of the manufacturer's brand today, and the weakened state of retailers, it was typical up until the mid 1980s that the local agent maintained much of the retailing power to a discreet, local, customer group. This situation existing for much longer in the USA, especially mid-western and more remote patriotic regions, given the level of innate dealer protection, to in turn help protect Detroit's supply and demand; diminishing at the turn of the new century.

A Changed Retail Environment -

Of course over successive decades client-dealer relations underwent rapid changes. More brands and models were introduced, advertising became far more sophisticated, creative and influential - arguably reaching its pinnacle by the late 1980s and early 1990s – but as an ever greater volume of cars entered a single market, amid fierce competition, value destructive pricing eroded dealer margins, so destabilising the dealer's earnings power and thus the job security of dealer principles and his/her staff.

This most seen in the very liberalised UK market, to assist inter-European trade, but also later in the the (semi-protected) USA and even the small suburban monopolies of France, Belgium, Holland and Germany; Italy able to maintain a protectionist attitude because of political and consumer patriotism – against the Eurozone grain - far longer.

But ultimately as the sales environment became ever more harsh and ever 'slimmer', so the once esteemed role of the dealer-agent built-up over decades rapidly altered to that of yet another optional sales channel.

And of course, whilst savvy shoppers previously looked and telephoned around for the best deal in town, or indeed further afield, it was the simultaneous emergence of the used-car super-stores and the forever growing internet that had an impact upon the local dealer-agent.

The former created business models and sales techniques to “stack 'em high and sell 'em cheap”, or so the public was told, but in fact became 'prisoners of process' to maintain 'sharp-selling' profitability.

The latter of course offers a seeming world of opportunity and possibilities, with the ability to create a broad or narrow range of search options depending upon buyer criteria; though this itself is influenced by the spectrum of options available, ironically making choices harder if not disciplined.

Scaling Up to Battle On -

In reaction to the early days of these new disruptive inputs independent and franchise dealers improved their own business models through relocation, scale enhancement and cost-cutting. Often trading in older smaller premises for much bigger sites on easy access multi-lane roads and undertaking local acquisition of competitor dealers as part of the growth agenda. Amongst the mainstream brands, they might build their own portfolio of similar brands to provide apparent choice to the more demanding consumer, or indeed create their own brand ladder (akin to Sloane at GM in its early days) so that various buyer types could find the specific brand they wanted, and also similarly seek out their lesser second car for the family, or perhaps a smaller more fuel-efficient car for ageing parents.

Furthermore, some have sought to stave-off the damaging influence of car super-stores, established dealer groups would go on to seemingly mimic the model, even if in reality in name only via the internet, to help steer potential customers away from their undermining competition.

And likewise, with the rise of large dealer groups able to better manage new and used sales so as to protect resale values, and the rise and rise of web-based retailing, so the role of the vehicle auction house has diminished year on year, now specialising in the re-sale of ex-fleet vehicles with corporate clients seeking speedy liquidations of their balance sheet based 'end-of-life' assets.

Thus, just as the environment changed, so very necessarily, did the modus operandi of the 'agent'; long family run business overtaken by the consolidation techniques of highly professionalised dealer groups.

Today, of those groups we see names like:

UK: Lookers, Pendragon, Synter (pvt), Inchape, Jardine (pvt) (latter two international)
USA: Penske Auto Group (international), AutoNation and Group 1 Automotive
Europe: Porsche Holding Salzberg (pvt) [with various others seeking to mimic its strength].

Obviously, having rationalised on a geographic basis, such groups also recognised the threat posed by the internet. Critically, its ability to provide a massive virtual market-place effectively spanning the nation, or indeed in Europe's case, nations. Most concerning – as proven a reality – it used as a instrument to provide the consumer with bargaining power, and with that a re-run of highly competitive, value destructive environment seen earlier and that dealers had sought to escape.

So of course, to combat this threat, dealer groups have long offered themselves with virtual shop windows of varying sophistication. (Moreover, the likes of Inchcape and latterly Jardine have sought to internationalise into stable and growing AM and EM regions, the latter operating in Hong Kong, Macau and China).

The Virtual Showroom -

However, just as with the disruptive consumer influence of more mundane discretionary consumer goods, the online market-place has undoubtedly altered buyers' habits.

From the simple researching of models, variants and prices of standard 'batch-made' cars through regional dealers' inventories, to the near 3-D virtualised selection of colour, trim and options applied on-screen for an illustration of a potentially wholly tailored car; each choice made intended to create an greater engagement with the potential buyer.

Thus the on-screen world has allowed for greater convenience, reduced in-store sales pressures, greater realms of exploration and ultimately deeper immersion. Consumer's almost 24/7 web connectivity has assisted and indeed by promoted by manufacturers into what has come to be an expected 'play and pay' experience. This in turn has assisted the channelling of prospective sales into the hands of authorised brand dealers, whether VM owned or independent as part of the necessary advancement of the melded virtual and physical sales environments.

New Entrant Disruption -

Yet, diametrically countering this persuasive effort, intended to maintain at least decent margins for manufacturer and dealer, has been the ever increasing raft of on-line car-buying brokers, who set themselves up as prime 'go to' consumer portals for the car buying process. This is done by demonstrating a massive catchment area offered, usually nationwide and by plying a memorable or trust-worthy sounding brand name and persona; typically as the buyers' helpful 'best friend'.

Thus, as seen with the accompanying graphic, the car-buying world is today split into three distinct, yet merged arenas:

1. Physical Retailing:
the century old traditional model of physical dealer with factory ordering and on-site inventory
(as with the dealer groups mentioned previously)

2. Virtual Retailing:
the 20 year growth of dealer group websites which direct interest to specific dealers, but may allow the viewer to see all of the group's regional or nationwide inventory, so as to allow for intercity transportation of a buyer's desired vehicle.
(as with the dealer groups mentioned previously)

3. Virtual Brokering:
the 15 year existence of on-line marketplaces dedicated to vehicles, and critically unaffiliated to manufacturer and dealer entities, has spawned a newer realm of independent providers, in both brand presentation, spirit and business model. They typically promote themselves as offering a greater choice of vehicles, routings to optimised sellers and often with a better comparison-based end deal for the consumer.

Virtual Retailing and Brokering -

Companies which operate in this on-line marketplace 'space' include:

- (USA)
- (USA)
- (USA)
- (UK)

These firms have effectively sought to 'piggy-back' the rising tide of independent comparison information providers and associated websites. Some actually established from those very origins, whilst others have sought to present themselves in a similar manner.

As regards the rapidly changing dynamics of the new and used market, whilst Glass's Guide was once the renowned and closely held pocket-book of British used car dealers, it has become a consumer-facing entity in its own right, today with offering 'comparison' and 'finder' resources.

Its counterpart in the US has been the 'Kelley Blue Book' since 1926, spanning cars, light trucks and motorcycles. It has rebuoyed itself in recent years on-line to maintain its 'go to' service provision in the face of ever increasing competition, formal and unofficial.

One such has become renowned as the website to gain an unfettered understanding of new and used values; Edmunds however, not providing a sourcing feature so that it might remain unbiased.

Ebay - A Partial Operator:
Quite obviously the auction and retailing website ebay offers a method by which used and even new car sellers can reach a broad audience. Very well established, operating on a national basis and generally respected given the buyer-seller ratings mechanism, / / et al has perhaps become the default first stop shop for those seeking both general and specific models and variants.

Critically, the website has been seen to offer even unregistered vehicles from various independent dealers, typically small and specialist in nature, seeking a best price for specific cars – such as run-out luxury models (Ferrari, Aston Martin, Lamborghini etc) – which otherwise would have to be substantially dropped in price if remaining within the dealer's showroom. These ebay using on-sellers are often a somewhat secretive arm to such dealers.

And obviously, given the anonymity of seller and buyer, ebay is undoubtedly used by nefarious sellers and their accomplices (boosting ratings) as a method for deceitfully obtaining a puurchaser's funds without providing the paid for goods.

Similarly, as re-noted by the FT recently, given its size and scale in EM and BRIC regions, the luxury goods market – from jewels to art to new and classic cars – is used in a criminal manner by those seeking to launder illicit finances. Thus ebay and others, being lightly regulated and lightly monitored, are seen by the police and authorities as unfortunately almost ideal for any sizable laundering process, across one large ticket item, or more likely, broken down into many more smaller transactions.

Thus whilst undoubtedly a favoured channel for legitimate sellers and buyers of typically used, older vehicles, ebay has innate perceived disadvantages upon which the newer crop of vehicle brokers, dealing in both new and used cars, seek to circumnavigate.

Summary of Newer Entrants - (USA):

This was the first of the breed, created in 1998 by the entrepreneur Scott Painter, to sell cars wholly on-line, not referring to a 'bricks and mortar' dealer.

He had previously formed a line of start-up companies, with auto-market interests starting with the electronic data-base AutoAccess, and a low production-cost car venture named Build-To-Order. AutoAccess, or similar, provided the information platform for Painter has promoted himself as the deliberate disruptor of the traditional, staid and “ripe for revolution” vehicle marketplace.

Whilst 'BTO' flailed given its enormous challenges, it seems likely that Painter's ambition is to undertake disruptive change across both the production and retailing of cars, this academically known in its most ideological guise as 'Micro-factory Retailing'

The operation had been marketed as ripe for an IPO in 2000, but unfavourable circumstances (ie the collapse of inernet stocks in 1999) precluded that hope. Instead being sold to the Private Equity firm KKR in 2014 for $1.1bn.

It is now part of the Internet Brands group, which itself is a much expanded commercial enterprise originating from CarsDirect, had undergone an IPO in 2007, but was de-listed from NASDAQ when Hellman and Friedman bought it, and latterly (as seen) via a PE trade sale to KKR. (USA):

The ambition of this corporate website was to have a broader ambition than others, in as much as it has sought to span a greater automotive commercial 'bandwidth', with interests across vehicles (reviews / advice / comparison), financing and insurance. It thus seeks to offer greater 'one stop shop' facility for those who require more immediate convenience.

Established in 1997, the firm is majority held by the the Automotive arm of Cox Enterprises, a media orientated conglomerate which owns the 'Kelley Blue Book' operation. Its intermediary holding vehicle is the AutoTrader Group. With that association has been able to grow its recognition. In 2010 the private equity interests of Providence Equity Partners (at 25%) and Kleiner Perkins Caufield and Byers, likewise too a stake.

Very usefully offers a two-way transaction routes, one for a private buyer seeking a new or used car, the other a double aspect service for private used car sellers. The first to contact local or regional dealers to gain a valid price on their vehicle for either cash sale or trade-in against another in-stock car. The second a tiered service by which the seller is assisted by the firm to best promote the sale to another private buyer. Moreover, dedicated apps have been created for the most popular smart-phone operating systems to broaden appeal and use. (USA)
The second of Scott Painter's efforts. Established in 2005 the firm attracted over $200m in private equity backing so as to undertake a nation-wide advertising campaign. Well received by consumers, it was however immediately problematic for incumbent manufacturers and dealers who objected to what appeared significant on-line discounting of their vehicle inventories. Over a dozen states initiated investigations requiring a change to TrueCar's virtual 'store-front' so as to be compliant with standard practice.

The fact that TrueCar did indeed need reformulate its website - part of an overall restructuring - may have been as seemingly damaging to the brand, but may equally be argued as actually quite PR positive. It is likely that the 'discounting' perception has remained within the public subconsciousness, even though pricing regimes are now far more aligned with dealer expectations and needs. This has been managed by using a dealer certification regime, which is likely to have assisted in TrueCar's referred “per unit price reduction” negotiation.

The 're-launched' TrueCar took effect in 2012, and grew affiliations with its 'marketing partners' including financial institutions, membership based organisations and large enterprise employee buying programmes.

It also provides data-based consulting services regards vehicle valuations and future residual values for lease and loan companies, financial institutions weighing risk exposure of their own lending categories and fleet management companies. (UK)
AutoTrader Group has long had a stranglehold on the used car advertising publications sector in the UK, about a decade on from its inception in 1975. Although previously (and still partially) competing against local private sale classifieds, the local paper advertising of used car dealers and the likes of LOOT and similar, AutoTrader's simple and effective brand identity and its over-riding continual presence on the shelves of magazine retailers means that it has build an strong nationwide presence.

The now defunct magazine's circulation peaked in January of 2000 at 368,000 copies, its sales dwindling since, reaching a low of 27,000 in March 2013, with a final hard-copy edition in June of that year. The website had been established in 1996, and inevitably substituted for the magazine, allowing users to buy and sell on-line. The website has recently seen an average of 10.3m users per month. Mobile phone and smart-phone access has likewise been encouraged, with the provision of broad handset availability in 2009; the apps for apple products launched in 2010.

By December 2014, it was publicised that 92.2% of Britains knew of the brand and what it did. Like others, it recognised the need to diversify within its prime segment, so latterly offered services to dealer group retailers – with a reported 60% of dealer sales also advertised through the website – and also finance and insurance products to the general public.

In March 2015 AutoTrader's owners decided to partially monetise their holding by releasing 59% of the group via an IPO as a public listing on the LSE. The 590m shares issued provided £437m after fees, and provided a nominal MktCap of the company at £2.35bn

The Much 'Shifted Sands' of Auto-Retail -

As seen, decades ago the purchase of a new car was heavily influenced by the strength of the personal relationship with the local agent or dealer. Trust and personableness were necessary, indeed vital, features well understood as critical by the often family-run proprietors. This the pattern until the early 1980s.

However, as those local businesses were acquired by larger and larger dealer groups, so the personableness was gradually lost, especially amongst low margin mainstream vehicles. It remained in part within the luxury brands, but even here the large turnover of staff meant that return contacts were lost. Instead dealer principles looked to the new world of CRM (customer relationship management) whereby 'invitation only' new model launch events, and preferred client away-days, were seen to be better methods for retaining loyalty.

However, the fact is that since the increased use of smart-phones people themselves are less and less open to periodic or easily forgotten brand names. Thus for the average car buyer, dealer group names like Glynn Hopkin or Bristol Street Motors have become diminished. These names may have meant much to their fathers, but less and less to them. This is recognised by the umbrella holding companies and they in turn have sought to re-invent themselves regards identity, with the relatively newly established Vertu Motors acquiring Bristol Street Motors, etc. However, even with seeming brand reinvention, and a good slice of the TIV upturn, it is essentially still regional locality and the value of the deal to the walk-in buyer that dominates the dealer group. Not the brand relationship (ie brand equity) that has 'share of mind'.

Thus, the likes of Vertu Motors, and its many counter-parts, are far away from the brand presence the likes of CarsDirect or AutoTrader enjoys today, and very likely into the future.

The auto-market's newer, wholly web-based entrants obviously seek to gain the kind of brand presence for new and used cars as AutoTrader has done for pre-owned. Their notion, to create a strong brand bond that hyper-realistically mimics the aspects of trust and personableness arguably not seen – or at least perceived - for decades. Achieved by being “in the palm of the users hand” and so “top of mind”. Effectively, they wish to gain the same level of brand knowledge and brand equity that car manufacturers themselves enjoy having built it up over many many decades; but to achieve this within a 10-15 year time-frame. In essence comfortable familiarity.

With such an ambition, it is well worth better understanding what some of the key financial measures are, between the 'advanced old guard' of publicly listed dealer groups and the 'progressive new guard' of similar web-only retailers.

Comparison of Key Figures-

Mkt Cap / Price to Earnings / Price to Book / EV to EBITDA / Profit Margin / Earnings Growth / Cash to Debt

Physical (& Internet) Dealer Groups
United Kingdom:
Lookers £666.9m / 13.7 / 232 / 692 / 1.5% / 7.8% / £20.5m vs £92.4m
Pendragon £621.4m / 7.54 / 162 / 421 / 1.96% / 130% / £149m vs £202m
Synter Owned by Penske Automotive Group of USA
Inchcape £3.35bn / 20.6 / 275 / 1,000 / 2.5% / -8.7% / £450.4m vs £419.7m
Jardine Motors Owned by Jardine Matheson
Vertu Motors £255m / 13.3 / 134 / 794 / 0.87% / 28.7% / £39m vs £6.9m

United States:
AutoNation: $7bn / 15.8 / 3.1 / 12.2 / 2.25% / 11.3% / $63.9m vs $5.4bn
Penske Auto Group $4.2bn / 12.7 / 2.3 / 13.2 / 1.75% / 16.2% / $49.7m vs $4.35bn
Group 1 Automotive $1.9bn / 13.7 / 1.9 / 11 / 1.4% / 73% / $22m vs $2.66bn

Porsche Holding GmbH Owned by Volkswagen AG

Mkt Cap / Price to Earnings / Price to Book / EV to EBITDA / Profit Margin / Earnings Growth / Cash to Debt

Vehicle Locator Websites
United Kingdom:
AutoTrader Group £3.92bn / 65 / n/a / 2,600 / 22.6% / 504% / £12.1m vs £461.2m

United States: Privately Held $720.5m / 142 (exp)/ 2.7 / -19% / -16.3% / n/a / $124m vs $27m Privately Held

Basic Interpretation -

A quick and dirty review of these key figures demonstrate just how world's apart the two 'old' vs 'new' business models appear.

The commercial weight of the traditional and conventional incumbents can be seen by the scant profit margins seen even recently, the costs of: real estate, sales staff, large back-offices and distribution illustrating that even though US and UK regional car markets have enjoyed a robust rebound over the last 3-4 years, it is only now that minimal profits are being seen.

In the UK this ranges from Vertu's 0.9% to Inchcape's 2.5%, the latter assisted by its focus on premium marques and internationalism. And likewise in the USA ranging from Group 1 Auto's 1.4% to AutoNation's 2.5%, and these figures only achievable after impressive ongoing quarterly growth rises, Pendragon's 130% best amongst its UK counterpart, and Group 1 Auto's 73% likewise in the USA.

Obviously, given the fact that these are well established, and well understood retailers, operating within a cyclical field, it is unsurprising that the respective price/earnings valuations are within expected bounds and generally accord to the component-part mix of the underlying metrics.

Of the newer crop of internet retailing and sourcing websites, only the American and Britain's AutoTraderGroup provide insights, since they are the only two entities presently listed on the NASDAQ and LSE exchanges.

Herein, we see that both companies, in comparison to 'bricks and mortar' operations, have high p/e values: AutoTrader on 65x and TrueCar on 142x.

Given the UK market saturation aspect of AutoTrader Group's prime business, its high p/e ratio may be deemed either overtly high given that it is effectively a matured business, or indeed rightly valued given that it has such a monopoly in 'share of mind'. To paraphrase Warren Buffett's terminology it “enjoys a market moat”. However, disadvantageously, the business's immediate 'cash cover' is only 2.6% of the overall debt level; thus no doubt suffers from its debt servicing costs. Thus although new to the IPO market, its highly matured composition means that it is very different proposition in character to many high expectation, web-based IPOs; such as Ocado previously. On that p/e basis, AutoTrader arguably looks fully price for now, awaiting the likelihood of international expansion,

Far smaller, in MktCap terms is TrueCar in the USA, but its apparent potential - shown with over double the p/e valuation of its seeming UK counterpart – appears far higher. This a function of not only the room to expand into its potential advertising slice of the overall US space, but critically also buoyed by a wider range of separate yet intertwined service provision B2C and B2B income streams. Presently a cash-burning, inwardly investing operation suffering volatile growth, it at least has a cash-pile which is a very strong multiple of its debt (4.6x) which will undoubtedly be used primarily upon an ongoing nationwide press campaign, itself supported by its young youtube channel. Via its youtube adverts, it is recognised however that inevitably the TrueCar formula of seemingly offering transparent, 'like for like' comparisons of local vehicle sales deals is hard to quantify given that any dealer, and even cross town dealers, typically do not hold exact 'like for like' model variants, so the pricing mechanism is only itself a rough guide. Moreover, the adverts suggests that the TrueCar business model innately favours those dealers which can offer greater discounting, these inevitably the large scale dealer group: Penske, AutoNation and Group 1 Auto, etc.

Ultimately, the lofty p/e valuations of Britain's AutoTrader Group and America's TrueCar are only good guestimates, and could be said to rely much on an ever-expanding new and used car sector, when the former may be now plateauing for a period, with any such 'slack' taken up by the latter as people trade-in 3 year old cars so inflating used car inventories. But critically AutoTrader Group appears to be awaiting international expansion, whilst TrueCar promotes its brand as the “car buying friend”.

Lastly, given that the very name AutoTrader exists on both sides of the Atlantic – as the British entity and the privately held American enterprise – it seems almost inevitable that some kind of future relationship will be born between the two companies. Whether the UK listed Manchester firm eventually seeks an acquisition of its American 'dopple ganger' with a purchase from Atlanta's Cox Enterprise, or any possibility of the reverse, remains to be seen.

Rebalancing the Retail Channel Mix -

What is obvious today and into the future, is how the now immensely brand-centric consumer realm has itself been diced, sliced and effectively 'funnelled' by the immediacy of the smart-phone. And likewise the consumer is being 'funnelled' toward a select band of large and mega-sized retailers.

It seems then that consumers will be given ever greater choice, and be assisted within the car-buying process, but on a national level at least, that expanded model choice will be offered by ever fewer, though thankfully publicly listed, dealer groups.

The resultant message for today's auto-makers is that the previous 'shifting sands' of the marketplace continues, with tomorrow suggesting a rebalancing of the business and profit equation, as the third realm of 'virtual brokers' gain ever greater traction.

As dealer consolidation grew in the 1990s and 2000s, so we saw manufacturer's expand their interest of in-house dealer operations, perhaps none more so that “Porsche Salzberg” with recognition that its distribution chain, assisted by captive credit, was perhaps even more important than its supply chain, given the importance of corporate proximity to the buyer and end user.

With the new threat of 'virtual brokers', ultimately seeking ever greater referral discounting from auto-retailers, it is inevitable that those auto-makers and dealer groups who reside on either their brand laurels or geographical strangleholds will be undermined.

The future of auto-retailing then is a triple aspect realm; and obviously those who can orientate those central pieces to their own advantage will support long term profitability.

As to whether AutoTrader's, TrueCar's and others' ultimate goals are to become direct-sellers of today's and tomorrow's automotive brands - so by-passing dealer groups and their heavy overhead – or simply seek an investment exit via absorption into the likes of Penske or Porsche Salzberg remains to be seen.

What is clear is that endemic disruption of the auto-retailing sector will continue as consumers own minds are effectively recalibrated to seek-out (perhaps overly superficial but powerful) 'comforting convenience'.