A different approach to improving profitability
For decades, motor retailers have concentrated on maximising gross profit. New and used car margins, finance penetration, value-added products (VAPs), labour rates, parts profitability and manufacturer bonuses have all been closely scrutinised.
And rightly so. These are fundamental to the financial performance of any dealership.
However, with margins under increasing pressure and operating costs continuing to rise, there is another area that deserves the same level of attention.
How effectively are dealer groups managing the money leaving their businesses?
For multi-site operations, centralised purchasing and improved expenditure control could represent a significant opportunity to protect profitability without compromising customer service or operational effectiveness.
The hidden complexity of dealership purchasing
Many dealership groups have expanded through organic growth, acquisitions or a combination of both.
Along the way, individual dealerships have developed supplier relationships that support their daily operations. These may include vehicle logistics, valeting, waste management, workshop consumables, equipment, facilities management and numerous other services.
While these arrangements often work well locally, they can create a fragmented purchasing structure across the wider business.
Research from Spendesk found that SMEs had a median of 800 suppliers on their books. Separately, research from RS and the Chartered Institute of Procurement & Supply (CIPS) identified an average of 83 suppliers for maintenance, repair and operational requirements.
Although these figures are not automotive-specific, they illustrate how complex supplier management can become.
Now consider a dealer group operating 10, 20 or 50 locations.
How many suppliers are providing essentially the same services? Are individual sites paying different rates for identical products or activities? And how much negotiating power is being lost because purchasing decisions are made independently?
Without group-wide visibility, even well-managed individual dealerships can collectively miss opportunities for savings and efficiency.
Centralisation is about more than negotiating cheaper prices
Centralised purchasing is sometimes perceived as removing local autonomy or forcing every dealership to use the cheapest available supplier.
But effective procurement should be about much more than price.
It starts with understanding what the business buys, who supplies it, how frequently services are used and whether existing arrangements represent the best overall value.
A coordinated approach can deliver several benefits:
- Reduced administration: Fewer supplier relationships, invoices and duplicated purchasing processes.
- Improved commercial terms: Greater negotiating power through consolidated expenditure.
- Supplier accountability: Consistent service expectations, performance measurement and contractual standards.
- Greater financial visibility: Better understanding of expenditure across departments and locations.
- Operational consistency: Processes that support group standards while recognising local requirements.
- Better management information: Reliable data that identifies trends, inefficiencies and opportunities for improvement.
Importantly, these benefits can extend well beyond the initial savings achieved through negotiating supplier agreements.
Vehicle logistics: a practical example of the opportunity
Vehicle logistics provides an interesting illustration of how fragmented purchasing and operational processes can affect dealer group profitability.
In many dealer groups, vehicle movements are arranged independently by individual dealerships or departments.
A vehicle may need collecting from another branch, transferring between sites, delivering to a customer or moving to a preparation centre.
Each movement might be managed efficiently in isolation, but without visibility of other activity across the network, opportunities can easily be missed.
For example, one dealership could arrange a vehicle collection while another nearby location is organising a delivery along a similar route.
If those requirements were visible across the group, could they be combined? Could unnecessary journeys be avoided? Could transport capacity be utilised more effectively?
The opportunity is not limited to negotiating a lower cost per vehicle movement. It also includes reducing administrative effort, improving vehicle availability and making better use of existing resources.
This is where centralised purchasing, operational process improvement and technology can work together to deliver measurable benefits.
Getting the balance right between central control and local flexibility
Of course, implementing centralised purchasing is not without challenges.
Dealership operations are fast-moving environments, and local teams need the flexibility to respond to customer requirements and unexpected situations.
A purchasing strategy that delivers attractive contractual savings but creates delays, unnecessary administration or operational frustration is unlikely to achieve its intended benefits.
Successful implementation requires more than issuing new supplier agreements.
It involves understanding existing processes, engaging the people who use them, identifying operational challenges and introducing changes that genuinely make their jobs easier.
The objective should be to establish group-wide purchasing control without losing the responsiveness that makes individual dealerships successful.
The next opportunity for improving dealer group profitability
Motor retailers have become highly skilled at monitoring gross profit performance across their businesses.
Sales margins, finance performance, aftersales productivity and departmental profitability are regularly measured, challenged and reviewed.
Perhaps the next opportunity is to apply that same discipline to purchasing and operational expenditure.
For multi-site dealer groups, understanding the supplier base, consolidating purchasing opportunities and improving processes could unlock savings that are difficult to achieve when dealerships operate independently.
And the opportunity is not simply to spend less.
It's to spend smarter, reduce unnecessary activity and create more efficient operations.
The starting point is a relatively straightforward question:
Do you really know how many suppliers your dealership group uses, how much you're spending with them and whether you're achieving the full benefit of your collective purchasing power?
How AccelR8Auto can help
At AccelR8Auto, we believe sustainable business improvement starts with understanding how operations work in practice.
Drawing on over 40 years of experience in automotive retail, we help businesses review existing processes, identify inefficiencies and explore opportunities to improve operational performance.
From supplier management and vehicle logistics to process improvement and change implementation, our approach focuses on practical solutions that work for both the business and its people.
Because improving profitability isn't always about selling more. Sometimes it's about making better use of what you're already spending.
AccelR8Auto – Driving Performance
Research references
- Spendesk (2024): European SME procurement research, reporting a median of 800 suppliers on the books.
- RS and CIPS (2026): Indirect procurement research examining maintenance, repair and operations purchasing, including an average of 83 suppliers.
These research figures provide general business context and should not be interpreted as specific benchmarks for UK automotive dealer groups.