Automakers poised to shift dealers to suburbs as pandemic fuels exit from cities

Automakers are rethinking plans for innovative city center retailer formats and instead looking at ways to increase their visibility in the suburbs in response to a shift away from large metropolitan areas as a result of the pandemic.

That was one of the key takeaways from panelists who participated in the Automotive News Europe Shift online event, "Sizing the Dealer Network in the New Normal."

"We need to fully understand the socio-demographic shifts we have seen with COVID-19 and which ones will continue to gain traction in a post-COVID world," Spiros Fotinos, director of Lexus Europe and head of EV planning at Toyota Europe, said. "We see suburbs becoming sexy again, as people trade balconies for gardens, and we need to understand where the luxury consumer is physically going."

Fotinos said Lexus was prepared to expand its coverage to the suburbs if demand there dictated it.

• For the full discussion on Sizing the Dealer Network in the New Normal, which took place Dec. 3, click here.

Overall, automakers are looking to reduce the size of their dealer networks, said Paul Dillamore, managing director for the UK and Italy at Urban Science. "But there is always this trade-off about being able to implement financially viable locations in areas of slightly lower potential, like suburbs, which are becoming increasingly talked about."

In contrast, automakers are backing away from grander plans to reinvent their presence in cities, Dillamore said.

"Two years ago it was very hot to recommend locations for alternative retail formats, like flagship stores in cities," he told the panel. "Now they have come to a simplified understanding that that is not always going to work except for a limited set of locations where the opportunity, the customer base and their local profile would support that."

PSA-owned UK retail group Robins and Day is not necessarily reducing its city center locations, but they are combining brands into single multi-marque sites, CEO James Weston said.

"In last six to seven years we have been through a real transition. We have changed our footprint and tried to managed our cost base. We have a high footprint in cities and high costs," he said. "Many years ago we would have sold the sites, but now we have shifted to a model where we have multi-marqued the sites with the PSA franchises and finding ways to be more efficient with the footprint we have."

Although automakers talk about reducing the size of their dealer networks, there is not a lot of evidence that is happening, said Steve Young, managing director of dealership analyst firm ICDP.

"There is a need to transfer investment from physical to digital by substantially reducing sales points, but the trend line we have been tracking for years shows that the year-on-year reduction in sales points is barely over 1 percent per annum," he said. "The recommendations [Urban Science] and similar firms make don't translate to substantial network reductions in most cases. The automakers don't actually follow through."