Perrys Motors

Source: Retail Digital

Date :20/03/2007 00:00:00

Perrys Motors: The Motor Men

You might know that Perrys is an established name in the trade but you’d never guess what the current management went through to become the country’s best, if not its biggest dealership group. John O’Hanlon spoke to the company’s chairman Ken Savage

Written by John O'Hanlon and produced by Kate Bradley

The history of Perrys is, pretty much, the history of the motor trade in the UK. It’s worth recording that it was Percival Perry, later Sir Percival, who persuaded Henry Ford ‘The Motor Man’ to come to the UK in 1908, and was appointed Ford’s first agent. In 1930, a Time Magazine article on the ‘Fordization’ of Europe commented:

When Mr. and Mrs. Ford went to England in 1928, the Motor Man was able to hire Sir Percival a second time, and from this dates the enormous expansion of Ford Motors Ltd., a subsidiary which showed profits last year of £1,013.506, or almost as much as dividend-shy Sir William Morris made with his whole enterprise.

Perrys continued its close relationship with Ford right into the 1990s when Ford’s chairman Ian McAllister (now chairman of Network Rail) and the then Perry leadership disagreed with the result that the Ford Franchises were withdrawn. The sites took on other franchises, but the episode caused Perrys to reconsider its relationship with the car manufacturing industry, a strong feeling emerging that the future for the company lay not in its traditional distributorship role, but in its emerging body repair division.

The team takes over

Ken Savage, now the chairman of Perrys, takes up the story. “The then management of Perrys took the decision to sell the motor division. Paul Millard was employed in January 2000 to prepare the division for sale, at which point he threw his hat in the ring and said he’d like to buy it himself. I joined in June 2000 very much to help raise the finance and help Paul do the deal, which we completed in March 2001.” This was, then, less of a management buy-out than a buy-in, by a small team of energetic and entrepreneurial people who truly believed in the future of Perrys as a leading and dedicated car distribution business. The team was soon augmented by Ray Somerville, very much a motor trade specialist, with whom both Paul Millard and Ken Savage had worked in the past: “I think that a key move was to bring Ray in as MD. Ray was always part of the business plan. From the outset, we focused on the business of selling cars. We had to do a lot of restructuring. Some loss-making businesses were sold and were replaced with other businesses that could give us a good profit stream. We employ some of the best and most experienced people in the sector and encourage them to perfect their entrepreneurial skills. As a result we have grown from a first year turnover of £258 million to £395 million in 2006.”

Initial nervousness was soon dispelled once the employees found out what was going on. They had seen Ken Savage arrive as financial director, and had worked out that changes were in the wind. “There were rumours of a sale but nobody knew exactly who was buying it. We couldn’t say anything during that time though. Then when we did the buyout, Paul was a huge personality, a great character, and he rallied the troops behind us to support it, and while there was a degree of nervousness from our people, there was great relief that it hadn’t been sold out to one of the larger operators, which would have meant a great deal of change. In the event there was not any seismic change. What we did was to focus the business, which had been neglected for a number of years under the previous Perrys Group management.”

Tragically, Paul Millard did not live to see this remarkable success. Soon after leading the buy-out his life was claimed by cancer and his 60 per cent holding in the business inherited by his widow Denise. Nevertheless, says Savage, his memorial is secure in the sound foundation he laid in the early days.

“We had a fair element of luck,” says Ken Savage modestly. The deal was difficult to pull off because in 2000 the “rip-off Britain” campaign was giving the whole of the motor trade a bad press. “There was a feeling that most manufacturers and dealers were conspiring to rip off the public, and a lot of people were flying off to the continent to get cut price cars. That was very damaging. We were trying to do a MBO of a car retail group while all this was going on. The block exemption was about to be revised and nobody knew how it would go. But when we bought the business in March 2001 the exchange rates moved in our favour, and the fact that car prices started to come down meant that issue dematerialised. We had a fair wind that we couldn’t have anticipated; as far as the rip-off slur was concerned I think we had won the argument. It was clear the manufacturers had to do something and one after the other they reduced their retail prices. That fitted quite nicely with the interest rates coming down in the UK, which obviously helped a well leveraged business such as ours, and that in turn impacted on exchange rates and made it less desirable to bring cars in. Shortly after that we saw demand for vehicles come back. We had a new business with a new hope, and a great team that knew what they needed to do.”

Getting an edge in cyberspace

However it wasn’t luck that caused Perrys to beat the competition into cyberspace. By and large the motor trade failed to understand the nature of internet marketing. We recognised the value of the web as a tool earlier than most, and have invested heavily on our internet site. We are punching way above our weight as a result.” Market analysis provided by Hitwise has often shown Perrys among the top three in the motor dealer sector – to the extent that the website www.perrys.co.uk has become a benchmark. “I believe we have the best site in the sector. We have worked very hard to make sure we have very good content and high proportion of photographs of good quality. I firmly believe this is the way forward for motor retailing.”

The point is, he says, that the internet does not compete against the showroom. Customers still want to see a car before they part with their money. “Back in 2000 there was a school of thought that the internet would make life very difficult for the traditional retailers because people will just buy their cars on the internet. I never believed that. I think that in our business the internet is complementary to bricks and mortar.” Interestingly, he found that the perception that the internet is not a local selling tool is a myth. A large proportion of the traffic comes from a radius of 30 miles of a dealership.

When Perrys established its national contact centre at Nelson in Lancashire it advanced both customer service and the bottom line. “The contact centre gives a better customer experience because it cuts down on queues at the service desks; it benefits the business because we can take time to talk to the customer, get to know their needs and capture the data we need to give a good service: and it’s linked directly to the workshop management system, so jobs can be booked direct, anywhere in the country.”

A new sales system is being implemented at the moment to replace the traditional diary system that has been used till now. “A manual system is fine if people operate it properly, but that says it all. The new E-Good Manners system, which will be live throughout the group by the summer of 2007, gives us great benefits in terms of management and control, and will take our sales operations into the 21st century!”

Challenging days

It’s not as easy to sell cars as it was. If interest rates gave the company a fair wind at its launch, the regular rises we have seen recently represent a change of wind. Sales of fleet cars are flat; luxury cars are regarded as gas guzzlers and the whole motor retail sector has contracted. “We have continued to grow in spite of that because we are fitter than our competitors. Our turnover increased by 3.6 per cent in 2006 but our margins were squeezed and our cost base went up. Still, we are doing well because we are very much forcing the market and getting more than our fair share out of it. Market forces rule at the end of the day. The best businesses will survive. The retail sector will shrink to the size of the market.” He concludes pragmatically.

The group continues to expand in alignment with its regional strategy, with a Land Rover dealer in Luton recently acquired and a small group of businesses soon to join the group. Having parted company with Ford in the period leading to the break-up of the former Perrys Group, Ford has now returned to the company’s massive Aylesbury showrooms, where it shares the space with Seat, Alfa-Romeo and Peugeot. The Aylesbury business is multi-franchising with a vengeance, says Savage, and its success as Perrys’ flagship site encouraged a £500,000 investment in a new 20,000 square foot accident repair centre there, equipped with the very latest machinery and opened in 2005.

But the key to success in the motor trade is in getting the right people, something Ken Savage regards as his biggest challenge. “You need entrepreneurial skills down there on the forecourt. Just like a school or a supermarket, the success of a site is often down to the local team. We want the best people, and we want them to know that we will train them, develop their skills, and treat them well. Some operators have a command and control culture, but we favour the carrot over the stick.”

In 2003 Perrys Group Training Centre won automotive Management’s award for the best dealer training facilities. “We won that because of our dedicated training facilities and our four-level sales training programme,” explains Ken Savage. “Now we are introducing a fifth level for managers, using Bank of Scotland services. Our managers are coming back enthused because it is helping them do their job. It has been said you get promoted until you can’t do the job. We promote people, then we make sure they can do the job because we have given them the tools to help them.”