| La Lettre du GERPISA | no 121 (march 1998) |
Changes underway in the automobile distribution sector are leading towards a profound upheaval in approaching the automobile system, "as profound as the one provoked ten years ago by the externalization of entire functions of the automobile", writes Bernard Jullien in his text proposed during the discussion workshop on February 13th. This topic joins others already being debated in GERPISA, notably discussions on Chanaron-Jullien's 1995 work, Hoffmeister's 1996 work, and the Williams-Froud-Haslam-Johal's 1997 teamwork. Two complementary approaches to the aforementioned changes can be observed : one was developed by the CCFA, or by Williams & cie. It consists in studying motorization costs in order to reconstruct automobile usage systems, which differ significantly in function of income and lifestyle. Certain lessons are to be learned : the portion of total spending figures devoted to the purchase of a new vehicle by households seeking motorization has diminished; the market share of used vehicles is larger in volume, and is at least equal in value; this is more obvious in households with modest incomes, while higher income households continue to devote a large part of their budget to the purchase of a new automobile. Hence, constructors and their networks are in direct contact with a decreasing number of households, in particular, as well as a diminishing portion of the population in general.
The other approach, presented herein in detail, studies changes at play in supply to consumers, insofar as new and used vehicle sales are concerned, as well as repairs, guarantees, insurance, trade-ins, car rentals, credit, etc... These different supply types constitute more or less flexible systems and can follow different coherences. It is precisely this form of supply system that is experiencing important recompositions.
Certain signs point to these supply system modifications: for example, among large automobile constructors, the decreasing portion of new vehicle sales, or increasingly complex service supply packages linked to vehicle launching. However, these changes are for the most part initiated -- and illustrated -- by the advent of new market operators, either in realms of specific services such as maintenance or specialized repairs (as in France, Midas or Speedy), or in distribution such as in the United States in recent years with the creation of superstores selling used products. In this country, changes underway in the automobile service sector are accompanied by a movement of economies of scale, with an accentuated task specialization. They are structured in function of the market's geographical characteristics : size and spatial extension, degree of urban concentration, organization and size of cities. However, activity recomposition also results in action on the part of new operators, especially large used-car distributors, as well as in opposed reaction on the part of automobile constructors. For quite some time, the latter refused to participate in the used market and/or repairs sector. Indeed, for awhile it even appeared that they appreciated the superstore offensive against classical networks : once this offensive went into action, for example reconditioning vehicles or the lack of negotiation to determine sales prices, the need to reorganize the sector was felt.
Hence, two service system coherence types seem to be in the making : on the one hand, a large distributor such as Republic relies on the act of responding to the entire range of automobile needs : sales, rental, leasing, In other words, as Bernard Jullien explained, it offers these services the entire life of the automobile, thus "maximizes recurrent income" linked to each vehicle. This strategy unites what are otherwise dissimilar activities, and requires local entities allowing for the organization of activity specialization, for example in reconditioning vehicles. This occurs thanks to a major quality of Republic which lies in it client computer management, based on know-how acquired in other distribution areas, and which takes advantage of the lack of such management in classical networks. Republic thus intends to stabilize its revenues by compensating for market fluctuations for new vehicles with those in the used vehicle market. This path chosen by the new group implies much more flexible sector organization ambitions than initial vehicle distribution practices. It runs the risk of upsetting not only classical distribution network "tradition", but also integration activity types applied by constructors themselves. The perspective of this competition undoubtedly explains new attitudes in American automobile firms. The latter expressed a variety of reactions. However, following the aforementioned complacency, automobile constructors seem to be choosing different paths : Chrysler continues to turn its vehicles over to certain superstores belonging to the CarMax group. On the other hand, GM and Ford seem more inclined to recompose their automobile dealer networks into groups having their same brand, thanks to market shares they are maintaining throughout the American territory, in order to constitute their own integration subsidiaries along the lines of those found at Republic. Recent service sector evolutions in the American market are both important and transforming. It is still too early to fully define the form of this activity recomposition, nevertheless, Bernard Jullien's analysis remains pertinent. He proposes a recomposition according to three possible poles, maybe even complementary in function of market diversity : - service parcelization within which consumers would organize their own use, by "doing their own shopping"; - service coordination making the choices for the consumer, case by case, the nature of coordinators remaining very uncertain : constructors, distributors, credit agencies, etc.; - service integration, allowing for a long relationship with the consumer by offering him/her automobile use adapted to his/her demand, sales, long or short-term rental. It is thus economies of scale which would allow operators -- constructors or new distributors -- to remain competitive.
1. Bernard Jullien, Les constructeurs face aux nécessaires mutations de la distribution: quelles leçons tirer des rapides évolutions en cours aux Etats-Unis, paper presented at Gerpisa, february 1998, 21 p.