Expanding the number of outlets is still the main way to increase sales
Upon the study on the reform of auto circulation channels in China conducted by Sinotrust latterly, we found that the quantity of outlets has been substantially increased with the rapid growth of sales volume in China’s auto market. Also, upon the analysis on the quantity of outlets nationwide and the sales volume thereof, we found that the quantity of issued license plates and that of outlets nationwide are closely linked. In view of the bottleneck of sales volume in a single store as well as the demand of newly-added markets, the expansion of outlets still remains the main channel to boost sales.
In addition, the auto circulation channels are still featured with the coexistence of shared and separated sales modes in the future several years. Along with the launch of new products of some self-developed auto brands, brand difference seems to be more evident and a surge of sales volume will turn up. So, separated sales network could be further developed.
Rapid growth in the 3rd tier and 4th tier markets gives an impetus to the scalization of outlets
The 3rd tier and 4th tier markets covering a far-flung area prove to be a main force for the growth of China’s auto market this year, the growth rate of which outstripped that of the 1st tier and 2nd tier markets. In a bid to satisfy the increasing market demand, the manufacturers are bound to reinforce the construction of sales channels in the 3rd tier and 4th tier markets.
Rapid growth in the 3rd tier and 4th tier markets enormously drives the scalization of outlets. Thus, regional integration has set in motion. Power Diversity Automobile Trade Co., Ltd., one of the largest automobile agency groups in China, plans to add from the existing 160-plus 4S stores up to 300 4S stores this year. Also, Xinjiang Guanghui Automobile renowned for acquisition plans to set up 800 4S stores in 10 focal regions nationwide by 2017, increased by 80 stores in average every year.
In our opinion, the input of a great amount of capital achieves the 2nd peak of channel development. Currently, this amount of capital is playing a vital role in driving the expansion and integration of automotive agency groups. Via capital operation, agency groups can not only achieve merger & acquisition of automotive outlets within a certain region, forming a relative monopoly, but also make the integration of quality resources nationwide come true. Guanghui mode won’t be an example any longer. The integration of agency groups will give an impetus to the small-sized enterprises for automotive aftermarket. Moreover, more capital will flow into such enterprises as verified with effective modes.
Independent chained aftermarket mode usher in rapid growth again
Upon Sinotrust’s analysis, consumers pay more attention to the convenience of car repair and maintenance service rather than prices along with the increasing quantity of automobiles. Thus, the independent chained service modes that are popular for convenience will be appreciated in the future after-sales service system. Hundreds of “Little thumb” chained stores are springing up in China on the strength of advanced franchised mode since the new mode of “Tiny maintenance” initiated in Hangzhou in 2004. Also, “Little thumb” plans to expand to 1000 chained stores in five years. In October, 2007, Wu Yuzhang established Shuaiche since he left from Volvo. Based on the introduction of the most successful operating mode around the global (CarMax operating mode for used cars), it offers customers specialized technological evaluation and transparent transaction prices & process, so as to build up a brand-new concept of automotive residual value. These chained modes will vitalize the future development of automotive aftermarket.
There is no doubt that a new round of channel reform is under way in the context of rapidly developing market, and then the potential of China’s auto market will be further fired up.
Author: Tony Liu, Senior Vice President of Sinotrust International Information & Consulting (Beijing) Co., Ltd.
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