HONDA CUTTING DEALER NETWORK BY A QUARTER

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Honda are making a significant change to their lawn and garden dealer network - reducing it down from around 200 to roughly 150 retailers, in order they say, to maintain dealer profitability.

The 50 or so dealers who are being cut from the network were informed of the changes yesterday (Thursday 1st October 2020).

Steve Morris, head of Power Equipment Division at Honda UK, spoke to Service Dealer to explain the reasons behind the changes.

He said, "The reason why we are making this change is two fold. Firstly, it is so we can ensure that our dealers can continue to deliver an outstanding experience for our customers. We do lots of customer research and from that we are being told customers choose Honda because they see it as a premium brand and therefore they expect a premium customer service - and I must say that the vast amount of our dealers are achieving that today. But what we recognise, is the delivery of this is coming at a cost and their profitability is increasingly coming under pressure.

"The second reason therefore, is that we want to improve dealer profitability, in order to guarantee a sustainable dealer network for the long term."

Steve explained why Honda believe making this change will add to the remaining dealers' profitability. He said, "We undertook a large study regarding how we should approach this. As a consequence our customers have been telling us they are happy to travel a bit further to buy our products and receive that premium level of customer service. This means we are able to have slightly larger dealer territories to cover the UK.

"We also identified that there were a number of dealers who simply didn't have a high density of Honda customers in their geographic area. This brought us to the conclusion that if we had a smaller network, with larger dealer territories, each dealer therefore has a larger customer footfall with increased potential for higher profitability."

Steve acknowledged that dealers profitability can be under threat from factors such as the internet, but pointed out that Honda's e-commerce channel does keep their dealers in the loop. He says it pays them a commission on website sales and importantly maintains the link between dealer and customer at point of handover.

When asked how the 50 dealers who have been cut were chosen, Steve said, "The principal for the decision was based on the profile of Honda customers within their territory. We looked at what the pool was like of Honda customers in their area and whether they had the potential to make them viable. So it's not really to do with dealer performance or dealer facilities, it's principally related to the marketplace."

Steve went on say that there are in fact still dealer opportunities, with some gaps to be filled in their network. He said, "There are 16 areas of the UK where we've identified there is a need for us to have representation to service our customers. So we are looking for some first class dealers to become part of our network in these areas."

It was stressed to Service Dealer, that this decision has nothing to do with the events of this year and the Covid pandemic. Steve explained, "This is part of a longer-term, strategic plan that we have been working on for some time. We have been planning this implementation since the start of the year."

Service Dealer asked Steve if there's any regret over the loss of these 50 dealers. He said, "It's mixed emotions really. We have a relationship with all of our dealers, so inevitably with some of those relationships coming to an end it's sad - and we thank those dealers, wishing them every success in the future. But I think the irresponsible thing to do would be to not recognise the pressures on our network and react to that. 

"We haven't taken this decision lightly. We have given a lot of in-depth study to it, with the conclusion that for our dealers to be sustainable in the long-term, this is the right thing to do."