Shape up or shut down: Purchase

OUTGOING executive director of the Victorian Automobile Chamber of Commerce (VACC), David Purchase, has warned that small business operators in the motor trade will face closure unless they adopt modern business practices and systems.

Mr Purchase, a champion of small business who has led the VACC for the past 17 years, said small auto business operators who were prepared to be proactive and open to the changes taking place around them “are probably going to do very, very well”.

But he predicted that the number of businesses in the auto trade sector would shrink over time unless they addressed pressures from bigger players, addressed increased customer expectations and addressed the increasing complexity in the technology of the cars they were required to repair or service.

Mr Purchase told GoAuto in an exclusive interview that small operators will “need to be good at what they do, they’ll need to have the right equipment, they’ll need to have the right skilled employees and provide them with ongoing training, and they’ll need to be able to market themselves”.

“They will need to be doing the sorts of things dealers do in order to compete on an equal footing with them,” he said.

Mr Purchase said that consolidation and rationalisation of small business was one of the biggest changes he has witnessed at the VACC.

“We are seeing businesses go out of business and we are seeing those who remain become larger – not only in this country, but right around the world. That’s going to continue for a little while to come and that has been very tough on our members,” he said.

“I think there has also been a recognition by our members that they just can’t continue to run up and down on the spot because to do that they’ll eventually fall behind.

“Now unfortunately there are some businesses, some members of ours, who are finding it difficult because they don’t have the capital to spend on their businesses they haven’t got children to take over the business and they are getting a little bit long in the tooth as well so they are finding it very difficult to change.

“And, unfortunately, in my view, those businesses will fall by the wayside, which is a very sad thing to witness.”

Mr Purchase said that apart from customers now being more informed than sales staff on the showroom floor, internet-educated customers knew more and demanded more in the service and repair areas.

“There’s clearly a greater demand by consumers for better service and faster service … (so) our customer service standards have had to increase because that’s what customers expect.”

He warned that as cars become more complex it may not be possible “for businesses to attempt to do everything” and that many smaller repairers could secure their future by developing a niche.

“Cars have become so complex and we’re probably going to see more niche players who develop a particular skill and who will develop very well in that particular specialisation,” he said.

Mr Purchase added that longer warranties and fixed-price servicing by new-car dealers would inevitably put pressure on the independents but that the car fleet was so large and the workload so great that new-car dealers “cannot do everything anyway”.

“There’s just not enough of them, so there is still a very important role for the independent repairer or the independent service centre,” he said.

“The independents are a very resilient mob. I have every confidence that they will meet the challenges to compete with the dealers, the new-car dealers in particular, and I think those businesses that change and are viable, that are up and running and looking forward to the challenges … they’ll survive and they will compete effectively with the dealers and the manufacturers.

“So the good ones will survive but they will need to be good at what they do.

They will need to have the right equipment, they will need to have the right skilled employees and provide them with ongoing training, and they will need to be able to market themselves. They will need to be doing the sorts of things dealers do in order to compete on an equal footing with them.”

Mr Purchase said that one of the disappointments of his VACC career was that he was “not able to achieve as much as I would have liked to achieve in the area of establishing a fair, competitive environment”.

“We still do have large businesses with whom my small business members deal who are unfair towards them,” he said.

“We have done a lot of work in trying to establish a fair, competitive environment – (and) whilst we’ve had our robust discussions with some of these larger companies … there is still a fair way to go and I am disappointed that we have not gone as far down that path as I would have liked.

“So we have not achieved as much as I would have liked. That is a disappointment.”

Referring to members’ expectations, Mr Purchase told GoAuto that “because the whole world has become a lot more complex” it had become more difficult to deal with governments and regulators.

“VACC has tried to overcome that challenge by becoming more effective, efficient and professional so that when we do lobby governments or regulators I think we are much more effective in that than we once were,” he said.

“We don’t win every battle by any stretch of the imagination and there are members of ours that I know feel that we don’t do enough for them. That is the nature of organisations like us. We have 5500 members and there are some that would like us to do more for them, but there are many who are satisfied with what we do.

“What we cannot do is we can’t run members’ businesses. We can’t make them a profit and we cannot ensure their continued viability. But what we can do is provide them with the advice and services that we do, strive to achieve a fair commercial environment and keep government and regulators off their backs as much as possible.

“So I think we do as good a job representing our sector as any other organisation in this country does for their sector. But we certainly don’t win every battle and we don’t please every member all of the time which is the nature of employer associations.

“A challenge for associations is to stay relevant to their membership. As the world changes, needs and wants of business change and I think an employer organisation like VACC has got to change. And if we don’t change we won’t stay relevant to our members.

“But we have changed enormously in the last 17 years that I have been here.

Because the change is incremental, it is not observed as much as it would be in one big hit.

“For instance, in this organisation we have improved our financial soundness, we have improved out of sight the quality of our staff (and) we have a team of staff that can now do most of what is expected and asked of them.

“We have introduced more products and services, we lobby more robustly, we have a high profile, the governments and regulators know who we are and what we do, so we have addressed all those challenges and I think we are a better organisation as a consequence.”

Referring to the thawing of the long-standing frosty relationship with the RACV, Mr Purchase said that the joint venture established with RACV for the Australian Motoring Festival was “indicative of the way the organisation has matured over the years”.

“I think it’s fair to say that when I came in here in 1997, relationships with RACV were not anywhere near as good as they are today,” he said.

“That doesn’t mean we don’t have our arguments and that we don’t robustly debate and discuss issues with RACV – we certainly do – but even in that environment, we are mature enough to be able to co-operate with one another when that’s good for both of us.

“The Australian Motoring Festival is a good example where we have come together because we both have a great interest in owning this particular space. So what we are doing is jointly putting on this festival which will, over time, take over where the static motor shows have left off, and so it’s working very well.”