MT Interview: Mark Raban, Lookers CEO

It has been quite a journey for Lookers and its CEO Mark Raban who joined the group in 2019 as finance director just as the Financial Conduct Authority (FCA) began an investigation into the dealer group’s sales processes.

Lookers promoted Raban to CEO in early 2020. He has nearly 30 years of multi-channel retailing experience and is steeped in finance. Before joining the group he was CFO at Marshall Motor Holdings. His previous experience takes in finance director of Inchcape Retail and Selfridges Retail.

He faced a triple whammy. There was the pandemic, with showrooms shut for business. Lookers turned in pre-tax losses of -£50m on turnover of £1.6bn in the six months to 30 June 2020.

There was a restructuring programme with the closure of 12 outlets in the second half of 2020 following the 15 that closed in 2019. A total of 1,500 redundancies were made.

And there was the FCA inquiry, which took up time as the company cooperated fully, opening up its books. Ultimately, the FCA did not fine Lookers but made it clear its concerns over the historic culture, systems and controls the group had in place.

That was then. Lookers has emerged from the bruising experience a leaner and more efficient business. “Good businesses, come through,” said Raban.

The numbers speak for themselves. In August Lookers reported first half underlying pre-tax profits £47.2m, with revenues of £2.23bn, driven by increases in used vehicles and aftersales. It outperformed the UK new car market by 1.7% and had a record new car order bank of 22,000 units.

All these customers are waiting for cars. What is Raban and his team doing to keep these customers on board?

On the marketing front, Lookers has driven awareness for customers with its first major multi-channel brand marketing campaign in more than five years, launched in May across the UK and Ireland on TV, radio, online, social media and outdoor. Within the business Lookers is also trying to keep in touch with customers.

“We ask our colleagues to stay as close to the customer as they can. Most customers understand the shortages. What customers don’t like is being left in the dark. Regularly connecting with the customer is important,” he said.

That isn’t easy with evolving production schedules and finance rates and used car values that change over time.

“It does feel like we’re having to sell the car two or three times, keeping the customer up to speed through that process,” he said.

Like other dealer groups Lookers is dealing with the cost of living crisis, which is impacting customers and company costs. Motor Trader met up with Raban before the business cap on utility bills was announced but he made it quite clear that utility bills were rising fast.

“Lookers’ costs are up 8% in the first half with payroll, rates, utilities all increasing. Our utilities bill used to be a million a month, it is now two million a month. It’s doubled,” he said.

The company is pushing an educational programme on electrification and carbon management. Raban himself has been on the course. It is also looking at ways at cutting its electricity bills in a campaign called Switch Off. “You know, we’ve discovered that 30% of our electric usage happens when we are closed. How can that be?”

To help employees on lower pay, the company has introduced a minimum wage of £10 and £11.50 in London to help staff with rising costs. “We’ve addressed a number of our salaries across the company, particularly in sales and technicians.”

It has also raised the minimum sales salary to reduce dependency on commission. Sales staff relying too much on commission is not seen as best practice. “I don’t think it’s good, culturally and behaviourally for the customers,” he said.

Like other dealer groups Lookers has benefited from rising used car values. He does not see any significant decline in used car values in the foreseeable future. While they have risen over 30% over the past year, he does not see a sharp fall.

“I don’t see any hard reset to that anytime soon. I think we’ve returned to normal and that we were seeing, you know, small monthly declines. I think you can be fairly bullish on residual values.”

He also believes that as budgets get tighter, consumers may trade down, or shift to nearly new but they will keep on buying. Carmakers and dealers may be short of stock because of the chip constraints but Raban argues that dealers and carmakers are making more money with reduced supply and higher profit per unit.

“If we get to a place where you have cars that consumers want to buy, they’re produced in the right volumes with reasonable lead times on them, then you start to move away from this constant targeting and supply push,” he said.

Will the market revert to the pre-pandemic model with self-registrations, churning cars through low profit channels like daily rental? According to Raban it depends on whether carmakers “keep to the script.” Either way, Lookers is pushing hard on used, adding two five-acre Lookers Cube Concept used car centre anchor sites to its network. “The Cube concept is about omnichannel retailing and multi franchise servicing of vehicles. It is a big growth area for us,” said Raban.

Lookers has been consolidating its business after a few years of acquisition and has in fact shut 27 businesses over the past few years.

“We’ve been focusing on restructuring and getting our portfolio as we want today. We closed 27 businesses over the last three years. But that that is done now, and we are actively looking to take on new franchises. We’ve taken on Polestar, which is a phenomenal success.

“It’s a great product, it’s an agency model, it’s a pure electric brand. So, we’ve learnt even more about electrics and it’s a very different sort of distribution,” he said.

And what about agency? Lookers has relations with multiple brands, which have to be maintained. Each brand has its own approach and not all brands are taking the agency approach.

“Agency has to be a good thing. I think if it produces a better customer experience and I think it can, then why wouldn’t you do it? Each brand has their own particular motivations, their own nuances and that I think that is one of the slight challenges for a group of our size. They all want to do their own thing. I think Mercedes-Benz will be first there early next year.”

Raban points out that agency is not a new concept for dealers. It already has parts and fleet deals on agency basis.

“A number of our parts businesses are agency based we do a number of corporate deals on an agency basis.

“We’re in a really lucky position. We work with some of the best brands in the world. So, we’re in a very privileged position and want to absolutely support all our brand partners into developing the business models that they wish to do and will serve the customer better.”

The car dealer sector is currently subject to a lot of interest from investors. Pendragon is currently in play with a £400m Hedin bid. Constellation bought Marshall. Lookers was also in the headlines earlier this year when Constellation took a near 20% stake in the group. Does Raban think Constellation will make a move?

“I don’t know. We’re a public company So anyone can buy shares in Lookers, we can’t control that. We’ve got a focus on the business fundamentals, to build a good healthy, sustainable business for the future. And if we do that, the valuation and the share price will come good. I think most people would recognise that we are undervalued at the moment, as are other players in the sector.”

Lookers, like many dealers has spoken about operational efficiencies. Companies cannot control the cost of living, they have little say over supply restrictions and the legacy of the pandemic, but they can make their business more efficient. Make it work better.

“I can’t control all the stuff outside, we’re a big believer in controlling the controls. There’s a lot of noise out there we can’t do anything about. The cornerstone is operational optimisation. Doing everyday things better, quicker, more cost effectively.”

Historically, the group grew quickly through acquisition.

“We haven’t maximised the opportunity for integration. That’s a huge opportunity now,” he said.

Raban cites the example of Lookers dealer management system. Currently it has Keyloop in about 75% of its dealerships but by the end of next year it will be 100%.

“We will have a standard dealer management system across our group by the end of next year. We have got about 70 to 75% of the group on that at the moment, and that’s going to be on set over 100%.”

Lookers has also signed a deal with US firm Salesforce, which is building a showroom system for the dealer group, which will sit within its DMS. “That is going to be a game changer,” said Raban. “This will enable a customer to do the car buying journey as they choose, visiting a showroom or not, going online. They can do the whole journey online if they wish. It is their choice.

“It will enable the customer to work with us as they want to, right? We believe it is the customer’s choice. So, a customer will be out to dip in and out of that as they wish. If they wish to come into the dealership and apply for finance with one of my colleagues, they can do that. Or they can do it at home on their own,” he said.

“If the customer wants to come in and have a big handover ceremony, If they want to take it delivered to their home,” he said. To this end Lookers has invested in delivery vans. Lookers’ customers had already been enjoying a home delivery service for their vehicle purchases through third party agreements. However, this move means Lookers can fulfil and track more orders using its own dedicated fleet and experienced teams.

On Raban’s watch Lookers is also looking to expand its smart repair business. Increasingly, smart technology on cars will mean fewer crash repairs but there will be demand for smart repairs conducted by mobile vans.

“We’ve got an ambitious plan to roll out smart repairs to 50 sites with 20 mobile solutions out on the road,” he said.

Lookers is looking to drive efficiencies by reducing the number of suppliers it does business with. The dealer group has extended the availability of RAC-branded warranties from two franchises to all divisions, including the Northern Ireland-based Charles Hurst business

On the people front there have been a lot of developments. In March this year Raban launched a new employee trainee programme that will create 80 new sales roles across the UK and Ireland. The new six-month ‘Jump Start’ programme includes classroom and on-the-job training. Mentorship forms part of the programme.

The group is also combating the shortage of technicians with plans to take on 208 young people in maintenance, servicing and parts across England, Wales, Scotland and Northern Ireland.

“One thing I would like to get across is our commitment to our apprentice program. All our colleagues are important, but our younger colleagues are very important to the business, you know. We were one of the dealer groups that kept our apprentice programme running during the pandemic,” he said.

In May Lookers celebrated the return of its annual Excellence Awards. This is the first Lookers awards ceremony to take place since 2019. For Raban, Lookers is now in a better place and that is for a large part down to the people it emloys.

“We’ve been through, you know, a terrible experience together. You know, with our colleagues and in many ways, we’re bound together through that experience. We’re a very tight team. We’ve got a clear strategy. We’ve got the people with the ability to deliver on it. We’ve got the money to do it and the balance sheet strength, and we’ve got a fantastic colleague base. I can’t really thank my colleagues enough for what they’ve done for the company over the last two to three years.”