Interview – Eddie Hawthorne, chief executive of Arnold Clark
“Our customers want to see a car, try a car and have the time to make a good decision. Those bits can’t be shortcutted.”
Eddie Hawthorne is chief executive of Arnold Clark (one of the ‘Big Five’ dealer groups in the UK, consistently turning over more than £4bn a year), having initially trained as an auditor and chartered accountant before joining the firm in 1990 and taking on managing director duties in 1998.
Despite the impact of the coronavirus pandemic, the firm recorded strong results, selling more than quarter of a million cars in 2020, and Hawthorne and his team have their eyes set on matching pre-covid sales this year. That resilience has earned Hawthorne an Autocar Outstanding UK Leader Award, announced today, and he has dedicated it to “every one of the incredibly hard-working team at Arnold Clark.”
Here he outlines the rollercoaster of the past 18 months, revealing some of the learnings and his hopes and ambitions for the future.
How has business been since lockdown eased?
“We’ve seen incremental gains over what we were achieving online as lockdowns have eased. It’s really been quite busy, albeit with a little bit of a dip since people have started to go back into work and edge a tiny bit back towards normality.”
Which is stronger, new or used sales?
“Used has been strong throughout the pandemic, or at least since the first lockdown lifted. But this past March was very strong for new cars too, and it’s been okay since.
“The worry with new cars is stock availability as a result of the semiconductor shortage; it’s a challenge now, and it’s becoming more of a problem for us from some manufacturers. Some are okay, some aren’t and it’s something we’re watching because it’s hard to give a blanket answer on how long it will last – but we’re factoring it in for the rest of this year.
“It’s frustrating, but if there’s one thing we’ve learned in the past 18 months it’s flexibility and adaptability and how critical it is to carry on, regardless of what comes your way.”
Casting your mind back, how did shutting up in March 2020 feel?
“Personally, I felt a big wave of failure because the business had never ever had to shut the doors before. But once you get past the fact that it’s not anything that’s within your control, you quickly move on. Then the issue was, “Right. Okay. How do we preserve our business? How do we protect the staff? How do we make sure that we’ve got a viable business to return to, to open up again?” That really was the challenge for all of us, and it kept us busy.”
How dark were those days?
“We went into defence mode in terms of protecting the business. Then, once we’d secured the business, it was then a case of, “How do we shape it for the future and how do we navigate ourselves out of this?’ It was an interesting challenge because we were trying to move forwards at the same time as – when lockdown eased for the first time – deal with customers that had more time on their hands than they’ve ever had.
What was the lowest point?
“Well, the worst case scenario was that we were going to lose serious amounts of money and I would have had to shut a large proportion of the business. I’d be lying if I didn’t say that thought flashed through our brains, although it obviously didn’t come to pass.
“The work that went in was immense. My board of directors and operations teams were in constant contact, problem solving on the go for weeks. One of the first things we did was support the local hospitals and key workers, giving away our PPE, fixing cars and loaning cars and so on.
“But then as we started to look to be ready to open – and don’t forget everyone thought we were going home for three to four weeks initially – and that meant resourcing protective equipment, making screens to separate servicing bays. There were huge logistical challenges.”
Did looking ahead make everything easier?
“Bar that brief moment of shock, we were always looking forward. Initially as to how we would support the NHS and key workers, from lending them cars to making sure we were open to maintain them, while also remembering at all times we had about 12,000 employees sitting at home, worrying for their health, their jobs and so on.
“We had to push forwards, for the business and for their well-being. Step by step we prepared to reopen, and of course that meant learning a lot of new things, from social distancing protocols to a greater emphasis on online sales.”
Was there a key turning point for you?
“There were many, but the biggest was probably the day we could reopen the showrooms, starting in England, where automotive got a head-start on other retail. That was a big deal, and from that moment on it felt like we finally could stand there and say, ‘Come what may, we should be able to deal with what’s happening.’
“We could talk to our staff with some certainty, letting them know who was coming in, who was staying at home, we will do this, we won’t do that – we knew what was possible and we could communicate with some degree of certainty again.
“Even when lockdown came round again, it wasn’t as nerve-racking. Don’t get me wrong, there were a lot of worried people, but whereas the first time we weren’t prepared at all, this time we knew what steps to take – and we had developed ways to mitigate the pain points.”
Presumably, that first re-opening allayed a lot of fears on used car pricing too?
“Sure. Normally we pick up the guide and mark down the value of a car every month it would sit on the forecourt unsold. If we hadn’t been able to maintain values we’d have been in trouble, but thankfully there was this swell of demand, from people wanting to avoid public transport to those wanting to spend the money they had ear-marked for a holiday on a new car. Prices held up and in some cases grew, which helped our recovery.”
Personally, what kind of leader did you need to be during the crisis?
“Everyone will say the same – communication is key. We’ve always tried to be an open, upfront, approachable board, and the feedback we’ve had is that the team appreciates that, even if you are telling them bad news.
“That level of openness took on a new dimension in the past year. We have a scheme called ‘Ask The Boss’, the idea being that I’ll answer any question that comes in. In 2019 I think I got 111 questions. Last year it was more than 2000. People were concerned, and by answering their questions myself I hope I could take some of the uncertainty, or some of the risk of interpretation of what people thought was wanted, out of the business.
“My main goal in all communication was to be fair, transparent, and open and honest with the staff. I couldn’t always stand there and say, ‘I’m absolutely sure we’ll get through this okay’ but by being open we all knew where we stood.”
What did you learn from re-opening that you hope will stay?
“The one thing that stands out for me is how we are now so much more efficient – and customers are conditioned to helping us be that way. Where, previously, a car might have been booked in for a ‘morning’ service with the expectation that it would be dropped off around 10am, customers are now happy to take a slot to the minute. That helps our efficiency no end and gives the customer a better experience because we can be more precise in knowing when the work will be finished.
“Likewise, we can handover more cars in a day; there’s more of a structure to proceedings, and that includes sending a walkaround video with the car before the customer arrives. Now, the need to socially distance drove that, but I suspect it’ll work well in future too, so people can see and understand their car prior to collecting it. Most people just want to sign the paperwork and get in the car – sending a video tour the day before means they can do just that.”
What won’t change?
“It’s a hard one to predict, but I do think that the transition to hybrid and electric is more dependent on being able to test drive, simply because people want to try it before they buy it.”
The used car market is booming again, and set to grow further with new car supply strangled. With fleet and rental returns down as well, could stock become an issue?
“We’re fine. We get stock from a number of areas – including our own contract hire and hire-drive division, plus some tie-ups with major leasing firms, so we’re in decent shape.
“Yes, I’ve got an eye on values, which are definitely hardening, and you can pay some really strong money for certain cars just now, but that’s a different risk. Stock is fine for now.”
How do you manage customer expectations if there’s a long wait for their new car, or you can’t get quite the used car they want?
“To answer indirectly, the focus has to be on listening to the customer more. One of the key points we’ve taken from lockdown is our ability to have more detailed communications with the customer before they come in, be it on video chat, the phone, email or whatever. Obviously the fact that a fair few people had more time on their hands helped, but I think that it actually helped both sides enjoy a better experience, because we could serve them more efficiently.
“Our customers want to see a car, try a car and have the time to make a good decision. Those bits can’t be shortcutted. But others can be done remotely, and more efficiently. And it’s blending those two sides of the journey so that they bring some more pleasure to the process that is key.
“Today we are leaner and more efficient. We’ve got smarter and offer more digital solutions, and the customer is more open to them. There’s no doubt that we’ve leveraged our digital department and really improved our offering online, but it’s not been painful – not least because we had 120 developers already working on our digital journey! They just focused on accelerating what we had in the pipeline.”
Will everyone make the transition? After all, not everyone has 120 in-house developers?
“If you were struggling before I don’t see how the past 18 months will have helped you. But change does bring opportunity, too.”
And are you looking to expand?
“If the right opportunities come up, yes. Arnold Clark is about more profit from more volume, and that comes as the end result of hard work, good customer experience, and really pushing the volume through, so we’ve actually geared our business up for a large increase in volume this year and next year.
“We sold about 330,000 cars in 2019, new and used. We sold just over a quarter of a million cars last year. So obviously that has made a wee bit of a dent in our turnover. We don’t think we will be that short of getting back to 330,000 cars this year and our aim is to get to 400,000 cars within the next two to three years. We’re definitely going to grow – the key is to do it in a way that is right for our business. There will be structured growth, including around click and collect and a few other ideas that we have.”
Looking back, what lessons have you learned?
“I was asked this the other day, and I joked that I would have retired in February 2020! It’s been a tough year, but I think the thing I can be proudest of is the way the team have all pulled together to get through it – actually, to the extent that I have the genuine problem of a lot of them having too much holiday to take!
“The pace we have adapted at has been remarkable. I’m proud of that, and proud of everyone. The challenges might keep coming, but we’ve proved that we are resilient and adaptable.”
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