“Tesco will cost us £150,000 a year”

 

W.R. Davies Motors Group has been a leading family business in Welshpool since 1924, but the arrival of Tesco has presented it with one of its toughest challenges yet.

 

And in an exclusive interview with mywelshpool, the company’s managing director Jonathan Davies (right) says the forecast predicts that Tesco will cost the company £150,000 a year.

 

“Unfortunately supermarkets use fuel as a hook to attract people to buy bigger margin items from their main shops,” said Mr Davies: “Therefore the fuel sales become a means to an end rather than a business in their own right. What this means is that other filling stations such as ours are left with lower volumes and much slimmer margins. Although it is early days, we estimate the impact of Tesco in Welshpool will cost our company £150,000 per annum.”

 

About 18 years now, I joined after leaving university having read accountancy.

 

We have six branches throughout Mid and North Wales as well as three in Staffordshire. The franchises the company represents are Ford, Toyota, Citroen, Nissan and Renault. We employ over 250 full time staff. We have an annual wage bill of approximately £3.5m. In total, the group turns over in excess of £70m

 

The company has a strong local connection, particularly in Mid Wales, where it was founded in 1924 by Mr William Rees Davies. It is still totally family owned, now with members of the 4th generation working within the business. However, even though it is a local business, we now have the scale to be able to compete with any other car dealer group. We like to think that our customers are treated as a local family business should, but also they get the deals that are as good as any in the country.

 

Apart from growing larger and adding more dealerships, the biggest change over the last few years has been brought on by the internet. We now sell vehicles to all over the country. In the last month, we have sold cars to both Glasgow and London! This shows that we are providing a premium service at prices that can’t be met elsewhere.

 

Some of the biggest challenges have been created by government, both local and national. Our petrol forecourt in Welshpool has seen its rateable value rise from £12,000 per annum to £65,000 per annum since April this year. We have also have the increase in employer’s national insurance contributions from April this year, as well as the VAT increase to 20%. These three extra taxes look likely to cost the company an extra £100,000 per annum.

 

The one way system hasn’t affected us too badly, but what has been huge is the impact that Tesco has had on our petrol filling station. Unfortunately supermarkets use fuel as a hook to attract people to buy bigger margin items from their main shops. Therefore the fuel sales become a means to an end rather than a business in their own right. What this means is that other filling stations such as ours are left with lower volumes and much slimmer margins. Although it is early days, we estimate the impact of Tesco in Welshpool, has cost our company £150,000 per annum.

 

The traffic in Newtown is one of the most serious issues the town, our business included, has ever faced. Consumers are avoiding the place like the plague! The fundamental problem seems to be having so many sets of traffic lights in short succession, and I can’t see things improving until the decision is taken to re-instate the roundabout coming off the Kerry road. Again, although they can’t be blamed directly, Tesco coming to the town has caused this change in the road layout leading directly to many local businesses questioning their future altogether.

 

Wouldn’t it be fantastic to have a crystal ball! In the short term, the company is looking to ride out the likely difficulties the economy is going undoubtedly to face over the next 12 to 24 months. Careful control of costs, whilst maximising the sales opportunities going forward will be our priorities. As things hopefully return to a more normal economic cycle, we will be looking for further opportunities, both inside and outside the retail motor trade. Who knows where we will be even 10 years from now – maybe space travel is the way forward!