Some Worrying Trends With Consumer Spending

A few months back I wrote an editorial where I mentioned that the changing automotive repair landscape would bring a range of challenges for Canadian independents. This year’s J. D. Power and Associates Canadian Customer Commitment Study confirmed my earlier remarks.

In October, SSGM will take a more detailed look at the study; but for now, I will only focus briefly on two findings. The first is Canadians are cutting back on automotive maintenance; the second is the dealer share of the maintenance and repair market is down this year. Both should give Canadian independents pause.

Let’s take a look at the first one. J. D. Power found the annual payout on vehicle maintenance and repair was down some seven per cent from 2008. Most will rightly put this decline to the continuing economic uncertainty. When times are difficult, people will cut back on expenditures, and automotive repair and maintenance are not exempt from this trend. What should catch everyone’s attention is when people are going to spend money on a necessary repair or bit of maintenance work, they are focusing more often on price first. The J. D. Power study found the number of people replying “I will go to the cheapest place I can find for service” has increased to 23 per cent, up from 17 per cent in 2008. This may explain why there was a small dip in the number of people transferring their loyalty from dealership service facilities to independents. Figuring that the dealership operations are more expensive, consumers are switching to independents because they believe they are cheaper. That sounds like a good thing, right?

This should be worrying to independents. The findings suggest some people are possibly turning to independents only because they think they can get a better deal from the independents in terms of price; they are not doing so because they think independents are offering a better service, use quality parts or have trained staffs who know what they are doing. Instead, they are coming to independents because they think they can be pushed on price. If a customer can’t get the price they want from one independent, they will without hesitation go to another and press them on price.

I’ve had several independents tell me they are starting to see a lot more of this price shopping by vehicle owners. If the customer feels they can get a better price somewhere else, they will take their vehicle there; or they will tell the shop owner “I know the guy across town can do it for cheaper. Why are you charging more?” I’ve even heard stories of customers showing up demanding that only one part be replaced, at the lowest price, so they can drive to the next shop which promised to finish the next part of the repair for some bargain-basement amount.

This is going to be a challenge for independents. I mentioned before the remaining dealership operations will focus aggressively on keeping and recruiting new customers by emphasizing quality and professionalism. That image will be made easier if independents are tagged by consumers as the choice for the lowest price, but not much else. I had a conversation only last month with one shop owner with a well-known franchise operation who complained of the focus of the head office on getting customers with cut-rate pricing. As he told me, the only thing it produced were customers who were not interested in booking a follow-up appointment or taking part in a maintenance program. That is not the kind of image or customer we want.

What do you think? Have your say and speak your mind! letterstotheeditor@ssgm.com