Is it time for a new aftermarket system in Canada?

In the years that Bob Greenwood has been training, studying and writing about business management for SSGM, he’s never been an industry pessimist. At the same time, like many in the industry, he’s deeply troubled by trends in the service aftermarket that suggest a dark future for independents unless fundamental changes are made. Bob has an idea that could turn the tide. See if you agree.Jim Anderton

The traditional methods of operating a business within the Independent sector of the automotive aftermarket industry in Canada is very simple. A person or licensed technician has the opportunity of having his/her own shop, raises the required cash and opens up for business. A person or Jobber sales representative has the opportunity to own a parts store, raises the required cash, and the doors are open for business. This is the capitalist system working at its best as one decides to take the personal risk to build a better future.

I submit that it is time to raise the question: “Is this the right method of conducting business that helps ensure the growth and success of the Independent sector of the automotive aftermarket industry in Canada?”

Consider the following variety of facts within the Canadian aftermarket industry:

1 The majority of Independent shop owners in Canada have Grade 12 or less formal education before moving on to “pay his/her dues” to obtain his/her Automotive Service Technician license.

2 The average Jobber store owner is trying to determine what the shop owner wants as shops continue to squeeze parts margin out of the Jobber but Jobber business costs continue to rise.

3 The North American vehicle count is dropping as Import vehicles surge from coast to coast.

4 In the eyes of Independent shop owners, aftermarket parts manufacturers have not produced appropriate import parts that perform fit/form and function.

5 Dealerships are retaining their customer base away from the aftermarket segment and aftermarket shops support dealerships by purchasing parts from them.

6 Pricing strategies of the aftermarket parts manufacturers are against other aftermarket parts manufacturers and not against OE parts themselves.

7 Jobbers do not understand the Service Provider’s business. Service Providers do not understand the Jobber’s business.

8 The term “Profit” throughout every level of the aftermarket segment is treated as a “dirty” word as everyone is in a race to the bottom in their pricing strategies. “How low can I go and how fast can I get there?”

9 The industry thinks in terms of “Cost” and not “Profit”. It is an embedded state of mind!

10 Warehouse Distributors and Manufacturers continue to spend millions of dollars each year on “toys, trinkets and trash”.

11 Manufacturers, WD’s, and Jobbers are consumed with parts volume at any price.

12 The industries focus and support processes are focussed on the “bottom-feeder/cockroach type” shops and not the “best business practices” shops; i.e. — Jobbers carry too many shop receivables that are 60/90/120 days old because these shops do not know how to run a business profitably in order to pay all bills on time when due. The Jobber, therefore, does not have the cash necessary to grow his/her store and cannot bring value to their best practices shops. WD’s focus on “programs” to “buy volume” from the average Jobber and marketplace shop, which are traditionally the weakest shops in the industry. The WD’s beat up the manufacturer on price to support these “programs”. Manufacturers don’t listen to the best business practice shops as to their needs and future requirements and, like the WD’s, have focussed on toys, trinkets and trash rather than fit, form and function coupled with not manufacturing the wide coverage of import parts availability required for today’s marketplace at the right price.

13 The Independent shop lacks proper recognition from the consumer, because the best of the Independents are also associated with the worst of the Independents.

14 Vehicle quality and service intervals have changed, therefore, shop processes must change. More bays with more equipment with a larger, relationship/education focussed client base is now a standard requirement today to secure and sustain tomorrow’s business and consumer needs. “Learn to grow the business or go home.”

15 Television commercials are encouraging the lay person consumer to read the instructions on the box and change their own brake pads on their vehicle.

16 There is a tremendous need for a change in “Corporate Culture” at every level of the aftermarket industry.

17 There is a tremendous need for a change in “Communication Practices” at every level of the aftermarket industry.

Currently, in essence, the aftermarket operates with no real accountability for their actions.

One might respond to the above statement with “this is the free enterprise system and if they are wrong they will lose money or go broke, leave it alone.”

Well then, considering that response, now consider these facts:

1 We have now become and will continue to be a “knowledge based” industry as vehicle technology continues to develop.

2 Technology development means the requirement for highly skilled technicians for proper vehicle diagnosis and to secure the right safety related “prognosis”.

3 Capital costs for this industry are high, so it is very important to implement and obtain the right price from the consumer.

4 Technology development and the demise of the Big Three population means more parts proliferation for Jobbers.

5 The consumer is more educated today, but is very uninformed as to the proper vehicle maintenance required to maximize the vehicle’s life. The Dealerships are using “tactics” on the consumer to retain the aftermarket client with them.

6 Independent Shop owners and Jobbers must learn to trust and work closer together for each respective business to succeed.

7 Business “communication” must be greatly improved between each and at every level of our industry.

8 To be “Professional” in today’s economy means meeting, and sustaining an “Industry Standard”.

If the aftermarket sector of the industry acknowledges the above-mentioned facts and wants to achieve the right level of prosperity, then perhaps it is time for a dramatic change in focus. A change in focus that will allow the next generation to have a better chance to enjoy the elusive words, “professional prosperity”.

Consider, if you will, the “system” used by Accountants, Engineers, Lawyers and even Liquor Control Boards.

These organizations “sanction” people and companies who want to deal in that profession at that professional level. It is the law. The organizations are recognised by the Federal and Provincial Governments.

A Chartered Accountant must obtain a certain education level, then pay his/her annual dues to their “Society” by which they are “sanctioned” to operate with outlined standards.

The same applies to Engineers and Lawyers.

To sell liquor, the Provincial LCB’s across Canada “License” the premises to sell alcohol under certain conditions and “standards”.

I submit that it is time for the Independent sector of the automotive aftermarket to form its own Society that sanctions Independent shops and Independent Jobbers to operate in this business. It is an issue of protecting consumer safety and obtaining/sustaining best business practices. It must be approved and recognized by the Federal and Provincial Governments so it has teeth. The owner must meet pre-set, established criteria. Business conduct rules are set. Sustainable, on going, communication processes are put in place. Annual dues must be paid to the “Society”. Accountability is now in place and it is “policed” internally as are the other “Professional Societies”. When this is achieved, the focus will be on best business practices throughout the industry rather than accepting the current status quo focus of weak, unprofessional practices. WD’s and manufacturers woul
d adjust their businesses to meet the requirements of their customer, namely, the new shop owner and the new Jobber. Communication lines are clear. The aftermarket would have an incredible future. This “system” becomes the “industry standard” not just a “shop standard”. The mind-set is elevated and conduct is changed. The consumer sees the difference from a sanctioned business to a non-sanctioned business as is recognised from a Chartered Accountant to a Bookkeeper.

If your comment is “impossible”, or that it sounds like a “pipe-dream”, I submit that it is perhaps you who is not willing change to be accountable to his or her peers to improve the standards and image of our sector of the industry. You use the phrase “I am only accountable to my customers, my clients”. I submit to you, that attitude is correct for running one business, but not running an entire industry of this complexity and magnitude.

The challenge would be great, however, the end result would make the task worthwhile. All issues must be brought to the table from each level of the industry and fully discussed by appointed representatives. All levels clearly agree to work together to form the structure.

Consider most of the infrastructure to such a mission is already in place through our National and Provincial Associations. Fine-tuning would have to take place, but a lot could be accomplished in two to three years when the “will” is there to make things happen.

SSGM would welcome your comments to such a concept so send your thoughts to the Editor, Mr. Jim Anderton via E-mail (jim@ssgm.com) and please copy me at greenwood@ekw.ca. If your desire is to tear this idea apart … great … but then please submit your own detailed plan for our industry because, as I see it, same old, same old, just doesn’t work any more.

Robert (Bob) Greenwood is President & CEO of E. K. Williams & Co. (Ontario) Ltd. and Automotive Aftermarket E-Learning Centre Ltd. Bob has 29 years of industry-specific business management experience. He has developed shop business management courses for independent Service Providers recognized as being the most comprehensive courses of their kind available in Canada. Bob is the first Canadian Business Management Consultant and Trainer to be recognized for his industry contributions when he received the prestigious Northwood University Automotive Aftermarket Management Education Award in November 2003. E. K Williams & Co. (Ontario) Ltd. offices specialize in the independent sector of the automotive aftermarket industry preparing analytical operating statements for management purposes, personal and corporate tax returns and business management consultation. Visit them at www.ekw.ca and sign up for their free monthly management e-newsletter. Automotive Aftermarket E-Learning Centre Ltd. is a leading edge company devoted to developing comprehensive shop management skills through the e-learning environment. Visit www.aaec.ca and take the free overview. Bob can be reached at (613) 836-5130, 1-800-267-5497, FAX (613) 836-4637 and by E-Mail: greenwood@ekw.ca or greenwood@aaec.ca