What will your vehicle repair business look like in 2014? How will it look in 2019 and even beyond that date?
It seems the only constant for the foreseeable future is change according to presenters and panelists at the Global Automotive Aftermarket Symposium (GAAS). Over 300 aftermarket professionals and 30 presenters/panelists attended the event earlier this year in Chicago. Since 1996, the first GAAS event has been held in Chicago to share information and trends among industry leaders and to fund scholarships for students pursuing careers in the automotive aftermarket. Since its inception, proceeds of the event have funded over 1,600 student scholarships for future industry leaders.
Technological advances continue to lead the charge of change in operations, management and marketing according to this year’s speakers, from shop owners to parts manufactures, to marketing and media experts.
Too Many Parts In Our Future?
There seemed to be a consensus that there is no end in sight for parts proliferation, ever increasing the number of parts the average parts distributor needs to stock.
Looking at a vehicle today and a vehicle from a decade ago there is a 50 per cent increase in the number of SKUs, according to a study cited by speaker Paul McCarthy, vice-president, Industry Analysis, Planning and Member Services of the Automotive Aftermarket Suppliers Association (AASA). He indicated that there are over two million aftermarket SKUs on the market today. That’s created huge overhead costs for not only parts distributors, but also manufactuers that have to spend more money on shorter runs, lower volumes and higher tooling costs.
From the shop point of view this translates into more complicated parts ordering, a greater likelihood of out-of-stock parts and a greater chance of mistakenly getting a wrong part from the parts distributor. That doesn’t take into account any added complexity in repairs caused by the sheer number of parts under a hood.
E-tailing and Price Transparency
E-tailing, as opposed to e-commerce, is using consumer sites to research or shop for parts online, according to McCarthy. Projections are that there will be a 15 per cent increase in aftermarket e-tailing from 2012 to 2018 according to a study Booz & Company did for AASA.
“Fast growth,” said McCarthy. “But more importantly about e-tailing is it really isn’t about online sales. It’s about offline sales.”
Few DIYers buy parts online, but more than half research online. Within five years that will be 90 per cent according to the Booz & Company study. This creates US$4 to US$6 bricks and in-store sales for every US$1 of online sales. This runs counter to the trend of showrooming that most retailers are experiencing. Showrooming is a consumer stopping in a brick-and-mortar store to see, feel and research a product, and then going online to buy that product for a lower price.
This is also impacting your DIFM customer. It’s driving price transparency, according to McCarthy. And that transparency will affect what a shop can charge once a customer has a certain price expectation. “With service professionals, if parts move towards market pricing, they are going to have to make their money on labour,” McCarthy said.
What Does a Customer Want in a Part?
A panel of four shop owners, all former technicians, participated in the “What Shops Really Need” session indicating that their customers are relying on the shop to select quality parts.
“Usually when the customer comes to us they’re not asking for a specific brand,” said Bob Shanahan, owner of DuPage Tire & Auto Center, in suburban Chicago. “They’re coming because they have a problem with their car … the check engine light is on, it’s making a noise, it’s dying out. Very, very seldom do they come in and say, ‘I want a certain brand part put on my car;’ they really leave that up to our shop. Sometimes it takes us years to figure out what the better brands are.”
Shanahan explains in the customer’s mind the brands he sells are invisible. If a part fails, his customer doesn’t blame the brand – the customer blames the shop and expects it to be fixed for free.
“My name is on that part,” Shanahan says, emphasizing his customer’s perspective.
Shop Priorities and Customer Priorities
Even in this economy, panelists agree, price is still secondary to quality of service in the consumer’s minds.
Moderator Bill Moss, owner of EuroService Automotive Inc. in Warrenton, Va., said that in his surveys he has found getting the job done right the first time is the primary concern of the average customer. “The second concern is often convenience. Price is fourth or fifth down the line.”
When choosing parts, shop owners and technicians are focused on a similar set of priorities as their customers. They usually prefer increasing customer satisfaction and reducing comebacks over saving a few pennies on a parts purchase.
“Number one with me is quality. It’s got to be something I feel is going to work for my client,” said Dave Walter, owner of Kehoe Automotive Center Inc. in Carol Stream, Ill. Walter has 37 years of industry experience, 25 as a shop owner. “Second is availability. If I can’t get it, I don’t care how good it is, it’s not going to work. And third on my list would be price.”
Walter said it is most important that his parts suppliers have a complete inventory and quick delivery of parts to his shop.
In a separate panel discussion, owners and managers of parts stores discussed the importance of technology is keeping their shelves stocked with fresh inventory, while not tying up working capital in over-inventorying rare or obsolete parts.
Too Many Jobs, Too Few Takers
One of the recurring themes at this year’s GAAS was the lack of talented young people seeking careers in the automotive aftermarket. Presenters reiterated that many young people that traditionally would choose careers as automotive technicians are being drawn to careers in computer hardware, software and IT.
One group of students from Northwood University’s Executive Program presented a “recruiting” video that was part of their school project intended to sway more careers to the aftermarket. One advantage the video points out is that a career as an automotive technician can’t be outsourced.
For shop owners and managers, this means good technicians and service writers may become harder and harder to come by in the short term.
But as unemployment among young adults becomes an issue, there may be an influx of new blood in the aftermarket.
Planning for Your Personal Future
If you own a shop, at some point your business is going to change hands. In North America, 60 per cent of owners of a family business are 55 or older and fully 30 per cent are 65 or over, says Susan Rounds of Wells Fargo Wealth Management.
Basically, there are big transitions coming for family-owned business. About 50 per cent of them will go to th ird parties, 30 per cent will stay within the family and 14 per cent will go to internal management. The balance will likely go to an Employee Stock Option Plan, but that number has been in decline.
About 90 per cent of business owners agree that having an exit plan is critical, but roughly only a third have done anything about it, said Rounds. The key to transitioning your business is to start planning early. This can help create a strong leadership transition, plan financial transactions and deal with tax planning issues.
Overall, the automotive aftermarket is in a state of change. But the future is bright for those that are willing to embrace that change. SSGM
Phil Sasso is the founder and president of Sasso Marketing, Inc., having been a marketing consultant, creative director, writer and speaker for more than two decades. He can be reached at email@example.com