People who like numbers tend to like them a lot. They’ll study graphs and charts for hours, looking for hidden meanings.
I’ve never been particularly good at math, but I understand that kind of obsession. Like a lot of journalists, I even have some training at reading statistics. In the never-ending quest for news, such things as budgets, forecasts, and reports are a treasure trove of information.
Recently, I found an exciting statistic in the Outlook Study produced by the Automotive Industries Association of Canada (AIA). There were no remarks about this particular statistic. No fanfare. But I found it to be quite telling, nonetheless.
In 2013, for the first time, labor sales outpaced parts sales at Canadian repair shops. It’s a statistical intersection that many people have anticipated for quite a while.
Not that long ago, it was commonplace for parts to generate significantly more revenue than labor. Then things started changing. The significant lead of part sales started to diminish. And in the past decade or so, the two major components of automotive repair bills approached parity.
In 2013, labor became the dominant component (though just by a hair). And if predictions hold, it will continue to grow larger compared to the parts component.
Why is this? Well, it makes a lot of sense when you think about it.
* Cars are better made than they used to be, with components that last significantly longer.
* There’s a lot of pressure on parts margins, which keeps their prices fairly flat.
* Labor, on the other hand, is an increasingly valuable commodity, with older technicians retiring and young people not exactly flocking to the skilled trades.
* And the complexity of modern engines calls for increased reliance on diagnostic troubleshooting and electronic reflashing – neither of which involves part sales.
In this new paradigm, the shops that will thrive are the ones that invest in high-tech equipment and the most up-to-date training. Anticipating the crossing of the parts and labor lines, some shops even established a separate diagnostic rate, elevated from the normal door rate because diagnostics requires the best technicians with the most training, and does not entail a lot of parts sales.
The shops that looked at the numbers, interpreted them correctly, and acted on them are in a better position, obviously, than those who ignored them.
Quite frankly, this is the rationale for our monthly “By the Numbers” page. We get a lot of those numbers from conferences and seminars that highlight aftermarket trends. We believe that if shops act on trend-lines, they could gain an advantage in the marketplace.
The rise of light trucks and SUVs over passenger cars? Some shops saw that coming and responded accordingly.
The rise of import nameplates at the expense of domestics? Some people saw that trend forming and positioned their shop to handle the influx.
There’s an old saying: “The trend is your friend.” It has guided investors for decades. It could guide your shop too.
Allan Janssen is the editor of CARS magazine. You can reach him at 416-614-5814 or email@example.com