A New Vision Required for the Aftermarket

The commodity sector represents three- quarters of the traditional automotive aftermarket industry and through the supply chain, they all sell to the shop level.

Consider that today, the commodity sector of the industry is forced to deal with a more competitive environment and technical world than ever in history. Modern vehicles are more sophisticated, loaded with fully interactive modules and high-tech parts. The proliferation of SKUs is overwhelming for aftermarket parts manufacturers, WDs, and jobbers. Management of inventory lines and business process efficiencies are top priorities at all levels of this sector of the industry. Additionally, things like computerization with on-going software upgrades has now become an annual budgeted item. The costs of running the top three levels of the industry have dramatically changed within the last ten years.

At the shop level, owners and technicians are dealing directly with this technology within the vehicle. Vehicles now enjoy longer service intervals compared with the vehicles of the ’80s, but require a longer service time period within each visit, in order to maintain the vehicle in accordance with the vehicle manufacturer’s recommendations for reliability and performance. Shop equipment specific to the model being worked on is now a must, compared to the one catch-all scope on a sliding track that went from bay to bay 20 years ago. Technical training just to maintain a competent knowledge base within the shop has more depth and requires more time than ever before. Furthermore, the shop now deals with consumers who are generally uninformed about the maintenance required on the vehicle they are driving, and of whom, unfortunately, a high percentage can’t afford to properly maintain the vehicle they have leased or purchased. The shop now is in the knowledge business as far as technology and consumer relationships are concerned.

The shop business has most certainly changed as well within the last 10 years. The key word in both industry level descriptions is change, but both sectors are prisoners of their past.

The parts manufacturer, WD, and jobber have always been consumed with sales and volume of their products. In order to achieve this, they traditionally went to the marketplace where their ultimate customer was, the shop owner, and spoke to them about business volume and how more sales equated to business success. Price, volume, and car count were key. This was always the theme of the ultimate business message sent to the shop level: sell more, be competitively priced, do lots of volume, and your shop will succeed financially.

But for more than 75% of shop owners and jobbers, the last year of formal education was grade 12 or less. From there the shop owner went on to earn his license to become an automotive service technician, and the jobber went on to learn about automotive products and develop key sales skills. Both are very good at what they learned.

The average technician is 54 years old. The average jobber has been in business 18 years. Both are seemingly set in their ways, believing that they know what they are doing and “how the game is played.”

Many, if not most, shop owners and jobbers have had no formal business training. They may not know how to understand, measure and run their own business, let alone understand each other’s business. There seemed to be no requirement for this in the past; activity and sales were the order of the day.

The jobber and shop owner need each other more than ever before to sustain, retain, and grow back market share from the aggressive car dealerships, who are focused on taking the shop’s client base.

Today there is little trust between the jobber and shop owner. The relationship is further poisoned by the fact that there are too many jobbers in the marketplace for the number of good service providers, forcing too many jobbers to flog whitebox parts.

And because many shops are in financial trouble, they are looking for every dollar they can get, without understanding the consequences of their actions. Most shop owners run their business as they were taught in the 1980s–focusing on price and volume–without considering that the shop business has changed. Very few at the jobber/WD/manufacturing level are talking about it or showing shop owners what is required today to succeed financially.

The jobber business has also radically changed, and no one is talking about that either. Many a jobber doesn’t understand “value added,” what it really means to the shop, or the discipline it requires. Many are still focused on price and volume, selling to any shop that buys at ridiculously low margins without considering whether that shop can even pay for it. It appears many jobbers survive and live for that year-end rebate. The consequences of this strategy–if you can call it that–is that the net income is not sufficient to provide a proper return on investment for the jobber today.

In today’s world the customer is king, or queen. You had better understand your customer if you want to succeed, but many in the commodity sector do not.

If you do not understand the shop business, then how do you grow your commodity business with that shop owner?

Not nearly enough manufacturer or warehouse distributor corporate personnel (presidents, CEOs and vice-presidents) have taken the time to learn what the shop business is all about. They are busy working out strategies to build more volume for their companies, but how do you build strategies for your business if you do not understand your customer’s business? Without knowing this, how can you sell to them at a proper profit margin?

Something must change.

The jobber has a new role today. He must talk with shop owners in terms of how he can help their business, rather than how much in parts he can sell them today. With the right relationship, business volume and margins will go up directly in proportion to the quality of the relationship the jobber has with shop owners.

Most jobbers in Canada say their shops are not interested in building a relationship, but you have to consider the mistrust currently in place, and why.

Many jobbers have let their shops down, however unintentionally. Most jobbers have never understood the shop business–and neither have many shop owners–so the blind were leading the blind. Volume, car count, and hyper-competitive pricing at the shop level only put them into debt and bought them a job. Now many don’t have a business at all; they only have this beast that causes stress and heartache. They did not receive the right advice from the sector they counted on most.

In order to earn the trust back, all parties must be given the opportunity to understand their new roles within our industry and how to run and manage a business that will produce enough net income and provide a rewarding career for both owners and employees. The fact is, I think this will take another half a generation to accomplish.

Ultimately, the lesson for our industry is to slow down and do the math. When you consider how to go about the business today from a mathematical standpoint, and the right business processes are implemented with discipline, the bottom line becomes stronger than ever. Take the emotion out of it. Math does not lie.

Still, once that is in place, today’s business is based on relationships and value. One six-word phrase sums up what you are trying to reach in your relationship with your customer: “I will not let you down.” Too few jobbers and service providers can boast this type of relationship, but when that promise can be delivered on, it will ensure the financial success of all levels of the automotive aftermarket.

Robert (Bob) Greenwood is President and CEO of E. K. Williams & Co. (Ontario) Ltd. and Automotive Aftermarket E-Learning Centre Ltd. Bob has 28 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 Consult
ant 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 AAEC at www.aaec.ca . 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.