As the new year begins to unfold, the aftermarket is hunkering down to assess what lies ahead. While neither boom nor bust is predicted by operators or economists alike, there is agreement that significant changes lie ahead and jobbers will need to be nimble to thrive.
For Bob Jaworski, president of Auto Electric Service in Regina, the bottom line has been healthy and this year will see a double-digit increase in revenue. “Overall our business has been strong,” he said.
However, the source of that success is shifting.
“Growth is not in the traditional aftermarket. You cannot continue to do what you have done in the past,” he added.
He pointed to an increased emphasis on commercial growth and greater opportunity in areas such as paints and abrasives. According to a global report available from Markets and Markets, the automotive paints market is estimated to be US$8.74 billion in 2018 and is projected to reach US$10.65 Billion by 2025. Growing vehicle production, especially passenger vehicles, stringent VOC emission regulations for paint manufacturing and changing customer preferences for paint textures are projected to drive the automotive paints industry and advancements in the paint technology.
“Growth is not in the traditional aftermarket. You cannot continue to do what you have done in the past.”
— Bob Jaworski, Auto Electric Service
Jaworski is also upfront about the tactics it takes to prosper in an increasingly competitive market.
“We have gone after more market share,” he said, meaning they’re ready to take on other jobbers in their area for a bigger piece of the pie.
That bold approach has defined the Saskatchewan company’s business model in recent years. There is a concerted effort to go where others have gone before.
“We are investing heavily to go after [competitors]. Everybody is focused on getting new business,” said Jaworski.
To do that, attracting and retaining talent is essential. The aftermarket is facing challenges and opportunities in this area.
“Over the past year, we have been able to develop our team with some great new hires in inventory and customer service positions. But for every good hire, we have had we have had approximately four bad hires,” said Zakari Krieger, director of business operations with Barton Auto Parts, in Hamilton, Ont.
“People can pick and choose their career path in today’s economy especially in entry-level to mid-level operations and customer service positions. Thus, it is so important to continue to build and improve upon recruitment and retention techniques,” he adds.
For Barton Auto Parts, that has meant taking the high-level view while being firmly rooted in recruiting new employees.
“We have transitioned our business to a strategic human resource management model,” said Krieger. “External forces within the economy have created a shortage within the labour market and every day we need to continue to improve our recruitment and retention systems.”
“But for every good hire, we have had we have had approximately four bad hires.”
— Zakari Krieger, Barton Auto Parts
At a practical level, that has involved continually updating the company’s recurring platforms through indeed.com, its position profiles, its pre-screening and interview process, and its onboarding and training process for new hires.
“While we continue to face labour shortages within our company, these human resource methods will allow us to be able to recruit top-level talent within the positions we are hiring for,” Krieger said.
Hiring has been relatively flat at Auto Electric for the last few years, and as a result, finding new people has not been a major challenge. One of the strategies the company has used: hiring immigrants, particularly from the Philippines.
“They are often better educated and/or more experienced,” Jaworski said. “You are getting entry-level people who are not entry level.”
Online challenges and threats
One of the key factors that impacts hiring – and sales – is the online opportunities for customers. Retailing giants are increasing their presence online and that is eating into the share dominated by the traditional aftermarket. It shows no signs of slowing down.
“Moving forward, the Amazons will be a threat,” Jaworski predicted.
Krieger agreed. “The Internet will just continue to make things more accessible to shoppers,” he said.
B2B and focused customer service models will continue to thrive in specific segments. However, Krieger noted, “the jobber model will change with the continued development of online competition.”
That competition continues to infiltrate new markets and offer up new options for customers. Last summer, for example, AmazonBasics hit the market with its own line of engine oil. It’s available exclusively from the world’s largest retailer website at an often more-than-competitive price.
If the initial reaction is to scoff at an Amazon-branded oil, that would be misplaced. Online reviews suggest many are all for it.
“It actually made my car quieter in the cold morning start ups,” one reviewer wrote before saying how much he liked it better than his usual brand name version.
“This is a convenient alternative to other oils I have tried, and is performing well so far. Looking forward to continued use,” another reviewer said.
In 2018, eBay also announced its latest auto feature, Shop by Diagram, which lets shoppers use interactive schematics to determine what parts are necessary, and then quickly make the exact items they need available for purchase. According to the company, Shop by Diagram makes it easy to find any auto part – even if a shopper doesn’t know the part’s name or part number — by making their car’s schematic diagrams interactive. The e-tailer also unveiled an enhanced My Garage that allows buyers to shop a personalized “virtual garage” of parts and accessories tailored specifically to their vehicle.
But that’s not necessarily a negative. Such high-tech education can be an advantage for brick and mortar shops
“Customers are getting information online and they are coming in better prepared,” Jaworski said. “They order when they want.”
What the online experience can’t provide customers, he noted, is a personal relationship.
“Our focus has been on increasing our service levels. We are spending more time directly with customers,” he said.
“I would like to see suppliers begin to focus on introducing new technologies and continuing to improve product quality and supply chain methods.”
— Zakari Krieger, Barton Auto Parts
Because customers – especially younger buyers – can turn to the Internet for the information they need, suppliers will need to change their approach. Circling markets and providing sales information is no longer necessary.
“I would like to see suppliers begin to focus on introducing new technologies and continuing to improve product quality and supply chain methods,” Krieger said. “This will, in turn, help our customers, which will improve brand loyalty.”
The dynamics of the supplier network continues to change, he added. “Suppliers should focus all the attention on research and development, engineering, lean manufacturing and distribution.”
What is not getting leaner as the aftermarket evolves: stores and their warehouses.
“Larger jobbers are going to get bigger and smaller companies may go away,” said Jaworski. “There will be fewer players but they will dominate the market.”
Auto Electric opened two new warehouses in 2018. “Inventory levels are skyrocketing,” he added.
The size issue will impact the relationships companies have with each other.
“Like in any industry, consolidation through mergers and acquisitions will continue and top-tier companies will be able to support sustainable growth by having the infrastructure to keep up with changing business dynamics,” Krieger said.
“Larger jobbers are going to get bigger and smaller companies may go away.”
— Bob Jaworski, Auto Electric Service
He anticipates a market slowdown in the near future. Numerous factors, including the federal government’s tighter interest policies, the possibility of a short recession and ongoing trade negotiations will have a ripple effect while consumer vehicle trends in the automotive aftermarket will continue to see flat results to slow growth.
But there are positive signs ahead.
“The aftermarket will also continue to benefit from equipment sales as new model vehicles require updated technologies such as alignment machines to be able to service newer vehicles and avoid having to use the dealerships as a crutch,” Krieger said.
Ultimately, he stressed, success will be defined by action.
“Companies need to position themselves strategically for the future and those who do should look forward to the opportunities and challenges ahead.”