The Parts/Sales Mix

Shop owners from coast to coast carry on their day-to-day business mostly without thinking about, or measuring, the effectiveness of their management ability.

Consider that many shop owners only break down their revenue to parts and labour. They were taught this twenty to forty years ago and, in their mind, this is all one needed to look at.

Now look at reality

Consider that up until 5 years ago, the Big Three car manufacturers, namely GM, Ford and Chrysler made up 95% of the common denominator of vehicles being serviced in a general Independent shop, consequently vehicle technical training focussed on these manufacturer models.

Today the vehicle mix has changed within Canada. Import vehicles are far more prominent as imports have passed the 50% mark in terms of vehicle nameplates that the consumer buys, overtaking the Big Three.

DesRosiers Automotive Consultants Inc. in Toronto consults to the marketplace including AIA Canada on many facets of the Canadian Automotive industry. One facet the firm measures is manufacturers vehicle output and the vehicle mix within the Canadian marketplace. They presented a report to AIA members showing the Import mix across Canada, by Province. The results sent a shiver up the industry’s spine as to what we within the aftermarket have being ignoring for too long. Import vehicles have made tremendous penetration into the Canadian marketplace, yet the average general Independent shop seemingly has not noticed, and surely hasn’t measured it within their own business.

The question here for the general Independent shop is “what is your vehicle sales mix between Domestic dealer parts and Import dealer parts?” Only measuring parts, as one catch all unit just doesn’t cut it any more. How many Imports do you service daily compared to domestic vehicles? Measuring the number of Import vehicles serviced compared to Domestic vehicles serviced each day can assist management in the measurement of the shop. Have you lost clientele because they purchased or leased an Import vehicle and are now getting it serviced back at the Import dealership because the client “perceives” you don’t know enough to service their vehicle?

Has the aftermarket industry failed in this regard to not only pay attention to measuring the Import effect in Canada but also failed to produce quality Import aftermarket parts and clearly communicate to our industry fit, form and function of said parts? Have we failed to provide effective Import training for the Independent sector of our industry? Has our sector of the industry, as individual shop owners, failed to communicate their technical ability to the shop’s clientele that they can service Import vehicles properly? Has the Independent failed to speak up to the industry to mention the critical need for more and effective Import training? The common denominator answer would be “yes”. Our sector of the industry is too “disconnected” from every level and this must start to change quickly because it is affecting the very profitability of every level.

A shop owner has to learn now how to measure his/her business effectively. As our company motto says “If you can’t measure it, you can’t manage it”. Breaking out the parts category into aftermarket parts, dealer domestic parts, and dealer import parts, is just the beginning to bring to the surface the effectiveness of management’s ability to stay on top of his/her clientele ensuring they are getting all the business. Measuring the number of Import versus Domestic vehicles being serviced within the shop has now also become a critical shop measurement. Eventually, when aftermarket parts have effectively penetrated the Import parts world, the shop will have to break out the aftermarket parts to Domestic and Import as well.

For example: If a shop is operating in Ontario and the import vehicle penetration is 37.9% for that province, then the general Independent shop must take a serious look at what is the parts sales mix of dealer domestic and dealer import parts within his/her shop? Also look at the “number” of Import versus Domestic vehicles being serviced in the shop since some aftermarket parts do fit into Import vehicles. If the shop is showing that 96% of all dealer parts purchased are dealer domestic parts (GM, Ford, Chrysler), or 92% of all vehicles being serviced are domestic (Big Three manufacturers), but 37.9% of the vehicles on the road are Import vehicles, then clearly some serious business is being missed or what I fear the most, completely lost all together. The shop owner is “too busy” and not paying attention to the actions of the customer/clientele of the shop. The dealerships win again and the aftermarket is sitting on the sidelines watching the show.

The key to this issue is that the general Independent shop must have access to such vehicle mix information. Some WD’s subscribe to the RL Polk vehicle information but the Polk contract unfortunately prohibits them from distributing the information to their Jobbers and thus their shop customer/clientele base. I understand that what is allowed is the merging of the vehicle on the road file with their parts catalogue and disseminating this information would be very useful to the average shop owner.

The general Independent must be able to measure his/her business sales mix to realize if they are keeping up with industry trends. When the Import sales mix is 37% and the shop’s import service mix is in the range of 30%, or above, then clearly management is doing a very good job in sustaining its clientele’s mix of business.

Everyone can start pointing fingers as to why this problem occurred but that does not accomplish anything. It is time for our sector to connect together for the benefit of each level. Mr. Shop owner — reformat your business measuring processes and clearly understand YOUR business. Mr Jobber — seek out industry information and take the time to properly communicate and share it with your clientele. Mr WD — help all your Jobbers to easily access critical marketplace information. Mr. Manufacturer — get on with the job of quality fit, form and function and communicate your quality clearly to the aftermarket industry.

The aftermarket industry says sales are down, or business is “soft”. The consumer has proven again, through their purchasing habits, that it is not only price in their mind (as the aftermarket forever keeps talking about), it is about quality and value for the dollar spent that they are seeking out. Import vehicles are perceived by the consumer to have a higher quality and value compared to Domestic vehicles. Perception is reality and they prove it with their chequebook. Maybe, we within the aftermarket at every level, have dropped the ball and not paid attention to the ultimate end consumer and their wishes. Who are we to over-rule the consumer?

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