From the Magazine: The changing business environment

As economic changes reshape the industry, jobbers must adapt to new challenges and opportunities to remain competitive and profitable  

As the global landscape continues to evolve, the automotive aftermarket faces a shifting economic and business environment. Recent political and economic developments, particularly in the United States, have created ripple effects that extend into the Canadian market, influencing inflation, trade uncertainty, and consumer sentiment.

For jobbers, understanding these macro and microeconomic factors is essential to navigating the current landscape.

In Canada, inflation has shown signs of slowing, with the Consumer Price Index (CPI) excluding energy recording 2.9 per cent in January and 2.8 per cent in February. However, the highest increases were in rent and shelter costs, while discretionary spending categories showed signs of weakness. This is significant for jobbers, as reduced consumer and business spending directly affects demand within the retail service environment.

Tariff-related cost increases and trade uncertainty further exacerbate these challenges, creating headwinds for jobbers who must adapt to shifting market conditions.

A look at publicly traded aftermarket corporations offers insight into industry trends. Icahn Automotive, for example, reported a 9.2 per cent year-over-year decline in Q4, citing reduced consumer spending in the retail sector. This serves as a proxy for the broader aftermarket business environment in Canada.

When service bays slow down and consumers become more price-sensitive, jobbers must carefully manage their sourcing strategies to balance meeting customer needs with maintaining profitability. The focus must be on optimizing operational efficiency, controlling costs and streamlining business operations to remain competitive.

For jobbers, strategic planning is critical. Large players in the industry are increasingly turning to mergers and acquisitions as organic growth slows.

Reflecting on past economic downturns, such as the 2008 financial crisis, the aftermarket historically benefited from the inverse relationship between new vehicle sales and tightening credit conditions. However, in recent quarters, this trend has not played out as expected. As the industry continues to navigate uncertain economic conditions, the long-term impact remains to be seen.

For jobbers, strategic planning is critical. Large players in the industry are increasingly turning to mergers and acquisitions as organic growth slows. The recently announced acquisition of Benson Auto Group by UAP Inc., expected to close in May, exemplifies this trend.

The past few years have been a “golden age” of profitability in the aftermarket, and those considering succession or exit strategies should take advantage of historically strong financial results before entering a more turbulent period. With interest rates and bond yields declining, M&A activity is resurging, making it an opportune time for jobbers to assess their options.

Whether planning for an exit or focusing on long-term sustainability, jobbers must take a proactive approach to financial planning. Working with accounting and consulting firms to analyze financial health, assess working capital needs and understand business valuation is essential.

While not every jobber is looking for an exit strategy at this moment, my advice is to better understand your business and draw connections from the macro environment. Jobbers need to optimize operations and look through all aspects of their business to be able to weather the slowdown, remain profitable and maintain an entrepreneurial competitive advantage when pricing pressures get tough.

Zakari Krieger is the Fix Network, Canadian vice president of Prime CarCare, responsible for the Canadian retail business, encompassing the Speedy Auto Service and Novus Auto Glass business lines

This article originally appeared in the March issue of Jobber News