Auto Service World
Feature   April 1, 2000   by Andrew Ross

COVER STORY: Maximizing Your Front Wheel Drive Performance

How to get full-throttle profitability in this maturing market.

In the early days of the front-wheel-drive market, parts were parts and repairing broken CV joints and rack and pinion units meant, well, repairing them. Now it’s a remove and replace business and, rather than a point of worry for jobbers and installers, it is the object of hard business decisions and the product of high volume.

As with many markets, as the FWD business has matured, it has become more competitive. That in itself isn’t worthy of much note, but the precipitous drop in the price of products is.

Ian Creaser, owner of Lunenburg Auto in Lunenburg, N.S., says that he’s amazed at the speed at which this evolution has occurred.

“It just seems a few years back that you had to get into joints and that evolved into the axles and shafts. I even remember selling rack and pinion seal kits; it doesn’t seem that long ago.”

Paradoxically, a drop in price for parts has accompanied the move from repair to replacement, not just a reduction in labor. Creaser says that he remembers selling single constant velocity joints for $190, and now whole shafts go for about half that.

“Now the consumer isn’t paying the parts cost and they aren’t paying the labor.” He gives a great deal of credit to suppliers for being able to reengineer the parts to perform better than the OE designs. He says that the net result of the aftermarket’s ability to efficiently remanufacture high quality steering and driveline products have turned what was once the problem child of an aftermarket raised on rear wheel drive into the industry’s strongest case for aftermarket service.

“Consumers don’t know how lucky they are to have products available to them of such quality. The remanufacturers are really doing a superior job.”

Creaser says that the price advantage that the aftermarket can offer is a real motivator for the consumer with the medium-old to old car to opt for service at the independent garage, rather than the dealer.

This general trend has led to a strong increase in business in the sector, but it has also attracted all manner of competition. In some locations, the salvage yards have even put up a good fight for the business, even offering warranties.

For Creaser, though, the competition is more a straightforward brand versus white box scenario, with short line suppliers thrown in for good measure.

“Our biggest competition is the short line guys with the top ten axles,” he says, adding that this is really only a factor with some customers. “In our market, we have different levels of customers, those who call for just price and those who call for the service and the part. Our primary objective is to sell a good quality product at a fair price. We try to keep away from the price end of things because you can’t have it all.”

He says that he tries to advise his trade customers to actively pursue the owners of late-model vehicles rather than older cars, where consumer dealings are highly price-driven.

“I tell them that their greatest earning potential is in the newer applications. We’ve been trying to educate the installer base that you build your customer base on the newer applications because they’ll be with you longer. So that’s where we work with our customers, because once you get into that downward price spiral, you’re there forever.”

As all jobbers do, he struggles with the need to be able to provide strong coverage in a market that sees a rapidly expanding number of parts. While dealing with that factor in combination with sliding pricing has its challenges, the desire to attack the price-sensitive customer base can still have its benefits.

Denis Brub, co-owner of Access d’Autos Nordiques, Inc. in downtown Quebec City, says that the market has been good for him despite his strong retail walk-in sales and the desire for lower and lower prices. Brub has found dual lining–as opposed to short lining–to be an effective strategy despite the added inventory investment. He says that the pressure continues on prices, too. Despite this, and the fact that the second line only garners about one-third the dollar margin of the national brand line, it has still been a worthwhile addition to the company’s offering.

“By offering both, we didn’t drop our first line by much, but we do sell a lot of the second line.” He says that before adding the budget line, there was a whole segment of the marketplace he wasn’t capturing. The evidence is in the cannibalization, or lack of it, which occurred after the second line was added.

“There were about 10% of the customers who moved to the second line, but we still have 90% of the customers who bought the first line and continue to buy the first line.” And, since volume increased substantially since the change about three years ago, the bottom line still improved.

Brub says that he has seen great benefits from strategies such as this as well as from working closely with suppliers. This is particularly important in terms of service levels. Seeking special consideration for building inventories on a trial basis is important if you want to reduce lost sales without mortgaging your future.

While the special arrangement may run counter to some company’s policies, promising loyalty to the line can work to everyone’s benefit. The goal for the jobber is to keep customers coming back.

Brub says that he believes customers will only call twice for a category. If you’re not able to deliver it promptly, you’ll be branded as not stocking the item. This has led him to the decision that it is better to order more often, even if it means emergency orders and stock orders that don’t meet the prepaid freight minimum.

“You’ll lose more if you lose the sale,” he says.

Doug Bexson, president and owner of Midway Distributors Ltd. in the Vancouver Island town of Sooke, B.C., says that overnight service is the rule for him and his competition, which is considerable as virtually every group is represented in the area.

“We’re not any worse off than anyone else, but we can’t run to the warehouse like on the lower mainland.”

Bexson says that he isn’t so particular about the specific brands of product available from the many sources of supply he uses, but he is particular about the quality.

“We sell brand name product and that’s what we do, but there’s private label undercutting out there. We chose not to go that route at this time. Some of it is good stuff, but some of it is not. As long as there is quality stuff in the box, it doesn’t matter to me what the brand is.”

In an interesting contrast with some other areas, he says that boot sales continue to be strong.

“There are people here who maintain their vehicles. The person who doesn’t repair the boot is going to need an axle in a couple of months. The dealers are taking care of their customers; the retail customers are the ones who only fix it when it’s broken.”

Considering the labor charge of the boot repair, there may just be a strong business case to be made, too.

Halfway across the country, though, it is the installer market which dictates the sale, even if the volume in 1,100 strong Coldwater Ont. is not tremendous.

“I find not as many people are DIYers any more,” says Cathy Beach, Coldwater Auto Parts Ltd. “It’s more complex than most of them are willing to do. We do get a lot of walk-in and they’ll still tackle some work, but as far as rack and pinion it’s more the garages that buy that now.”

For their business, it’s a category that they cope with by relying on the warehouse overnight service. This seems to work for them, considering the highly retail nature of much of their customer base: about 50% fits this profile, is motivated by price and will wait for the parts.

“We have switched to a cheaper line to be more competitive. If you don’t have a good price, you don’t get the sale.” Beach says that customers at the trade level have been happy with the “price,” and that comebacks are still in the acceptable range. She says, too, that national brand lines are still available through them for those customers who want it, though they don’t do sufficient volume to stock two lines.

While Coldwater’s experience may be uni
que in its own right, in combination with the experience of others, it effectively makes the point that the best way to maximize the performance of your front wheel drive steering, suspension and driveline sales is to closely tailor your offerings to your local market.

The best general advice, as repeated by successful jobbers across the country, is that the best way to maximize the performance of your front wheel drive business is by maximizing your service level and added value, not by minimizing your price.