Exhaust: Overcoming The Stocking Challenge

Stocking what your customers need when it comes to exhaust systems is becoming increasingly difficult as the number of vehicles in their prime maintenance years continue to grow. The fact that most vehicles are only retired when they reach an average of 320,000 kilometres means an incredibly large potential market exists for jobbers willing to fine-tune their exhaust sales channel and overcome the stocking challenges of this category.

“Given the proliferation of vehicle models, it’s virtually impossible for jobbers to have enough space to stock every exhaust component customers may need. There are just far too many SKUs, and you don’t necessarily know what parts are going to fail. The market has grown so big that it’s not possible to simply carry the top 100 numbers that are going to move for you. It just doesn’t work that way,” explains Cat Exhaust Systems president Walter Fantin.

“For an example of the parts proliferation explosion that the exhaust market has experienced of late, just take a look at a 2005 Honda Civic,” says Fantin. “You have your basic setup on that Civic. You have the DX, the CX, and the LX, and then you have the EX, which has a different muffler, and the SI model, which has a different converter system altogether. So, just for one Civic model you are probably looking at 20 different SKUs.”

“You’ll have three different mufflers, three different resonator pipes, different converters and a few different pipes, not to mention all the hardware, and that’s just one car,” says Fantin.

To get a handle on this market and make it work, jobbers need to focus on the sweet-spot years and know what models are predominant in their particular area. If, for example, you are selling a lot of brakes for 10-year-old F-150 pickup trucks, then that is going to be part of your exhaust market too.

“It’s very important to have the coverage and availability to complete every sale, particularly when you’re working with a technician who has a customer waiting for a repair. Rapid availability has become increasingly important due to the growth of the e-commerce channel, where a customer can get an overnight shipment of almost any common part. Having the right parts in stock at the right time is one of the biggest challenges facing jobbers, and it’s becoming more complex as the number of nameplates and models continues to grow. A leading manufacturer like Tenneco can help jobbers manage this complexity – and ultimately help increase their inventory turns – through advanced market intelligence solutions. The Walker INVision solution, for example, can help the jobber build the right product mix based on the unique characteristics of their market area,” explains Steve Myers, emissions control engineering director, North America Aftermarket, Tenneco.

“Flex Repair pipes have become an enormous part of the direct fit market,” adds Pat Bruder, president and co-owner (with brother Peter) of Exhaust Direct. “You can consider anything that has flex in it, that is part of the exhaust system, to be a high-wear product.”

Flex pipe is the most dominant replacement part, followed by the muffler and resonator. “We personally stick to a lot of the OE-type direct fit, so if someone says, ‘I have a front pipe for a Ford Focus,’ I will make it match. I like to use original flanges whenever possible, so 90% of my pipes come with original flanges. Our approach is to use customer feedback on anything we do in the direct fit market,” explains Bruder.

In most cases, repair shops are finding the converters in good shape but the flex pipes are failing, so a lot of companies are now offering repair pipes. “GM makes it easy with its 3.5 litre engine. Whether it’s in a Montana or another vehicle, the flange and flex pipe are the same. Chrysler has the 3.5 and 3.3, and those flanges will fit four or five different vehicles, but there are differences. For example, the Caravan has zero room at the front so you have a flex and flange, whereas the Neon has a two-metre pipe after it that goes down to the converter,” explains Bruder, adding, “I find the all the big custom exhaust guys carry a lot of stock.”

“I order quite a bit of stock,” says Scott Anderson of Hot Rod Scott’s, a specialty exhaust shop located in Etobicoke, Ontario. “If you’ve got it, you sell it. If you don’t have it, you talk about it,” he quips.

“My business is pretty much split 50/50 for domestics and imports, and exotics make up about 8% of the custom work I do. Trucks used to be quite good too, but as fuel costs go up they tend not to spend as much on them. The Dodge trucks are popular because you can actually increase the fuel economy on them by changing the muffler,” adds Anderson.

Vehicle registrations dictate market distribution. Based on the latest Polk VIO data, domestic nameplates make up approximately 60%, Asian about 34%, and European about 6% of vehicles between five and 25 years of age.

Anderson handles his shop’s stock needs himself and he deals with a wide variety of suppliers to ensure he has what his customers are looking for. His suppliers include Fincham Automotive Supplies, Exhaust Direct, Auto-Camping, Cochrane Automotive, and Parts Source, to name just a few.

“There are a lot of older cars on the road these days, and a lot of unusual stuff too, which makes it particularly hard to stock everything. As a specialty exhaust shop, my customers come in looking for brand names because they want to tell their friend what they put on their vehicle,” explains Anderson.

“FlowMaster and Magna Flow are my bestsellers. My approach is, if I get no headaches from it, I keep buying it. If it gives me headaches, I stop buying it,” says Anderson. “You need a good selection of quality stock, you need skilled installers, and you need to keep things rolling as well as you can.”

Anderson admits the late models are becoming more challenging. “With the new converters now, it’s just stupid. They’ve made them so complex when they don’t need to. Now we find a lot of the manifolds are going. We do a lot of Ford manifolds because the studs break in the head. GM and Dodge have problems too but not quite as bad.”

Volkswagen has gone to using an electric welding technique on the front pipes and they break all the time, according to Anderson. “It’s a two- to three-hour labour charge to take it apart and repair it.”

Fantin adds, “With these later models, the systems are so complicated you just can’t repair them so you have to go to a whole new pipe. Some things you just can’t fix now.

“I am a warehouse and I deal mostly with jobbers that use me as their warehouse, just because of the parts proliferation. Most complain about it – that they don’t want to be in it but they do it as a service to their customers. There are some significant jobbers that are involved in a big way, but for a lot of them, it just isn’t a big part of their business anymore.”

For the savvy jobbers that know their market in terms of stocking, the aging car park is a booming market for exhaust system sales. “I am ridiculously busy,” says Bruder. “I was up 30% for July compared to last year, and I back-order a pile of stuff that I just can’t keep up with. Some of my numbers are up 200 to 300%. A lot of it is the accessories. The economy has actually strengthened and helped things out. Pipe sales alone are up 250% just in the last three months,” he adds.

“Most jobbers would proudly and rightfully claim that they have built tremendous goodwill and customer trust through the years. The brands they carry are a significant part of that customer experience. Consequently, by selling an off-brand to customers, they could be putting their hard-earned reputation at risk. In fact, just one negative experience could eliminate years of goodwill,” says Myers.