Sometimes, even when you think you’re maximizing your growth, you are really getting a smaller share of a rapidly increasing pie.
In the “new tune-up” market, which is really neither new nor about tune-ups, the complexity of the market segment due to the proliferation of parts and technology continues to make it troublesome for many jobbers.
Driven by government policy and legislation, few changes have had as much impact on the pattern of automotive maintenance as the instituting of mandatory emissions testing in North America. Though the areas affected could be said to be a patchwork at best, it is no less significant in terms of overall demand, nationally and where the programs exist.
In Canada, this has been restricted to geographic areas in British Columbia and Ontario. B.C.’s AirCare program, which has been operating for a decade now–a fact that is startling to me personally–affects approximately 1 million vehicles in the Lower Mainland area surrounding Vancouver. In Ontario, the Drive Clean program has been rolled out in phases and now encompasses most of the major metropolitan areas and about 5 million light vehicles. With a total light vehicle fleet numbering about 15 million, this means that some 40% of all passenger cars and light trucks are subject to emissions testing. With Quebec’s new premier Jean Charest having made a commitment in writing to institute a program, this number will rise to more than 50%. Considering this, is there any wonder it has dominated the thinking of so many of your suppliers and your customers?
The fact that it comes at a time when the technology involved in controlling combustion and pollution is changing only complicates matters further.
“Caps and rotors are disappearing. MAP sensors, EGR valves, knock sensors and all those O2 sensors are definitely at the top of the line. It is driven by anything to do with pollution,” says Justin Sequiera, engine management product manager, Blue Streak-Hygrade Motor Products. “Some sensors will fail and set a code right off the bat. With some components, they will contribute to pollution, but they don’t really fail and won’t set a code. They will show up in the emissions test, though.” Changing components even when a car seems to be running okay is one of the biggest changes to come to the aftermarket.
“Before emissions testing, when a catalytic converter was bad, some garages would punch a hole in it,” recalls Craig Read, regional manager, eastern Canada, Honeywell CPG. “What has changed is that they have to repair them to get them through the e-test.”
The days of the points, condenser, wires, distributor, etc. have been replaced with a shopping basket of sensors and other items that require much of the jobber.
“Emissions have become a bigger item than ignition was. Jobbers have probably doubled their inventory, but their sales as a result are probably four times.”
“From a stocking perspective, most of it has changed regionally,” asserts Robert Tribe, national sales manager, NGK Spark Plugs of Canada Ltd. “For example, in the Prairies you have a heavy population of pickup trucks, so you won’t need a lot of foreign car parts, whereas you would in some metropolitan areas.”
Tribe says that getting a firm handle on inventory needs is complicated further by the fact that many jobbers are the authors of their own sales pattern. Take, for example, the situation of a business that has been traditionally very strong in the domestic makes, but has shied away from the foreign car park. Over time, technicians and service providers learn to call elsewhere for these parts, leading the jobber in question to believe that the foreign car park does not represent a market with potential. The fact is, says Tribe, that this is not a rare occurrence.
The perception continues to exist among many independent garages that the traditional aftermarket is really keyed exclusively to the domestic makes, says Tribe. “So, when it comes to import parts, a lot of the installers aren’t calling because they don’t think the jobber has them.”
The result is that the import specialist or the dealer gets the call, which just fuels the perception of the jobber that there isn’t potential there. Addressing this situation requires a multifaceted approach.
“The jobber needs to carry a certain amount of depth, but also breadth [of inventory],” says Tom Thomson, global products manager, vehicle electronics for Delphi Products & Service Solutions. Thomson says that as items such as electronic EGR valves, three and four wire O2 sensors, and other OBD II generation components make their way into the aftermarket demand stream, the jobber needs to work more closely with his suppliers to ensure he has the best coverage for his inventory investment.
“He has to make the decision about what he needs to carry. He needs to look at the applications he is carrying and be very conscious of the years [of vehicles they cover]. Oxygen sensors, sort of like fuel pumps, aren’t going to last in a vehicle four or five years and then be replaced like a chassis component. They’re going to require earlier replacement.”
Cameron Young, national sales and marketing manager, Robert Bosch Inc., says that jobbers would be wise to work closely with a WD that is committed to the market, even where just the O2 sensor is concerned.
“It is quite a sophisticated item, and OE-specific technologies are important. The ceramics are different from one application to another. When you start messing around with those, there is a huge potential for problems down the road.”
Young says that an on-hand inventory in the region of 20 to 30 O2 sensors–depending on the size of a business–would be appropriate. “Then tie into the WD with a broader assortment,” says Young. “What we’re seeing activity on could historically be covered by 10 to 15 applications. We just don’t see that with the newer applications.”
One area where there has been some significant activity, in terms of both its effect on the profile of an inventory and its cost, has been the influx of platinum technologies in the plug market. While spark plug replacement rates have plummeted–thanks to the 160,000-km tune-up interval–the cost of the individual hole fillers has risen, driving up inventory costs.
“The scary thing is that you end up seeing this huge fear in the marketplace in inventorying platinum products,” says Brent Berman, ignition products manager, Champion Spark Plug, Federal-Mogul Corporation. “We see it at the WD level where they just want to carry case quantities.” Berman says that case costs per SKU in the region of $1,000 are at the root of the reluctance, but the real villain is an overabundance of duplication.
“Definitely now more than ever, the jobber ought to decide which brands of plugs he wants to carry, going with one, two, or three manufacturers for inventory control purposes. If he really analyzes his spark plug inventory, he’ll find a lot of SKU duplication.
“I remember a long time ago when the majority were resistor plugs; the guys didn’t care how many 60 cent plugs they had on their shelf. As soon as you start going to a platinum inventory, people would be smart to do a little more inventory analysis.”
He says that using spark plug wire inventory as a template could be a quick method of honing an inventory, though there are naturally other, more detailed ways, such as using local vehicle population data and then mixing it with demand histories. The individual costs to a jobber to get this data himself would be overwhelming, but there are ways around that.
“I don’t think they can justify [the cost], but that doesn’t mean they couldn’t ask their representative to run the top 10 in their trading area and detail inventories of the car park,” advises Berman.
“So how do you know what to keep?” asks Tribe with a rhetorical slant. “We have taken it upon ourselves to recognize the problem. We use a postal code system and merge it with our catalogues to develop the right inventory mix. We have seen that mix change dramatically everywhere we go. The days of the manufacturer’s rep walking into th e jobber with a popularity list are gone.” He says that some WDs have even taken it upon themselves to develop their own data. “Their inventory has gone up, but their sales have gone up too, because they have the right mix. That’s the win or lose in this game. A lot of the time the price doesn’t come into the equation because the other guy doesn’t have the part.”
He says that one of the surprising factors they discovered is the popularity of the foreign car park, even in traditionally domestic areas. The Western Canada countryside may be pickup country, but in the cities it isn’t necessarily so. “A lot of the traditional aftermarket guys are geared to the domestic nameplates with the parts on their shelf. They are missing out on a very large segment of the market.” With the proportion of import cars growing in the vehicle fleet, a number that Tribe puts at 50%, it is not a market easily ignored. “A lot of jobbers aren’t keeping the import car parts. Four or five years from now, the guy is going to be wondering where his business went.”
Getting a handle on this market segment involves more than just putting the right products on the shelf. You need to prepare your people to sell the products, in terms of both understanding what parts do and what parts you have, so that they will see opportunities for added sales. You also need to prepare your customers by working hard to inform them on a continual basis of what you can offer–what we call marketing.
The right inventory is key, however. You may find that you have too little, too much, or the right amount of the wrong kind. Getting that situation addressed is the only way you are going to be successful at growing your share of your market, instead of just riding the wave.
Suggested Inventories of Emissions Parts
While no one can definitively offer you the exact inventory you need to cover your market sight unseen, there are a variety of suggested inventory numbers that can help you decide at a glance if you’re at least in the game. At the high end, it would provide somewhere in the region of 80% coverage.
Oxygen Sensors: $1,650
Fuel Injectors: $1,780
Oxygen Sensors: $2,000-$3,000 (approx. 20 SKUs)
Fuel Injectors: $3,800
Oxygen Sensors: $3,500-$4,300 (approx. 25 SKUs)
Fuel Injectors: $4,700
A key way to avoid lost sales is to provide customers with an on-site selection: an assortment of the top 10 most popular SKUs in O2 sensors, perhaps adding an EGR tester. In parts, such a selection can be delivered for about $500.
A Plug for Platinum
Platinum plugs debuted some years ago, but are really only now hitting the aftermarket in substantial numbers. Now, with a tremendous proportion of the fleet coming equipped with platinum plug technology–some estimates put four to six of the top 10 vehicle applications in this category–jobbers and their customers have to start thinking a little differently.
“There is definitely the perception in the market for a lot of jobbers that they don’t need the premium plugs because they don’t have it in their market,” says NGK’s Robert Tribe. Without the product on the shelf, they look for alternate sales. “What happens is they talk themselves out of a sale. When the local garage calls, they either make the down-sell or drive the customer to the dealer.”
Often there is the perception that, because there is an equivalent non-platinum listed in the catalogue, that the copper core plug is okay. The reality is that this is probably there to satisfy the DIYer who buys at a mass merchandiser. You should make sure your customers know better.
“In using the 80/20 rule, I will always say that those technicians giving a jobber the business are savvy enough to understand the marketplace,” says Federal-Mogul’s Brent Berman. “They at least know that the last thing I want to do is put cheap plugs and wires on a Cadillac.”
Though the price of the platinum plug is higher per unit than the copper core technology, SKU consolidation is addressing the investment required.
“The material allows us to cover a number of gap settings with one plug,” says Cameron Young from Robert Bosch. “While the copper core program might be hundreds of SKUs, a [platinum] line might be 10 to 12.” While not all platinum lines within the Bosch offering share this degree of consolidation, it does show that the inventory numbers are pointing in the right direction. “It is heavy consolidation. If you look at the dollars tied up, it would likely not be as heavy as a standard copper-core category.”
One of the issues remains, however, that platinum, and now iridium, technologies are often referred to as “premium,” which is often interpreted as top quality but optional. Copper core plugs are not designed for the environment in a modern engine, which is why platinum was introduced. They will work, but they won’t last like platinum.
“The other issue is the process at the pumps being what it is. The gap doesn’t change so your fuel economy doesn’t degrade,” says Honeywell’s Craig Read. “Plus, some cars are really hard to put plugs in. A technician may save you $20 on plugs, but he’s in twice as often. That’s where we hurt ourselves. If you took your car to the GM dealer, no one would ask you if you wanted regular plugs.”
Which begs the question, why on earth does the aftermarket?