Over the Counter – June 2002: Huge Untapped Aftermarket There for the Taking, says AutoZone President

When AutoZone talks, the automotive aftermarket listens. And what Steve Odland, president of the U.S. parts chain, said had them buzzing at the Global Automotive Aftermarket Symposium.

There is some $60 billion U.S. of unperformed maintenance in the U.S.–an estimate from industry research–which can be unlocked through marketing, says Odland. The automotive aftermarket often takes a passive approach, he says, focusing on market share rather than driving growth.

“We need to start leading the consumption. Why should people wait until their brake pads are down to nothing and their brakes are down to metal? What do we need to get them to change their brakes more frequently? Why wait till a battery wears out? I think there is an opportunity to have clean communication, to take a seasonal approach.

“We can get into cycles and start matching jobs to cycles. I think we can drive this maintenance back into the industry.” It’s going to take advertising dollars. That’s a commitment, he says. How, he asked, does he know that advertising works?

“There is no better example than AutoZone’s experience. When we first heard this $60 billion number, we were skeptical, but we went out there and put our money where our mouth was. We launched this ‘Get Into the Zone’ campaign last March (2001) and sales have gone up 5%, then 8%, 9% and 12% in the four subsequent quarters. I think that this says that this business is elastic to marketing.

“We are in this industry. We love cars. But most people aren’t in this industry. Most people would rather not think about cars. They’re busy thinking about other things.”

Odland says that a key indicator of how consumers view their cars is that some 20 to 30 million car owners in the U.S. are currently driving with their Check Engine lights on.

“You would not believe how many people have taken duct tape and put it over that light,” says Odland.

“I think we have an opportunity like never before to be spokespeople for our industry, whether with the investment community, whether it’s with the local newspaper, or the boy scouts or the girl scouts.

“We can lift the whole industry. There is a formula for success here, but if you take that $60 billion that we can drive simply by marketing and public relations, it translates into $4 billion of profit that this industry can add simply by getting up and going after it.”

Training in the Aftermarket Will Require a Multitude of Approaches

The challenge of training is critical to the continued success of the aftermarket, but how to improve participation is an elusive challenge all its own.

According to a panel at the Global Automotive Aftermarket Symposium, technical and business management training needs to be revamped and more clearly understood in order to address more properly the needs of the service provider.

“It’s being taken by the ‘best in class’ people, not by the service providers who really need it,” says Ray Datt, president of the Automotive Industries Association of Canada and a participant in a panel discussion on training at the symposium.

Datt says that this is as true of the Interactive Distance Learning program as it is for other more conventional forms of training. Technical proficiency in Canada is better than in the U.S. due to the licensing program in place, but it is far from a complete answer.

“Certainly the job is not over. We have the same challenges because our licensing process does not require re-certification. The ASE test results are higher because of the initial training, but we’re not getting them back for re-certification.”

Ken Walker of Meineke Discount Muffler shops says that it has had good success with Internet-based training, and more importantly has been able to measure positive results.

“We have 40 courses up on the Internet. About 60% of those are in sales and marketing or business systems; 40% are technical,” he says, adding that this has provided them with the opportunity to measure the results.

“We see an 8-10% sales increase as soon as they take the course,” he says. In a recent promotion, the chain saw an overall increase in sales of some 14%, but those stores that took the Internet training program saw an average increase of 22%.

“There is absolutely a dollar-for-dollar return. The more dollars we spend on training, the more that shop’s sales go up.”

How to deliver training continues to be a difficult issue, though. “What is the best time to hold training?” asked Larry Pavey of Dana Corporation. “Some say it should be done during the work day, some in the evening. Some are willing to do it on weekends, some evenings. The reality is that there is no one-size-fits-all solution. I wish that everyone had the initiative to go out and get it, but sometimes it has to be convenient to happen.”

“It all makes sense until 5:30 on Tuesday when one more tow truck comes in or a water pump–why do we always use water pumps?–starts to leak just before a car is supposed to be ready,” says Mitch Schneider, a service provider, technician and noted journalist in the trade.

Don’t Blame Canada for U.S. Trade Deficit, says Globalization Guru

Don’t blame Canada, noted economist and globalization proponent Dr. Jeffrey Rosensweig told a largely American audience at the symposium.

If the U.S. has a deficit, it’s the fault of a policy that has kept the U.S. dollar strong, he told more than 400 executives. While a strong dollar is good for the ego, it’s bad for the trade deficit, he said.

“The U.S. dollar is too strong and the (strong dollar) policy of the Clinton administration and the Bush administration has been very bad for the U.S. economy.

“A dollar worth almost $1.60 Canadian makes it very difficult for us to compete with the Canadian auto and lumber industries.” And losing the Olympic hockey gold hurt too, he adds.

Rosensweig strove to explain how the U.S. trade deficit has dramatically grown over the years and that sometimes this has been a positive move in the short run, but that it is an unhealthy situation over the long term.

“The U.S. trade deficit was relatively small in 1990. Then it went to $1.5 billion (U.S.) a month (in the latter part of the decade). I relate that to the wealth effect and the tech boom. As stocks went up, people felt they were wealthier. If you feel really wealthy, or at least wealthier, you might take a trip to Europe, you might drink French champagne instead of New York champagne, or you might buy a car made overseas.

“We were having a technology boom in this country, so our companies were buying switching equipment from Canada, displays from Japan, etc. We were buying capital goods to continue to build up our industry. Some of that was good, but it did mean we had a trade deficit.”

Lately, after the uneven impact of the recession, which he tracked back to prior to the oft-blamed September 11, 2001 attacks, the economy has turned around, which has meant the deficit has increased.

“At least we’re buying again. Or at least our stock market has settled down again. I think the trade deficit will be even bigger, because imports are higher, and I think that this is very good news because in the short term I want to see Americans having the confidence to be buying.”

Yet, he says, the growth in profits in a global economy may require a devaluation of the U.S. dollar. “If the dollar falls it makes it more expensive for us to bring our families to Rome, but it makes production here more affordable to foreign buyers. If the dollar falls it makes foreign currency profits rise (for American-based companies). It would really help stocks improve. I want the dollar to fall.”