What has me so fired up recently is a report I read in another industry magazine written by a UPS executive, who was reporting on a study they did on consumer online purchases and the automotive industry. Of course, this is a good thing for a carrier, as the greater the online purchases, the more delivery business for his company. And while I have no troubles supporting his company, I’d much rather see those deliveries coming from manufacturers and WDs and going to brick and mortar businesses like yours, and then on to the consumer.
There was a good deal of info in this short article, but the bottom line was exactly what I knew it would be. The biggest driver of online purchase is price. The report also stated that the majority of consumers would rather purchase online than from a brick and mortar business. Again, this was probably based on price, or perceived price savings. I hope we haven’t gotten to a point where we don’t want to interact with a fellow human. The UPS study also showed that online comparison shopping increased to 95 percent in 2015, up 12 percent over the previous year.
SEMA publishes a report every year that reinforces these buying trends. According to its 2014 report, online purchasing was up about 9 percent (33 percent of purchases were done online at that time). The UPS report has online automotive parts purchases near 25 percent. SEMA represents the performance market and the UPS report looked at the entire automotive industry.
The bad news is one-in-three or four automotive parts purchases is made online, and this trend is not reversing. The good news is sales are up substantially. In 2013, SEMA reported sales were some $31 billion and were up over $36 billion for 2014.
All these numbers may not mean much until you do some comparing. The national retail average is 5.5 percent of sales done online versus the automotive industry’s 33 percent! Since we have no means to extract automotive engine parts sales from the total auto parts sales numbers, we can’t measure what is directly happening to our specific part of the industry. But from what I’ve seen and what I’m hearing, the ratio of “walk-in” engine parts is increasing and we have no reason to believe it would be any less than the automotive industry numbers.
And while sales are increasing, with consumers hanging on to their vehicles longer and with our economy stabilizing, the largest growth areas were in wheels, tires and suspension, which has very little impact on most of us. So what does this mean for engine and engine parts sales?
In May 2008, Engine Builder ran my first article on Profitable Performance. I’d estimate that some 50 percent of my submissions since then have been on this subject: sales strategies to help you combat “walk-in” parts. This is important to me since I sell engine parts and plan to continue to sell engine parts as long as there is demand.
Many years ago, I recognized that there would be a battle over where and how parts would be sold, and it would be in my best interest to have financially healthy customers. I looked around and found that in all other industries, the builder was in charge of the bill of materials – and they profited from the sales of those materials/parts. Why should our industry be any different? Why should you the builder be responsible for your customer’s engine build, but not prosper from the entire sale?
I worked with a construction company/developer to build my new home some years ago. When I saw what it cost us for materials, I tried to do what your customers often do to you. I suggested that maybe I could save myself some money and supply my own doors, hardware and other things readily available at the “big-box-stores.” My builder suggested that I save that for when I was ready to build my own home, since that was not acceptable with his company. Needless to say, I paid full pop for my construction.
I strongly believe that if everyone took the attitude of my builder, you’d all have much healthier businesses and more financial security. Instead, we continue to talk about trends, where they’re going and what more we can do about it.
Times have changed, I believe for the worse, since my first article. Back then, customers were more like I was with the builder, fishing around for a deal, asking what sizes were needed so they could shop for parts, and the builder could adjust, promote or intimidate the consumer and hopefully secure more parts sales.
Today, I hear that the Internet shopper has already done his or her homework and often has parts when he shows up at your place of business. Now what? In my experience, most customers who give you the full business give you more control over the job and in turn, you move faster to completion.
I do hope you’re prepared when customers bring you parts. Are your principles offended enough that you will tell the customer to take his work somewhere else? Do you have a second price schedule that will help you offset your losses? Can you convince your customer that you sell parts and that this is a part of the job and they need to return their parts unless that mail order store can also bore their block and turn their crank?
I recently made an observation that a large machine shop attached to an auto parts store never really had walk-in parts problems. Well of course not. It says, “We sell auto parts” all over their signage. But what about your business? With a consumer base that is not as familiar with our industry and frequently turns to their electronic devices to learn about everything, how would they know you sell parts as well? The sign outside says “Automotive Machine Shop.”
Before you call BS, think about it. If you’re really not a motorhead, not talking to your friends about their machine shop, just getting into your first project, how do you know the machine shop sells parts?
The thousands of websites available in the palm of my hand say they sell engine parts. Perhaps those who advertise “Auto Parts and Machine Shop” actually do have a better message if your goal is to supply both. It’s something to think about if you’re ordering new business cards, work orders or doing any new signage or advertising.
I know many of you don’t advertise parts sales and don’t care whether you get the parts sale or not. To you I ask, “Can labor alone pay the bills?” I just don’t see how, or how you can do well. When I started in auto parts back in 1974, our shop made about half its living on parts sales. I know it’s nowhere near that today, and I’d think you’d fight tooth and nail to stop the shrinkage in your paycheck.
If you’re struggling with parts sales, you need a strategy and you need to spend your parts shopping time wisely. Whether you tie parts sales to labor by raising your prices, so you can discount them with parts sales, or you increase your list of labor performed so that you are getting paid for everything you do, you’ll need to look for one or more good sales strategies to capture those parts sales. But to be really profitable today, there’s more.
One excuse why some are turning their backs on parts sales, besides the fact that it had already bypassed them, is the fact that they can put too much time into selling and acquiring parts versus the profit dollar return. This is where a good relationship with your supplier and your own professionalism come into play.
By working with your vendors, understanding which is strongest in which segment of the market or just by finding a sales rep you can best work with, you’ll start down a road where your parts purchasing won’t cost you as much time. Several vendors, WDs and manufacturers have tools that will allow you to do your ordering online. This can be a huge time saver, and saving time allows you more time to bill for your labor.
But there is more information. You must get correct and complete info from your customer to get the correct parts. And today, the list of questions is even greater. To use many of the online programs I just mentioned, you’ll need to enter the right data to get to the right parts.
Of course, you do need to get year, make, model, engine size and eighth digit of the VIN for most late-model parts look up, and as much info as possible for older applications. Start asking the right questions. Educate yourself about what else you might need to know for what engine family. Save yourself time and money and get the info and make your call once.
I understand that the deck is stacked against you and that it’s never going to be as profitable as it used to be but parts sales can still be an important profit center for your business. But the time is NOW that we decide to take back our businesses and control of our jobs.
Look around. What other industry allows the customer to supply the materials for a build? Why should ours be any different? I hope you’re like me, “Mad as hell, and not taking it any longer.” ν