Predicting the Future of E-commerce in the Aftermarket
By Jenna Bates
Trying to predict the future of business is sometimes about as accurate as looking into a crystal ball. A reflection of the truth may be there, but the image can be easily distorted by timing, funding and unpredictable customer whim. Despite the uncertainty of these predictions, there are those who make it their business to know business and where it’s headed without the aid of crystal balls, Tarot cards or tea leaves. It’s not surprising that most of them say that if you want your business to succeed, you’ll have to learn about e-commerce, because the future is there.
Even though dot.coms are going belly up at every turn, e-commerce is still the wave of the future for every business, including the automotive aftermarket. According to Lang Marketing, a Wyckoff, NJ-based company that provides research and analysis of the vehicle products industry, e-commerce will significantly change the automotive aftermarket in the years to come.
"The automotive aftermarket, an industry exceeding $100 billion in 2000 product volume, is in the early stages of a long-running e-commerce revolution in which many aftermarket structures, business practices and players will be changed or replaced," states James Lang, president of Lang Marketing Resources.
With this in mind, Lang Marketing developed several predictions for the future of e-commerce as it relates specifically to the automotive aftermarket. Included in these predictions are the following:
- E-commerce will increase aftermarket volume from a business-to-consumer (B2C) standpoint;
- E-commerce will change the aftermarket product mix, including accessories and other discretionary aftermarket purchases;
- E-commerce will generate a brand renaissance, reversing the trend of the 1990s toward the brick-and-mortar aftermarket;
- Aftermarket business-to-business (B2B) will grow much larger than aftermarket B2C e-commerce;
- E-commerce will tear down many buy-sell barriers in the aftermarket because of the direct nature of B2C and B2B e-commerce; and
- Brick-and-mortar aftermarket players will strike back with innovative e-commerce initiatives.
How accurate are these predictions? Only time will tell. What we know for sure is that approximately 75 percent of Automotive Rebuilder readers have Internet access, according to a 2000 marketing survey conducted by Babcox. That’s a 63 percent increase from 1999’s numbers. Of these readers who have Internet access, 72 percent use the Internet to conduct automotive research, 67 percent use it for e-mail and 56 percent use it to make personal purchases. According to the Babcox survey, 43 percent of a rebuilder’s time on the Internet is spent in work-related transactions. When compared with other segments of the automotive aftermarket (body shops, jobbers, etc.), rebuilders spend the most time working on the Internet. What are they doing there? Forty-four percent of respondents say they are making purchases for work, and 10 percent are ordering from their main supplier. Has all this enticed rebuilders to create their own Web sites? Not really. While only 24 percent of the readers responding to our survey say their businesses have Web sites, an additional 19 percent say they would like to. This doesn’t mean that rebuilders aren’t a presence on the Internet. With the advent of exchanges and other e-marketplaces, more custom engine rebuilders, production engine remanufacturers, suppliers and distributors are making themselves visible on the World Wide Web.
"The online, high-tech industry is still strong," says APRA President Bill Gager, who pioneered BuyReman.com as a way of empowering remanufacturing professionals in the new economy. "Those who are not on the information superhighway will be left behind."
Gager’s certainly not the only person in the industry to believe that. "There’s a bright and rosey picture for e-commerce," says Joe Polich, executive vice president of the Production Engine Remanufact-urers Association (PERA). "We have a number of members who are certainly very involved in e-commerce, and as an association, we have made a commitment to provide that type of service through www.livelistings.com."
Livelistings is a new exchange site where members can post product listings and then negotiate the sale or purchase of the product through their secure site.
"There is interest in both the supplier side and remanufacturer side for that type of service," Polich explains.
Livelistings.com is only one of many exchanges out there; they proliferate in many industries, including the automotive aftermarket. However, according to some online sources, very few businesses appear to actually be conducting real-live business on them despite claims that these B2B marketplaces tout the benefits of making products and services easily available in a consolidated market.
According to information provided by aftermarketnews.com and Tech Web, 80 percent of the companies that have joined such exchanges have not yet used them to buy or sell anything.
Few of the current transaction services are bringing value to the buyer and seller. Why?
According to Scott Parker, vice president of business development for Livelistings.com, a lot of the marketplaces out there charge an upfront fee — as much as $400 a month — for a company to do business on an exchange. Therefore, the exchange has no incentive to create results for the buyer or the seller, since the proprietors of the site will receive an income anyway.
Livelistings.com only makes money once an item is sold by charging a 5 percent transaction fee to the seller.
One long-time tool that’s seeing a change these days are catalogs. No, the days of the phone book sized catalogs on the shop counter aren’t gone, but producers of electronic catalogs, as well as those who utilize them, are finding that their benefits can be far reaching.
"It was so cumbersome to put out our catalogs," says Tom Skok, vice president systems, Elgin Industries, Elgin, IL. "We decided more than 10 years ago to convert it to an electronic format for our own use."
It was about a five-month process to develop the software that enabled Elgin to transfer its print catalog to an electronic version, but it was a process that was well worth it, according to Skok. In fact, Elgin found the e-catalog so useful, the company decided to distribute a version to its customers approximately seven years ago. Back then, the catalog was provided on diskettes; these days, customers can receive CDs with the complete catalog just by calling their Elgin representative.
What are the advantages to an e-catalog that a print catalog doesn’t have? It’s a cost savings to the company producing it. Print catalogs are very expensive to produce. Not so in an electronic version. Once the software has been created, it’s only a matter of placing a cursor and typing in the information.
In addition, e-catalogs can feature color photos of the products, photos that in a print version can take up valuable (and expensive) space and add dozens more pages to an already cumbersome book. Of course, the expense is going to be more for a company who relies on e-catalog providers like CCI/Triad, Profit Pro, DSTMacDonald and others to translate their existing catalog information into an electronic format. It can be a long process and an expensive one, but one that may be worth it in the end. By writing its own software, Elgin managed to circumvent this cost and reap the rewards.
In addition to the cost savings realized by the business producing the catalogs, those utilizing the catalogs can find cost savings in spending less time thumbing through page after page of part numbers and engine specs.
An electronic catalog can feature thousands of interchanges alone, correlated with all product groups. Instead of spending the time leafing through a print catalog, an e-catalog user can have a bevy of information at his fingertips with just the click of a mouse, thereby saving valuable man hours.
In the future, many suppliers will likely automate their catalogs to allow customers to download updates via the Web. Currently, there are companies implementing conversions to follow AAIA standards, which should help to make all catalogs more user friendly. AAIA Electronic Cataloging Standards allow suppliers to maintain parts and application data in a universal format.
Suppliers aren’t the only ones automating their catalogs. Industry organizations will more than likely be the flagships of e-commerce for rebuilders, automating their own catalogs and providing exchanges. The Engine Rebuilders Association (AERA) has already become affilliated with BuyReman.com and offers a number of user-friendly links on its Web site, www.aera.org, including a searchable database that can locate rebuilders across the entire country.
PERA has also recently announced the development of SourcePERA™ to ensure PERA’s leadership role in the electronic distribution of information for the engine remanufacturing industry. Phase I of the new project began with the development of an electronic catalog, the basis for SourcePERA™. It will combine PERA’s printed catalog and PERA’s CoreID program into a common database, expanding the listings of both products. Phase I should be completed for distribution at PERA’s annual convention in September in Whistler, British Columbia.
Electronic build sheets will be introduced during Phase II of the development of SourcePERA™. This phase will allow PERA’s supplier members to link their parts to the PERA electronic database utilizing the AAIA standard lookup tables.
"Down the road, just imagine being able to do one look up and being able to see not only all the component casting numbers, but the parts, technical specifications, OE and aftermarket bulletins, vehicle populations and even the number of registrations of vehicles with that engine in your defined geographical area," says Polich.
Further phases of SourcePERA™ will include an e-commerce environment beginning with a secure B2B program. This phase will allow PERA’s remanufacturers to interact with other remanufacturers and suppliers as well as allowing suppliers to interact with other suppliers and remanufacturers. Ultimately, PERA’s remanufacturer members will be able to actually order parts and supplies directly from PERA’s supplier members through this program. And eventually a C2B environment will be created that will expand PERA’s members’ ability to do business between themselves to doing business globally.
The lesson of the dot.coms
Of course, the news about e-commerce isn’t all good these days. Companies who didn’t jump on the dot.com bandwagon last year may have made a good choice.
"While the dot.coms, which were busy building the new economy last year, may have won a few battles, it’s the smart old-line companies that are poised to win the war," says Steve Ely, chief operating officer of NetVendor, a B2B supplier enablement provider.
Ely predicts that savvy brick and mortars are applying the lessons they’ve learned from dot.com successes and failures to develop the next generation of e-commerce.
"These companies are leveraging a combination of the best of the old and new economy to extend and strengthen sustainable business models," explains Ely.
Perhaps one of the most important lessons the dot.coms have taught us is that no one should expect overnight results. People — businesses and consumers alike — are still learning how to utilize the Internet effectively. Studies show that only 5 percent of the world’s adult population are active Internet users, so no company president should anticipate waking up a millionaire the morning after going live.
What this mean for rebuilders?
Most engine rebuilders aren’t going to concern themselves with the plight of the dot.coms; in reality, it doesn’t mean much to them in terms of doing business.
If truth be told, the current processes rebuilders have in place work pretty well for them. But, as John Peake cautions, if you’re going to stick with what’s been working for you, then you’re going to keep getting what you’ve been getting.
Peake is an industry veteran who opened up a foreign car specialty shop in the early ‘80s. He is a master automotive technician and a master heavy duty truck technician, as well as a guest faculty member at the University of Utah, where he teaches courses on e-commerce.
Peake wants rebuilders to know that the information superhighway doesn’t have to leave them in the dust. With a little innovation and a few bucks a month, even small custom engine rebuilders can make the Internet work for them.
However, Peake cautions that a lot of what the Internet has to offer is hype; some of it will work for you, and some of it won’t. But, if you’re a shop owner who’s interested in using the Internet as a business tool, then there are several ways you can do it.
"In the aftermarket, the Internet for the most part is going to enable and streamline existing processes," Peake explains. "It probably won’t revolutionize the industry just yet, but will it make some things a little easier? You bet."
According to Peake, a rebuilder can really benefit from creating a Web presence.
"Web sites have become so affordable — $30 to $50 a month — that just about anyone can have one," he says, and it’s in a shop owner’s best interest to do just that.
Does this mean that a customer is going to buy a rebuilt engine from your shop via the Internet? Probably not. What it does mean is that a shop owner can use his Web page to disseminate information he may not have time to discuss with a customer in the shop or on the phone.
"It’s a way to get your feet into the water and test the temperature and start dabbling," Peake explains. "The real power of a Web presence is that it can be all the things you’d love to share with your customers but neither you nor they have the time for. On your Web page, you can put more information about the training your technicians have or the charitable stuff you do in the community."
It’s what Peake calls a "three-dimensional view" of a business that may otherwise be unavailable to the customer.
So, now that you’ve got your Web page, how do you route your customers to it? By implementing what has always been the number one use of the Internet: e-mail.
"Creating customer relationships through e-mail is a very powerful and affordable marketing tool," explains Peake. "To be honest, a Web page alone is just going to sit there collecting cyber-dust unless you do something to send traffic to it. If you have an e-mail list and a supporting Web site, you can feature links to all of your providers plus all kinds of information about why you use the products you use and why you do what you do."
It’s called thinking outside the box in business circles, and for many, that can mean improving your bottom line.
"In the end, what you have to keep in mind is cost vs. benefit," Peake says. " Don’t expect a bunch for nothing; don’t expect a $10,000 Web site if you’re spending $30 or $50 a month. But, you can start to play now and pay attention. It doesn’t hurt to get online at the old shop."
Looking into the crystal ball
"I think eventually what we’re going to see is that the opportunity for the inventory time lag between the time something is remanufactured and something is sold is going to be a lot shorter," APRA’s Gager predicts. "If we assume that the time frame is about 90 days now, and you reduce it to 30 days, then you have really saved yourself an awful lot of money. That’s where the future is — not so much in sales because sales go on right now in another form, but if there’s a way of managing this whole chain, that’s where the future is. Everybody will benefit from this. Everybody is going to save time and money and hopefully make a little more profit."
And, as usual, profit is the magic word.
"The Internet is going to become a very important tool to expand the traditional marketplace for those who are willing to put the time and effort into thinking beyond their traditional boundaries," PERA’s Polich says. "There’s a whole world out there that you can reach so much easier through the Internet if it’s done right."
You may e-mail Jenna at email@example.com.
What Babcox and Automotive Rebuilder offer:
Readers can access all editorial copy on the www.automotiverebuilder.com Web site and search its database for past articles on specific topics. Our 2001 Engine Rebuilders Buyers Guide is also available on the site. With it, readers can access hundreds of company listings and product categories. Readers can also access all 10 of the Babcox publications from the www.babcox.com Web site, as well as using the site to access aftermarketworld, the search engine for the automotive aftermarket; the latest in industry news with www.aftermarketnews.com, the aftermarket’s first and only comprehensive up to the minute news source; tech chats; and training information. If you’re interested in having your own Web site, Babcox can develop one for you. For more information, visit www.babcox.com or www.automotiverebuilder.com.
The Automotive Management Institute (AMI) is offering its third annual All-Star Seminars, a lineup of 12 business management classes designed specifically for automotive service professionals. The seminars will be taught by AMI faculty June 7-10 at the Embassy Suites, Charlotte, NC Students attending the "Electronic Marketing and the Automotive Service Industry" seminar, led by John Peake, will learn how to develop an electronic marketing strategy that will increase customer satisfaction and retention and better the shop’s bottom line. In addition, Peake will also present "Internet Cash Flow: E-commerce and Car Shops." For more information on the seminars, contact Toni Slaton at AMI, 800-272-7467 ext. 239.