Who is Who in the Zoo? - Aftermarket
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Who is Who in the Zoo?

By Ron Slee

Article Date: 01-01-2011
Copyright(C) 2011 Associated Equipment Distributors. All Rights Reserved.

As we observe aftermarket trends in the auto industry, seize opportunities to define and position yourself in a cut-throat parts and service marketplace.

Over the past three years we have been trying to adjust our businesses and have them reflect the new reality of the business levels. It has been an all-consuming activity. Reducing inventories, adjusting staff levels, readapting market coverage plans and payment programs - there has been a lot of change. That is all internal to the business, though. Have you noticed what is going on out there with our marketplace?

I want to draw your attention to our cousins in the automotive world. They have had, if anything, a more drastic adjustment to make to the new reality: Manufacturer and parts supplier bankruptcies, government investments, downsizing, dealership consolidation and mergers, dealer cancellations and bankruptcies, phew - a tough case. But we can learn from this if we want to pay attention. The same is true in housing, and in many other industries. There are hints of new developments and opportunities for us.

There has been for some time now an aspect of the market called DIY - do it yourself. We have that DIY with many of our customers. They prefer to do their own maintenance and repairs if they can. In many cases, this is because they are very careful with their money, and in some cases it is because they believe, with cause, that our prices are too high. Many of them fit into another demographic in the market that should be very interesting for us, too. The under-age-50 demographic has less money and more time today than used to be the case. They used to have enough money but not enough time.

The other thing that is going on is in the parts business. Today in the genuine replacement parts business in the automotive industry, 20 percent of the parts are being sold to customers while 80 percent of the parts are being sold to auto repair professionals. Remember, when we sell a part across the counter we have lost the labor to a competitor of some kind.

What is more interesting is a new category in the automotive sector. The DIFM - do it for me. This is a group of customers who are moving away from their traditional suppliers and finding companies and individuals who will do it for them. From the late '80s, focus groups in our industry were pointing out that customers did not want to have to employ their own mechanics. They were left with no choice because they didn't feel that the equipment dealers were responsive enough nor at the right price point for them. But the thought did not go away; they just are finding alternatives to the OEM dealer and to their own mechanics by contracting with professionals to do the work for them. This is not a good prospect for us. Not at all.

The market climate is not changing in any material sense this year, nor will it for several more years. The equipment market will not come back to any sense of normality for a longer time, perhaps until housing stabilizes, which will be at least five more years. It has been nearly 30 months already that we have lived in this new reality, and I hope that many of you have changed and adapted the way you do business to reflect this truth. This fact is clear: It is parts and service that will lead you to customer service and profitability. Without tuning and adapting parts and service, the future will not be very bright.

There is still a lot of turmoil in the marketplace. This is a time for improving productivity, and that cannot be accomplished without radical changes in the use of technology. This isn't just about adjusting the number of employees; rather, it is making each of them more productive.

So, here we go into another "interesting year." Reminds me of the Chinese curse, "May you live in interesting times!" We are seeing the competitive landscape change in labor supply and also in parts supply. Competition is fighting for every customer and every order. We have to adapt our market coverage or we will perish.

We also have to retest our thinking on labor rates and parts pricing. Both the market coverage and our price points have delivered poor market capture rates. Can we sustain our business with market capture rates of labor that are in the teens or low 20s at best? I don't believe we can. I don't think you do either. The question is, what are we going to do about it? Your customers, employees and suppliers are waiting for your answer.

Ron Slee (ron@rjslee.com) is the founder of R.J. Slee & Associates, Rancho Mirage, Calif., a consulting firm that specializes in dealership operations - celebrating more than 30 years in business in the United States. Ron also operates Quest, Learning Centers, a company that provides training services specializing in Product Support, and Insight (M&R) Institute, a company that operates and facilitates "Dealer Twenty" Groups.
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Article Categories:  Product Support