How would you like to have customers that want to spend money on their cars?
In the world of independent general automotive service and repair, one has two choices for success: Play the current game better than everyone else, or embrace a new world order.The emergence of specialty and high-performance parts and accessories, fueled by increasing consumer demand, is enabling shops to consider a whole new range of services that can not only re-energize bottom lines, but rejuvenate entrepreneurial enthusiasm.
Routine vehicle maintenance was once the bread-and-butter that earned an honest living. But in the today's current environment of squeezed margins and profits, cutthroat competition and dealership encroachments, there is a paradigm shift happening in shops across the nation. Increasingly, shops are including specialty and accessories work as a focus of, or in some cases, the entirety of their businesses.
WHY BOTHER?
Whether restoring classic cars or tuning late-model vehicles, there are a lot of reasons any shop today might want to consider entering the specialty parts and accessories business segment."These days, with Baby Boomers retiring, many of them want to have a car like one when they were young," says Don Seyfer Sr., who along with son Donny, owns Seyfer Automotive Inc. in Wheat Ridge, CO. "They have lots of disposable income, the desire to have these cars is strong and they will pay good money to get them restored or rebuilt.
"As a result, specialty parts is an extremely important and valuable area of our business," continues Seyfer. "More than just as a percentage of sales, specialty parts have impacted us dollar-wise with a growing and very profitable segment, improved our exposure and opportunities and helped us to capture market share.""When you do things right, tuning is very lucrative," says Shawn Sexton, owner of Street Sports, a full-time tuning shop in Lexington, KY. "I can't imagine where my business would be today if I hadn't embraced specialty parts years ago. Fifteen years in the specialty parts and tuning industry, as well as my understanding of electronics, have made me the go-to guy, for individual car owners and a number of new car dealerships."
KNOWLEDGE IS POWER
For shop owners who have seized the opportunity that the specialty parts and accessories work offers, there are a number of challenges that need to be faced. Three of the most critical are:
1. Having enough knowledge to be competent and hold a competitive, differentiated edge.
2. Determining and qualifying genuine customers from "wannabes."
3. Handling the threat of vehicle warranties being voided by automakers when unauthorized aftermarket upgrades or modifications are installed.
"I'm a grey-haired, old geezer," states Jack Schuler, owner of Avenger Superchargers. "Everything today is computer- or electronics-driven. The more information that one can get in those areas, the better off they will be."His counterman, Tom Lucas, agrees that knowledge is their company's edge to success: "Specialty parts is all we do. Our clientele is 90 percent enthusiasts and 10 percent dealer-referred custom work. That we can do what's needed drives our success."
"Knowledge is the critical part of restoration," shares Donny Seyfer Jr. He says that even with his firm's years of experience in restoration of vehicles, his extensive library of references and a network of suppliers and peers, he still relies of what he calls "affinity clubs." Groups, such as the Ranchero or Lincoln Zephyr clubs, include members that know virtually everything about their cars. "They've helped me with things no one else knew," says Donny.Paul Miller Autoplex's Ron Edwards, a service advisor for Paul Miller Mazda, also feels knowledge is critical to maintaining a honed, competitive edge in the specialty parts and accessories business.
"It's like anything else," he states. "Whether you're on the [original equipment manufacturer (OEM)] side or in the aftermarket, you can't have too much good information – be it technical tips, training, quality parts or service information."KNOW YOUR STUFF
"The number of computers in cars is increasing, and they're integrated," Sexton notes. Making a change to one system can cause a reaction in another system(s), that if not understood upfront, can be the difference between cementing or negatively impacting any customer relationship.
"For example, if you don't upgrade today's new vehicles that have adaptive electronic control units properly," Sexton says, "the computer will fight back like human antibodies, and could ultimately detune the vehicle and undermine any performance upgrades an owner wanted."
"It's a bad choice, not bad luck, when someone takes their car to the cheapest guy instead of the right guy," he adds. For him, installing a remote entry upgrade used to be a quick and easy install, but today, he needs to spend time researching the vehicle first. That extra time raises the install cost. He says he'd rather get the job done right the first time, even if it means an impatient customer balks and goes elsewhere. "Not every consumer will qualify to be my customer."
The Seyfers echoed the insight that not everyone can be your client. Qualifying who's serious and committed is a key to taking on business that won't blow up in your face.
Donny explains that setting realistic expectations with customers is essential. So, too, is attention to the financials, such as preparing a solid estimate for every project, knowing what to do, how much money and time will be involved, setting up escrow accounts and more.
If you don't have a good feel for things at the beginning, chances are the fit with that prospective customer is precarious. "If you don't think you are going to get along, send them down the road," Donny adds.
Another concern is an automaker attempting to void a warranty when modifications are made to a vehicle. Sexton says this is a line in the sand that no shop should back down from.
"Some dealerships and even some customers may blame your upgrade for any failure and then attempt to void a warranty," he says. But when faced with a dealership trying to void a warranty, he uses the federal 1975 Magnuson Moss Act. "The Act puts onus on the dealership to prove beyond any doubt that the specialty part caused the failure," he points out.
IT'S A BRAVE NEW WORLD
The specialty parts and accessories industry has seen revenues that are growing at a rate faster than general repair and service work. So is profitability, provided one has the knowledge, planning and marketing in place.
According to the Specialty Equipment Market Association (SEMA), there were $35 billion in sales in this segment for 2005, an increase of 9.68 percent from 2004. The results for 2006 and beyond are expected to continue growing.
SEMA Research and Information Specialist Ty Michael, in a recent report titled "2006 Trends and Forecasts Quarterly Update" notes, "New consumers entering the market, new vehicle models from the OEMs and new products developed at the manufacturer level each contribute to the ever-growing specialty equipment industry."
Specialty parts and accessories have been around for decades. From the beaches of Daytona to highway drag strips in California, hot rods and muscle cars of yesteryear continue to attract enthusiasts, whose interest has also led to the development of street rods, tuned cars and even high-performance diesel trucks.
The specialty parts segment has an infrastructure that is similar to the traditional automotive service and repair segment – industry associations, warehouse distributors (WDs), jobbers and shops. Sometimes suppliers are dedicated to specialty parts and accessories only, sometimes they service both industry segments.
While most have heard of SEMA, there is another organization working behind the scenes to nurture the growth of the specialty parts and accessories segment. The Performance Wholesalers Association (PWA), formed in 1971, is an organization of more than 400 members, including 265 specialty automotive parts manufacturers and 63 WDs. The organization is committed to assisting the specialty automotive warehouse distributors in their efforts to expand, maintain and promote the profitable distribution of their products through the supply channel. Only the WDs have voting rights within the organization.
Four to six weeks prior to Industry Week in Las Vegas, the PWA holds its annual Industry Conference. At the conference, suppliers book their own meetings and WDs arrange private one-on-one appointments with them to make deals regarding products, promotions and planning.
"In 2006, at the 35th Industry Conference, [more than] 2,600 private meetings occurred," notes PWA Executive Director John Towle. "While this conference doesn't have the glitz and glamour of the SEMA show, it's where the nuts and bolts of getting business done happens."
WDs can be traditional large-scale bricks and mortar operations like Keystone Automotive or they can be more regional and smaller in nature, such as Speed Warehouse or Racer's Equipment Warehouse. More recently, similar to the trend of the traditional parts market taking on an Internet-based presence, some WDs, including CatalogRack.com, have established themselves as an Internet-based WD, representing a wide range of specialty parts and accessories manufacturers and their brands.
In addition, some WDs in this segment provide a wider range of products; some are narrowly focused niche players. Don Seyfer cites Jack Rosen Mark II Enterprises (a specialist in older model Lincolns) and Mastermind Inc. (a specialist in '57 and '58 Cadillac Eldorados) as two niche suppliers he relies on.
Sexton has developed solid relationships with a number of key suppliers that have enabled him to become an authorized dealer for several of them, including Greddy Performance Products and Cosworth Inc. His association with Cosworth recently allowed him to install a racing engine into a 2006 Ford Focus. He also uses CatalogRack.com as a supplier.
The key, all our contacts say, is dealing with suppliers who know their business and understand what you need. No different than the traditional service and repair business, it's still about getting the right part at the right price at the right time.
TRENDS WORTH COLLABORATING ON?
Throughout all our interviews, one emerging trend stands out as having a huge potential for the aftermarket specialty parts and accessories shop: automaker/aftermarket collaboration.
Toyota's Scion line and the Honda Fit are two examples of vehicles introduced with an awareness that buyers want to dress vehicles to reflect their personal lifestyles or to make a statement. These automakers have exposed a market that others are now entering. For example, the Ford Lightning and Ford Cobra are vehicles designed to be tuned and upgraded by the buyer.
From a dealership's viewpoint, "specialty parts play a very strong role in the OEM side of the business," says Edwards. "Whether its something we can do from the dealer side, such as Roush Performance parts, or working with an independent aftermarket specialist, specialty parts help us take OEM vehicles to the next level for our customers." He emphasizes that working with expert aftermarket specialists helps, rather than hurts, business.
Sexton currently collaborates with a Virginia-based Ford dealer. The dealer currently drives vehicles 450 miles round-trip to Sexton's shop for upgrade work costing $20,000 and more.
"This dealer intends to sell Ford Lightnings and Cobras. To do so, Ford requires at least one technician to be Specialty Vehicle Training (SVT) certified. That 10-day course at Ford costs $15,000, and he's arranged for me to attend it on his behalf so I can do all his work for him," says Sexton. He adds that the dealer told him, "Why should I fight the aftermarket, when I can get into bed with it for mutual benefit?"
Perhaps these collaborations can breed a new sense of partnership within the industry. Traditional repair shops can seize an opportunity to smooth out workflow, improve revenues and impact bottom line profits.
Installing specialty, performance and appearance upgrades can empower shops to choose the vehicles, brands, parts and customers to work with – often on newer cars than currently enter their shop bays. In addition, rather than treating each other as adversaries, automakers and aftermarket shops can cooperate for mutual benefit in an area of growing and profitable consumer demand.It might even be fun. Go figure.
