As an industry, we are well aware that car dealerships are sometimes seen as an evil enemy empire all too good at taking business away from the aftermarket. But before you write them off forever, there is something you should know: they want to do business with you. Here’s why:
A 28-year-old male walks into a Ford dealership with the sole intent to purchase a new 2005 Mustang. After choosing his favorite color and style, and before all the paperwork is complete, the sales manager offers the buyer a range of accessories options that include a chin spoiler, performance exhaust and a rim package, to restyle the car with a “personal touch.”
So far, this may not sound like anything out of the ordinary — dealers have been offering factory-installed add-ons for years. But these accessories aren’t factory installed and they aren’t OE. A new trend has dealerships offering aftermarket customization packages and products at the point of sale. And they are wrapping the costs right into the financing.
The day may be coming when new car buyers can add virtually any aesthetic accessory or performance enhancement to their vehicle before leaving the dealership. SEMA market data show that the vehicle accessorization industry reaps $29 billion in retail sales every single year.
So, there is no argument that consumers are willing to spend money to make their cars unique. And many industry executives we spoke with believe that the car dealers have the first and best opportunity to tap into this vehicle personalization market.
Some aftermarket parts distributors may see this as a threat — one more way for the dealer to secure loyalty from car owners — and others may see it as an open door. No matter the vantage point, dealers are going to trek forward because they have discovered a powerful opportunity to make more money.
“I think dealers in general are doing more [vehicle customization] because they see it as a profit center,” says Louie Richards, finance and sales manager with Troy, Mich.-based Dean Sellers Ford. His dealership offers special products and packages for just about any vehicle they sell — Mustangs, F150s, Focuses.
He says most people are looking for aesthetic enhancements and not performance upgrades, but that a good portion of their new car purchasers are buying special items at the point of sale. The most popular accessories include bedliners, tonneau covers, remote starters, satellite radio, brush guards and step bars.
Though the dealership also presents a full range of factory options at the point of sale, Richards confirms that most products come from aftermarket distributors in the area. Once the dealership knows what parts and accessories are available from local WDs, they determine the types of special packages to showcase and sell.
Steve Carpenter of Gaudin Ford in Nevada says they actually have a custom division where consumers can have parts and accessories added to their vehicle. He claims that about 90 percent of the vehicles they sell at the dealership have some sort of customization that isn’t factory installed.
Frost & Sullivan Industry Manager Jasmine Sachdeva says the vehicle personalization trend is really taking off, especially in the light truck market as many move toward the performance niche. SEMA’s data show that the domestic truck market accounts for 65 percent of the accessory market, import trucks another 10 percent.
“I think that there is a huge trend in vehicle customization at the dealership level because [consumers] are finding that if they can do it at the point of sale, they can include it in the financing,” Sachdeva says.
Consumers prefer one-stop shopping when it makes sense and are all for convenience. Selling products as add-ons at the point of sale allows buyers to roll any additional costs into the financing while letting them leave the lot with a brand-new personalized car.
Though some dealers we spoke to actually perform the add-on installations in their bays, Sachdeva believes others are outsourcing the work to local jobbers with service bays because they can perform the installations cheaper and faster than a technician at the dealership.
Richards confirms, “We can either outsource it or we have installers here.” He says that most of the customization they do in-house is aesthetic. Outsourcing typically occurs when performance enhancements are requested. Either way, it’s seamless to the buyer.
Manufacturers’ delight
Based on our interviews with industry participants, there is little proof that dealers are going directly to aftermarket manufacturers for these accessories packages, but that’s not to say manufacturers aren’t pitching their products to dealers.
Dan Smith, president of Capstone Financial, an investment banking firm that caters to the aftermarket, suggests that it is becoming easier for manufacturers to sell to dealers directly, though Frost & Sullivan’s Sachdeva says they aren’t seeing a trend forming.
When referring to this method of sales, Smith says, “It’s been the exception rather than the rule, but we are seeing much more of that.” He believes that with the consolidation of automotive dealerships, it’s become easier to sell to one chain vs. several small independent dealers. “We are seeing more people like Texas DAR set up their route system particularly now that there has been a growing” demand at the dealership level.
Texas DAR, a manufacturer of rear spoilers and a distributor of woodgrain dash kits, grills and custom steering wheels, sells direct to auto dealerships in several cities and utilizes licensed route owners in other areas. Don Desrocher, president & CEO, says that the “most common [method] is either wholesale, traditional use of catalogs, selling through jobbers and direct to auto dealers,” pointing out that there are some shops that buy direct from the Web in very small quantities.
Desrocher emphasizes that the traditional distributors are their “bread and butter” and that the company wouldn’t jeopardize their standing with them. “They are the core of our entire wholesale channel,” he says. “We meet their needs and I think that’s worked well for both of us.” But he is tapping into the dealer market when opportunities arise so long as it doesn’t conflict with their traditional business.
Jay Smith of AMP Research, a company that makes a retractable, application-specific running board and sells through traditional channels, is also marketing directly to dealers in southern California, Nevada and Arizona. He confirms that dealers can buy direct from them but that they do ship and sell through normal channels as well.
Starcraft Corp. is yet another company that sells direct to dealers. A leading supplier to the OEM market, they also sell aftermarket parts and accessories to wholesale and retail customers, with ample choices for Corvettes and Hummers.
Jim Hurst, director of operations for the company’s accessories division, notes, “We are getting more and more calls from dealers. There is a wide variety of stuff they are asking for.” If Hurst doesn’t have what they need, he’ll do whatever he can to find it.
“We are looking to grow in the vehicle market,” he says, adding that there is huge potential for this kind of customization.
Most manufacturers, however, are sticking to their traditional distribution channels, letting their WD or jobber customer foster relationships with new car dealers. Sachdeva says that recent Frost & Sullivan research supports this. She also makes it known that with dealers being a new target audience for the aftermarket supply chain, manufacturers should expect to see an increase in sales on certain products.
Sachdeva warns the industry, though, that this trend may cause brand recognition to fall by the wayside. “We found that if we asked someone, ‘what is your preferred brand?’ regarding an aftermarket component on their vehicle, a huge percent say it’s their truck’s original equipment brand.” As consumers customize their cars at the dealership, they, at this point, seem unaware of the brands being used and are actually assuming that the add-ons are OE.
Jack be nimble
One of the most intriguing dealer-aimed programs is that offered by CPI Marketing Services, a full-service marketing communications agency that specializes in the design and implementation of business-to-business and business-to-consumer programs and campaigns.
They are the brains behind a company known as Jack Gear, which offers a vehicle customization system to aftermarket manufacturers and WDs as a platform for selling accessories to dealers. “We have two sides to our company,” says David Swan, president of CPI and one of the executives leading Jack Gear. “We’ve had as many as 3,000 OE dealers that just sell OE accessories products. But per dealer requests, we’ve started working with aftermarket companies. We’ve created a whole system which is dedicated to selling aftermarket product.”
He asserts that dealers are elated with the system, reporting increased profitability as a result. “What we have is a software program that allows a dealer to pick and choose the accessories he wants to promote on different point-of-sale materials,” explains Swan. “In the past, OEMs would put out generic accessories catalogs with MSRP information and an asterisk. The asterisk states that this is the dealer’s estimated cost, that prices may vary and don’t include installation.”
The Jack Gear system gives dealers access to inventory from area distributors. Enrolled dealers may join the Jack Gear Buying Club, which offers pricing discounts. The company’s quoting tool provides dealers with price changes as well as recommended installation costs.
“Dealers can change the parts/service prices on their end, choosing their own mark-up,” says Swan, but Jack Gear does price checks and analyzes average costs of products and installations in specific regions so they can advise their dealer customers on market retail prices and more.
For warehouse distributors tapping into the new system, results seem to be plentiful. “One WD says they tracked their sales and that they are averaging 342 percent higher accessory sales through this dealer on a monthly basis,” reports Swan.
The merchandising system from Jack Gear includes sales consultant guides, consumer brochures, pocket guides, window stickers and a personalization station. A special kiosk showcases up to 18 vehicles and 105 products, and also features acrylic pages that house slip sheets with accessory photos, specs and price data. It boasts a “generate a quote” system, which provides consumers with out-the-door pricing based on manufacturer or distributor costs.
The dealers’ mark-up is figured in automatically. “We are creating a whole new accessories standard,” says Swan, explaining that dealers just need to know the vehicle and style when using their system. “The accessories that fit that vehicle show up.”
As companies like Jack Gear make headway, one would only expect the OEMs to follow suit. Smith of Capstone says they are likely to start going after this portion of their business more aggressively too. “They are really going to ramp up the accessories business because it is so profitable,” Smith says.
For now, though, the opportunity is vast and wide for the aftermarket. Frost & Sullivan’s Sachdeva suggests tapping into this trend is a win-win for distributors, jobbers and manufacturers. “They don’t have to hound the vehicle owner, they can capture someone at ‘birth’ so to speak, right when they buy a vehicle.” For a trend that is truly in its infancy, catching consumers at birth seems ideal for the aftermarket.
