What do you think about the continuing consolidation of the manufacturing segment of the aftermarket?
Consolidation is not just limited to the manufacturing segment. The distribution segment continues to see a lot of consolidation as well. Every level of the aftermarket distribution chain has been consolidating in order to gain an edge, or at the very least, stay competitive.
I feel that consolidation of the manufacturing segment, thus far, has been good for our industry. As distributors, we are able to share in the cost savings and technology sharing that result when manufacturers join together. There is always going to be competition in the industry, especially considering how fast the rest of the world is becoming involved in the U.S. aftermarket, so whatever advantage manufacturers can gain by consolidating is a good thing for our industry.
Are your customers still interested in brand, or are they leaning more toward private label products?
While some categories are becoming generally accepted by professional technicians in a private label package, other categories are not. We have seen some of the less complex products become almost "commodity" items and thus, basically forced into a private label package in order to compete, while more complex components have remained brand sensitive products. In some cases, the brand manufacturers have identified this situation and have been making efforts to price their products more competitive with private label manufacturers.
Some brand manufacturers have even moved their production out of the U.S. and been able to lower their costs, resulting in a more competitive price point. These moves will help slow down the migration to private label packaging in a lot of cases. Unfortunately, in the long run, since there most likely won't be a quality advantage to using branded products like there has been in the past, it could end up costing the branded manufacturers their quality advantage (both perceived and actual).
How do you think distribution will change in the upcoming years?
Wow, where's my crystal ball? I would think that we will most likely see a slow down of acquisitions, due to the uncertain economic picture and the credit crunch. We most certainly will continue to see more globally produced product showing up in the market, both by private labelers and brand manufacturers. "Made in USA" may become a rare term used term in our industry.
The current economy will cause some hardships for many in the aftermarket, but there is a chance for an upside. The economic environment could possibly lead to increased replacement/maintenance parts business as the sale of new cars slows down and allows the aftermarket a larger window of opportunity to service vehicles which are remaining in operation longer. With training and support from their suppliers, the independent repair shops could capitalize on this situation.
What is the number one technology setback you encounter in the aftermarket?
Our customers like their independence. Having the freedom to choose a management system they feel is right for their business is important to them. The biggest challenge we face is sharing information seamlessly across a variety of platforms and across different segments in the distribution chain. Most mainstream automotive management systems lack user friendly integration with open platforms like Windows. Since Windows is a common platform found in most businesses today, we feel more integration development with these systems is crucial.
There have been some advances in the past few years, but overall, the exchange of data between platforms is not an easy process. If all levels of the distribution chain could easily exchange information, it would be a benefit for everyone.
What effect has the economy had on your business?
It is my opinion that the fear that most people have in these unstable economic times results in their delay in doing anything that is not absolutely necessary, especially in regards to their automobiles. That thinking, along with the well documented decline in miles driven due to gas prices, has lead to short term down trends, but we anticipate the trend will eventually change as cars continue to age and repairs become a necessity.
With companies like AutoZone and O'Reilly reporting sales increases, the volume is obviously not completely going away. The key is to take care of our customers and provide them with the tools to succeed.
What do you see as the biggest challenge ahead in 2009?
I don't think anyone can predict what is going to happen with factors like fuel prices, the economy, or future consolidations, so to anticipate which challenges lie ahead is a bit of a challenge in itself. We will hope for the market to improve, but plan for it to continue to be down.
We will continue to look for ways to cut costs without lowering our service levels and we will rely on our suppliers to do the same.
The biggest challenge may to be to try to keep everyone focused on the opportunities the market still presents, rather than on the negatives that seem to dominate the news.
