Although dealing with challenges is always going to be a component of doing business, a bright-as-chrome outlook for the aftermarket’s ongoing economic prospects was expressed among a trio of panelists participating in a Jan. 26 teleforum presented by the Auto Care Association’s Manufacturers’ Rep Council.
“There’s a lot to be very positive about; there’s some great optimism out there,” said Bruce Tartaglione, senior strategist for business development at Airtex/ASC, an Illinois-based global aftermarket and OEM supplier of fuel pump systems.
“Things are looking good for 2018 right now,” concurred Dana’s Dan Griffin, senior director of global aftermarket, sales engineering and finance. Headquartered in Ohio, the firm has a worldwide network of distribution centers while employing more than 30,000 people in 33 countries on six continents.
Corey Bartlett, president and CEO at Automotive Parts Headquarters (APH), pointed out that thus far this year has delivered “a really, really cold start for us.” And that’s a good thing. “We’re delighted that we had a real winter.”
APH is a third-generation family owned distributorship based in Saint Cloud, Minn., with 124 corporate locations and 36 independent stores throughout Minnesota, Wisconsin, North Dakota, South Dakota, Michigan and Montana – places where cold weather means hot sales
“Winter chemicals are off-the-shelf,” Tartaglione reported, referencing lower-than-normal temperatures throughout much of the nation. The trend allows WDs to move seasonal merchandise. “It’s given the ability for our distributor partners to shake some inventory from their shelves.”
“It’s about executing,” noted Richard Schwartz, the managing partner at Schwartz Advisors who moderated the teleforum. The consultancy specializes in aftermarket mergers and acquisitions, and Schwartz pointed out that a shortage of qualified technicians, and the necessary training programs, remains an issue.
Across the spectrum – including parts stores, repair shops, WDs and company headquarters locations – “we wrestle with how to attract new talent,” said Bartlett. The unemployment rate in some of the markets served by APH is under 2 percent, and “in our backyard that’s been a big challenge so far” as the industry strives to attract new staffers.
“The schools that feed the shops” with properly trained entry-level technicians are almost non-existent, according to Tartaglione.
At Dana, added Griffin, “Training is an important part of what we do for the installer.”
Vacuum of buyers
“These guys have gray hair,” said Bartlett as he discussed how consolidations are moving forward as business owners reach retirement age and seek younger people with a desire to purchase their operations.
“As the baby boomers get older there isn’t much succession planning in there,” Griffin observed.
“We’ll be continuing to scratch,” Bartlett said, citing “a vacuum of potential buyers” for repair shops. “We do our best to play matchmaker for someone interested in getting into the business. We’re focused on helping our independent installers transition their business.”
Bartlett explained that “there’s going to be more shop-level consolidation, and we need to deal with it. More of those bays will be controlled by multi-store operators.”
“They’re going to have to expand their businesses” in able to afford the more complex and expensive equipment that has become a necessity, according to Griffin. “You’re going to see consolidation; there’s only so much you can expand and grow.”
“You’ll see elimination of some of the single-shop owners,” said Tartaglione. Younger people with advanced skills, combined with some investment purchasing power, will be needed to service the existing driver assistance systems and arriving electric vehicles. “Now they’re becoming multi-store owners. There’s going to be a big push on expanding the bays to be able to compete.”
Brand awareness
Bringing up increased new-car sales, Schwartz said that “the traditional aftermarket sweet spot is shifting toward older vehicles.”
“In 2018 there will be a record number of leased vehicles hitting the marketplace,” said Tartaglione, and independent repairers are likely to see these now-off-lease cars and trucks coming into their shops.
He also said older and newer vehicles alike now comprise a typical American family’s fleet in the driveway. However, “We’re seeing that less miles are being put on the older vehicles and more miles put on the newer vehicles.”
An influx of lower-cost parts imported from China and other countries is creating a “tremendous amount of price pressure on the market today,” Tartaglione said. “There’s an opportunity to upsell” if proper branding is highlighted.
Bartlett said APH endeavors to “help the customer understand what’s in the box. Premium quality is very important to us. We have to win those customers over one-by-one, category-by-category.”
“You can change perception at different points in the supply chain,” said Griffin. A key goal is “finding ways to bring more value to the channel partner.”
“I’m a very big believer in brands,” said Tartaglione. “That brand is driven by every step of the distribution channel.” When you have the right part available at the right price, and stand behind your lines regarding and returns or product performance concerns, “It adds to the brand awareness out there.”
Back to the core basics
Making sure that access to correct product and installation information is available is especially important for ensuring that repairs are done right the first time.
“We need to get back to the core basics of our business,” Tartaglione said, and maintaining data availability “requires high-technology training” for the people charged with operating the systems.
Dana has accomplished the task of “getting more of that data at your fingertips,” according to Griffin.
He went on to forecast that internal combustion vehicles will still be commonplace over the next 10 to 15 years despite the growing presence of hybrids and electric vehicles.
“The greater impact is further down the road; I expect that trend to be gradual in the next five years,” said Griffin.
The complexity of repair parts will certainly become more complex, according to Griffin. Tartaglione added that the industry needs to heed the newer technologies to remain competitive going forward, saying, “Long-term I think it’s a little scary – if you’re not manufacturing those parts you’re out of business.”
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