by tonypisciotta

Aftermarket Parts | Big Profits for Auto Manufacturers and Dealers

by | Sep 24, 2021 | Uncategorized

As we move slowly forward this year through the pandemic, the automotive industry is facing challenges with retail sales of new vehicles due to chip shortages and resulting inventory shortages. While this will eventually pass, how will automotive manufacturers and dealerships ride this storm to increase revenue and profit? Aftermarket parts sales can make the difference. 

The Aftermarket Parts Industry 

The aftermarket parts industry is big business for automotive manufacturers and dealerships across North America. According to a recent automotive aftermarket report coauthored by Hedges & Company and BGL, the U.S. light duty auto parts aftermarket market size is projected at $290 billion in 2021 while the entire U.S. automotive aftermarket including medium-duty and heavy-duty vehicle parts is projected at $390 billion. Canada represents approximately 39 billion in aftermarket parts sales. These sales numbers are projected to increase over the next three years by approximately 4% each year. With an industry this size, the doors are wide open for auto manufacturers and their dealerships to increase aftermarket parts sales. 

The Marketplace 

The U.S. automotive parts marketplace represents 535,000 individual businesses consisting of independent manufacturers, repair shops, distributors, marketers and retailers. These businesses serve all 280+ million light, medium, and heavy-duty vehicles registered in the U.S. today. There are about 4,600 auto parts and accessories and tire store retailers in Canada and approximately 23,000 auto repair/service repair businesses. As you can see by the diversity of aftermarket parts dealers, there is a great deal of business spread across this entire industry. No one business type is dominating market share, and competition overall is high. Automotive manufacturers and dealerships have the opportunity to grow their aftermarket business through dealerships owning their own “backyard” so to speak. In other words, focus on a five-to-eight-mile radius around your business, targeting the independent repair facilities as well as commercial/fleet accounts that are looking for true quality original equipment (OE) parts for their customers and their vehicles.

Yet, most dealerships and manufacturers have seen their aftermarket business stagnate with most of the business residing with Independent Repair Facilities. 

Independent Repair Facilities (IRFs) 

The average age of cars and light trucks in the U.S. has risen to a record-high 12.1 years old, according to IHS Markit. This means that more than ever people are keeping their vehicles longer, thus requiring more frequent repairs for those vehicles. Independent Repair Facilities, or IRFs, as they are called in the aftermarket parts industry, have captured the repair market. IRFs perform 75% of aftermarket auto repair, while a mere 25% of the business lives with dealerships.

This is today’s reality so targeting IRFs to make sure they continue to use recommended OE parts is crucial. Other non-original equipment aftermarket parts companies have gained momentum in the marketplace over the past 20 years. But, if offered a competitive price, IRF’s would prefer to purchase from the local OE dealer to provide their customers with original parts. 

Commercial and Fleet Business 

According to a May 24, 2021 article by V12, “A Look at Trends and Statistics in the Automotive Aftermarket Industry,” the average age of the U.S. vehicle fleet has increased 17% in the last ten years. Commercial and fleet companies are holding on to their vehicles longer to maximize profitability. In doing so, the need for replacement parts is high and critical for their success. Each vehicle that is down for service and parts costs companies thousands or more in lost business. Commercial accounts and fleet companies are looking for original equipment parts at a competitive price. This creates a great opportunity for automotive manufacturers to work with their dealerships to provide OE parts for these vehicles. 

How to Grow Your Aftermarket Parts Sales 

1. Maintain Proper Inventory. Having the right inventory to meet the demand in your market is critical. What is the right inventory? Figuring that out starts with assessing market demand within a five- to eight-mile radius of your location. Once you know what makes and models are owned in your area, you can identify potential hot sellers and build an inventory of the right parts to ensure that they are available at the right time. 

2. Offer Expedited Delivery. Delivering parts in a quick, reasonable time is imperative. Time is money for the auto repair industry. Do you know if you are satisfying your customers’ delivery needs? Some dealerships feel that getting a part by end of day is sufficient. While that may be acceptable in certain markets, in others you’ll need parts delivered faster so cars are not sitting for extended periods in the shop. A comprehensive market assessment is key to determine what delivery time you need for your area to ensure that you are meeting market expectations. To build a sound aftermarket parts business, you’ll need to identify someone to conduct that market assessment—someone other than your current parts delivery truck driver, which is a distinct role in itself that is vital to business success. 

3. Assure Competitive Prices. Consumers expect quality parts at a competitive price. How do you know if you are competitive? Once again, the answer is to survey your area and create a profile of your typical potential customer. Your parts delivery driver may have some insight, but they can’t evaluate all the independent shops and fleet operations businesses in your area. 

4. Keep Feet on the Street. Waiting for your phones to ring will not grow your aftermarket parts business. Your marketing and sales strategy must also extend beyond shaking hands and dropping off a flyer. You need to get out in the market repeatedly and build strong relationships with your customers. And that is not done by the phone.  

What this boils down to is the need for a go-to-market action plan. The ideal plan would map out a territory, targeting a specified number of contacts per day at independent repair shops and fleet operations. Since most dealerships have neither the expertise nor the staff to initiate or manage this kind of go-to-market plan in a way that ensures success, they rely on experienced sales acceleration companies such as MarketSource to make it happen. In this way, MarketSource becomes your aftermarket parts business development management partner.  

Building a successful aftermarket parts business requires a commitment from within. It includes closely evaluating and gaining an understanding of your local market and your competitors, defining your ideal customer, implementing the right kind of focused training, and specialized industry expertise to assure the business will grow. 

Interested in learning more about how to accelerate your aftermarket parts sales and overall bottom line?  LET’S TALK >> 

 

Topic: Uncategorized

ABOUT THE AUTHOR

Tony Pisciotta has more than 25 years of experience in the automotive industry handling marketing, advertising, sales, recruiting, hiring and operations. In his role as Director, Commercial Client Services at MarketSource, he has worked directly with major auto manufacturers and dealerships to help them increase revenues and build high-performing and highly satisfied sales teams.

At MarketSource, an Allegis Group company, we believe better sales begin with better relationships. Our proven alternative to traditional outsourced sales is led by a proprietary process that helps businesses thrive by fostering deeper connections between people and brands.