by Jon Owens, AAP, Group Publisher
In a column I wrote for the April issue of Counterman, I suggested that it may be time for all parts stores (retail chain, independent and WD-owned) and two-step WD’s to implement delivery service charges to their delivery customers in light of today’s unprecedented gas prices. The article invoked many responses, and I was informed yesterday that the topic is a hot discussion item down at the annual Alliance shareholders meeting in Nashville, Tenn. Much to my delight, many entities across the market are taking this issue seriously, however it won’t be until ALL entities are bold enough to step forward that charging for delivery service becomes a reality.
In reviewing some commentary from an independent shop owner about how he would react if he were to be charged for delivery service – whether it be positioned as a “fuel surcharge” or a straight up delivery line item on the invoice – I was amazed at how willingly (though begrudgingly) he accepts these types of charges from other service providers like his laundry/uniform supplier, bulk oil supplier and UPS or FedEx (among others). I thought to myself, “Why would he accept them from these services, but be so opposed to accepting them from his parts suppliers?” I think the answer lies somewhere between expectations and habit. But, I also feel that a little Business 101 might provide all of us – shop owners included – with the perspective needed to fairly and properly address this issue.
The reason I suggest that is because shops transfer the price of their parts (at whatever gross-ups they apply) over to their customer invoices. So, it is easy for them to accept a “phantom” delivery charge that is neatly tucked in to the price of the parts they purchase from their suppliers. They just transfer that over to the consumer. Grossing up a higher number means more money for them too, so that’s a nice added benefit. However, they don’t have the same, clean process for transferring delivery charges from UPS or their uniform supplier over to their customer, so it’s best to keep those charges exposed so they are better able to capture them and apply them in some other way to the overall cost of a repair (if they do this at all – which they should).
In very general terms, this system works for shops. So, why disrupt it and cause them additional frustration? Well, there are some very compelling reasons why. First and foremost is that these charges, when hidden in the price of the part, become very arbitrary and unidentifiable. When parts prices are negotiated on a national, regional or even local basis, these “add-in” costs can be compromised, unevenly distributed, unequally applied, or taken out entirely in order to win a contract or secure some business volume. In addition, the shop owner can never really know what the true price of a part is when these types of charges are “baked” in to the price. Thus, different parts suppliers use different formulas to place these charges in to the price of their parts, and the shop can never truly do an apples-to-apples price comparison between his multiple supplier options on a part-by-part basis. How does any shop, under this scenario, truly know what his parts cost is? If I’m a shop owner, I don’t know that I’d want to be “in the dark” on this.
Also, given the current gas price situation, how can any parts deliverer truly put the total cost of delivery into the price of a part? At some level, this becomes a ridiculous calculation. If a “hot shot” delivery valued at $25 goes out to a shop located 5 miles away, for a 10 mile roundtrip, the delivery service charge added to that price could easily be as much as 50% (if not more) if the deliverer truly wanted to recover all of the costs associated with that one delivery. So, there are obviously instances where it isn’t feasible to add delivery fees to the price of the part, and there is also a consensus among parts suppliers that they’ve put as much as they can into the price of the part to try and recover their delivery costs and have reached the “tipping point” (to quote one WD).
There are many more scenario’s to discuss, and other ramifications to identify that would all serve to justify the need to place delivery service charges as a separate line item on a parts suppliers invoice to a shop. But, my promise to a WD friend of mine was to pen another article on this subject to keep it at the forefront of industry discussions and dialogue. I have fulfilled my obligation. Now, I hope the industry will fulfill theirs and start conducting business in a more practical and profitable manner by charging for this VERY valuable service.
