by Brian Cruickshank Editor, Counterman
LAS VEGAS — While in Las Vegas, aftermarketNews.com sat down with Dayco’s Dennis Welvaert to discuss the current state of aftermarket brands and the increasing competition from OE parts and service.
Welvaert is a 36-year veteran in the automotive industry. His career started with Firestone Tire and Rubber Co. where he held various technical positions in Research and Development before moving into the OEM Sales division. He joined the Dayco OEM Sales group in 1981, becoming vice president of OEM Sales in 1989. In 1991, he was promoted to the aftermarket and led Dayco’s Aftermarket sales and marketing organizations as vice president of sales. In 1998, Welvaert became vice president and general manager of North American Aftermarket Operations. In 2003, Welvaert was promoted to his current position as president of the North American Aftermarket Division
He is a member of the University of the Aftermarket Foundation Board of Trustees, a board member of the Automotive Aftermarket Suppliers Association and a member of the Society of Automotive Engineers. In addition, Welvaert has been recognized as an authoritative industry spokesman and innovative presenter at many key industry functions such as the Global Automotive Aftermarket Symposium and the Aftermarket E-Forum.
Welvaert has a bachelor of science degree in chemistry from Wayne State University and a master of business administration degree from Eastern Michigan University.
Both anecdotal and empirical evidence show that more and more technicians prefer the OE brand on certain products. What is the state of brands in the aftermarket and have they lost their prominence in the minds of technicians?
I think brands are still very, very important in the aftermarket. We put a lot of investment into our brands. We make sure we have the best-quality product at an affordable price with great availability.
There’s a “new” brand in the market that is fighting for brand awareness and brand share — that’s the “OE brand.” It’s not “Ford” or “Toyota” or “Mopar” — it’s “OE.” It’s become unto itself a brand.
There are, of course, some advantages that the OE has, and some disadvantages. I think the traditional aftermarket brands are still considered by jobbers, WDs and technicians as quality brands that they need to have available in the independent aftermarket.
Of course, the OE brand is nothing new. Why, then, do technicians prefer the OE brand in a growing number of cases today? What has changed?
There’s no doubt that the OE brand is growing in market share. There are a lot of reasons why that’s happening.
First, dealerships and the OEs are putting a lot more emphasis on (the parts and service) sector of the market than they ever have before. I’ve spoken at various symposiums about the ‘2, 4, 8’ phenomenon: that dealerships make 2 percent on new cars, 4 percent on used cars and 8 percent on parts and service. Especially in today’s tough car sales climate, dealerships are trying to get as much business coming their way as they can, and so they have put much more focus on the OES portion of their business. They’ve put much greater emphasis on it through better pricing, better availability and hot-shot delivery.
Secondly, parts proliferation, which has been discussed at length for the last 20 years, is really beginning to affect the market. The auto companies make rapid technology changeovers, and that has brought a lot more complexity to the parts situation. There’s such a wide range of vehicles out there — German, American, Swedish, Japanese, Korean and of course, the rapidly emerging Chinese auto market — that parts proliferation is a huge issue.
On the manufacturer side of things, we’re trying to find a way to have enough parts for everything. To do that, we have to do some part commonization and part consolidation. Resellers and jobbers are trying to service all these brands and all these model years. There’s just not enough physical space to store all these parts. In comparison, a dealership only has Toyota or Honda parts to stock.
Because of this commonization issue, especially among electronic parts, the aftermarket part ends up not always looking exactly like the OE part. That’s a concern among technicians.
Another issue that feeds this is the diagnostic needs that cars have. Right to Repair legislation continues to be a big deal for the independent aftermarket. Sometimes it ends up being easier for the dealership to diagnose a problem and use the OE part.
Considering all this, what advantages does the aftermarket have?
There are, of course, advantages for the independent aftermarket. The jobber or the installer doesn’t have to go to different sources for every vehicle. Plus, technicians like to buy from the independent aftermarket. He views the dealership as his competitor. He doesn’t want to buy from his competitor; he wants to buy from his channel partners.
Considering that more customers (both motorists and technicians) are going to the dealer for service and parts, has the aftermarket done (or not done) something to drive sales away? Is the aftermarket not minding its brands, perhaps?
I really don’t think it’s the brands. The independent side of the industry has not done a great job at getting information to the point of sale — what parts go on what cars — and having that information easily accessible for technicians, jobbers and resellers. That’s why I’m such a proponent of the PIES and ACES standards. If it takes the aftermarket six months to get part information to the counter or in front of the technician, that’s six months of lost sales. The dealerships, with the support of their OEMs, do a better job. The aftermarket needs to improve on this a lot. If you’re a technician and you have a car on the rack, you don’t want to find out that your preferred jobber doesn’t have the part in the catalog. That’s wasted time. If he gets burned enough times, he might make his jobber the second or third call instead of the first call.
Technicians, for whatever reason, want parts that come in the OE box, even if that same exact part is available in an aftermarket branded box. Is this a branding problem and if so, how does the aftermarket educate techs to understand that often these are the same parts as the OE?
I’m not sure I would call this a "branding” issue. It’s more of a perception problem. I’ll give you an example. Dayco makes belts, hose, tensioners and a variety of other automotive parts for the global OE and heavy duty market; we make them in Europe, Asia, North America, South America, virtually all over the world. And yet, we’re considered a domestic source for the aftermarket by the technician. Why? Because many technicians think that simply because a part or “OE type” box carries a European or Asian parts manufacturer’s name, it’s that manufacturer who is the OE supplier for that particular foreign nameplate … when in fact the true authorized OE supplier may be Dayco.
The bigger question is this: Would the industry be better off having 150 different part numbers — some of them may be the exact same part, but one says ‘Toyota’ and the other says ‘Ford’ when they all could be consolidated under one aftermarket brand? That’s a dilemma this entire industry needs to consider. There’s a perception that these parts aren’t the same.
And I’ll tell you that sometimes the parts aren’t the same — sometimes they’re better. This is a really important point: Say a 1995 model-year vehicle needs a new belt. The industry has had ten years to improve on that original product. It’s not the same chemistry. We’ve improved it. We have the opportunity to include the latest and greatest technology in our products. Tensioners first came out in mass, at the OE level, in model year 1987. Does it make sense for us to make the aftermarket tensioner for that 1987 vehicle with the same 1987 technology and perhaps the same problems that may have occurred in the OE part in 2006? Of course not. We want to make it better.
Dayco services both the OE and aftermarket channels. Is there an advantage to Dayco for a product to go through one channel over the other?
It’s not really a matter of one channel being better than the other. Dayco is a technology company that uses that technology to manufacture products. We develop products and then bring them into the market.
We want to expose that technology to as many distribution channels as we can. We want to sell through OE. We want to sell through the aftermarket. We want to sell through heavy duty. We want to sell through international channels. That gives us the biggest bang for our technological and capital investment buck. So we don’t go after only OE or only after aftermarket. We believe it all ties together.
New technologies are developed at the OE level. Dayco develops those technologies and products for the OE, then improves upon them at both the OE and aftermarket levels. We believe strongly that we want our aftermarket parts to have the advantage of OE technology. There are 18 million cars and light trucks built every year in North America and there are 240 million cars and light trucks on the road in the aftermarket. Those are two big markets. We need to be part of both markets.
Now, I’m not going to tell you that at the operating levels we don’t have (OE and aftermarket) people fighting over resources. But part of the job of top management is to make sure we leverage ourselves into all the distribution channels. We don’t look at one as the enemy. They are all opportunities to sell our products and utilize our technology. The reality is that you have to create rules and agreements between the two groups (OE and aftermarket sales forces). You have to make sure the groups are following the rules so you’re able to satisfy all your customers’ demands.
Despite the aftermarket’s ability to create ‘better than OE’ products, the aftermarket is still losing share to the OE channel. Many aftermarket brands were once considered by technicians as much better than OE. I am not sure technicians view these brands in the same positive way today. How did we get to this point?
It has taken a lot of years and a lot of slow erosion. The automotive industry has changed so much in the last 20-25 years. Back then, GM, Ford and Chrysler had 90 percent market share. Toyota was considered a low-price economy car. Now, those same domestic OEMs are fighting to stay above 50 percent market share. The Big Three has lost the next generation. There’s been a huge change in vehicle demographics. Where this ties into the aftermarket is this: If a person buys a European vehicle, he most likely will take that vehicle to a European specialist, who will install the same parts that originally came on the car.
The change in the automotive industry has made people migrate away from the traditional places where they used to get cars fixed. The aftermarket needs to win those customers back. We can do that through fit, form and function … along with doing a better job of rapidly getting data to the point of sale.
Are aftermarket brands hurting themselves by marketing themselves as “As Good As OE?” Doesn’t this set the OE as the standard, lessening the aftermarket’s status as the better option?
I think your assessment is right on target. When the market says “we’re as good as…” that means the aftermarket is playing second fiddle to the OE. I can still remember when OE parts were considered inferior. There’s a perception out there (today) that aftermarket parts are not as good. Part of that is brought about by the aftermarket through the existence of lower-cost value lines. You don’t go to the OE dealer and say you want the lower-cost OE part. So we’ve kind of hurt ourselves by trying to “cheapen up” things to appeal to certain customer’s needs or because of certain marketing pressures.
At Dayco, we put a lot of effort into trying to make sure there is visible difference — as well as a performance difference between our Dayco brand line and our value line — because we offer a value line too; we have no choice. We try to differentiate. I think other companies are not as fortunate.
One of the great advantages for distributors is the ability to source from a limited number of manufacturers. There are about six OE belt manufacturers in the world, and there are about eight OE hose manufacturers. How would a wholesaler buy from all these manufacturers? We have 1,500 curved hoses in our line. If we made, individually, all the hoses required by OEs, part by part, you’d end up with more than 15,000 parts. How do you service that? As we add more and more part numbers, I joke around the office that someday WDs will come to us and say, “You manufacturers have too many part numbers…what ever happened to part consolidation?”
A jobber is trying to service all makes and brands, while a dealership is servicing only a certain make. It’s awfully tough for a technician to develop all those relationships and call ten different places to gets his belts.
As an industry, we need to communicate better. We need common standards. We need to share information. We need to be faster. If we’re quicker and faster, then we’ll end up being better as a result.
Maybe the industry gets a little defensive when we talk about the OE dealer. I mean, who really cares what the OE is doing? Aftermarket parts are great, and they’re available at the corner jobber store. Maybe we just need to start acting a little more confident.
Certainly customers can be very demanding. Some might even say that manufacturers have ‘abdicated control’ of their brands to their customers. When a customer takes on an aftermarket brand, they take on a certain level of responsibility in maintaining those brands. How are distributors — both retail and wholesale — doing as stewards of the aftermarket brands they carry?
I think those companies that have invested a lot of money into their own brands want to protect those brands as much as possible. I think they’ve done a pretty good job making sure they put top-quality products in their top lines.
We believe very strongly in our brand. However, there’s a lot of pressure on manufacturers to take what has been built up and devalue brands and sell them at a big price differential. It really comes down to internal discipline; you basically have to determine how “low is too low” and then stick to that. There’s a lot of pressure to drop prices to win business. But then what happens? After a while, you start devaluing your brand. As a matter of course, we try to avoid that. There’s a lot of temptation, though.
This abdication of brand control has, of late, included consolidation of sales forces. Now, major program groups are representing brands and lines rather than the manufacturers themselves. When will the tide turn and manufacturers begin representing themselves again?
We’ve not had that situation happen to us at Dayco. Other manufacturers have, and we’re familiar with those situations. Certain customers do what they want to do, and they believe, since they develop their own brand strategies, that they can have their own people go out and push that strategy. It remains to be seen whether that’s going to work in the long term. If you had those guys in here, they’d tell you that it’s the greatest thing since they can control their own destinies rather than having a manufacturer sell with them and against them, because they’re representing to multiple customers. I think that’s a legitimate argument.
The sales force is an important part of the whole approach, but it’s not the only part. I’ve been in meetings with resellers when they’ve said that they’d like us to reduce our sales force and drop prices. Well, be careful what you wish for. We’ve all been under pressure to reduce cost. And sales forces tend to get hit. We believe in having our own in-company field sales force to go out and service our business. We believe that’s a very strong advantage. I like to control my own destiny and that’s why I like to have my own sales force.
Would you agree that the reduction in field sales forces, over time, has diluted aftermarket brands?
I do agree. How do we get the story out to all the technicians in the industry? Will 100 sales people do it? 200? In reality, you’re never going to have enough time. It’s a multiplicative effect; you have sales people talking to jobbers, who talk to technicians. The Internet is also a good way to communicate. It’s still a big country, so you need to use better methods of communication. Getting pictures of your products down to the parts store level is important. So is getting installation instructions into the hands of technicians. “System selling” is important, too. How do you expect a counterman or technician to understand all the complexities on a vehicle? We have to help them sell our stuff. We don’t have to sell to them; we have to sell with them. We need to do that so when a customer comes in and wants the OE part, the jobber or tech is armed with the right kinds of information to select the right aftermarket part for the application — and then sell or install it with confidence.
