AMN's Top Ten Week: Top 10 Distribution Influences

By Brian Cruickshank, AAP, editor

Annually, Counterman magazine, in conjunction with aftermarketNews, presents the 10 trends and issues that influence the aftermarket parts distribution industry. For this year’s list, Counterman and aftermarketNews editors examined all the major issues, eventually paring the list down to those issues that most affect today’s and tomorrow’s aftermarket industry.

Consolidation of Distribution

Mergers among distributors and retailers are nothing new. Just over the last three years, acquisitions by major distributors such as General Parts Inc., Genuine Parts Co., Parts Depot, Uni-Select, AutoZone, Advance Auto Parts and CSK all made headlines in the market. Of course, the effects of these large mergers touched the industry in significant ways; however, the impact is perhaps most acutely felt among the program groups to which some of these distributors (and the companies they acquire) belong.

Program groups are only as strong as their members. What is one group’s loss is often another’s gain, creating stronger distributors as they acquire WDs from both inside and outside the group confines. The result? There are fewer — but stronger — program groups in the market today. As demonstrated by Uni-Select’s (a Parts Plus member) acquisition of MAWDI, an IAPA member, in late 2004, often groups find greater strength when membership and resources are pooled. Thus, in early 2005, IAPA made the decision to join with Parts Plus, creating the Automotive Distribution Network.

The ever-shrinking distribution population continues to impact other groups as well: RPM, which had lost membership because of migration to other groups, attrition and acquisitions, ended up finding greater value in a merger with Pronto. Strong groups such as Aftermarket Auto Parts Alliance must continually be on the lookout for new members and markets, such as in South America and Europe.

Program groups are among the most influential entities in the aftermarket. Consolidation of their members changes the very dynamics of these groups, and significantly affects how these groups wield their considerable influence over the market. As for retailers, O’Reilly and Advance have been the most active. Then, there was the early December announcement that CSK had acquired regional chain Murray’s Discount Auto. The impact of these moves among retailers, combined with the changes happening among traditional distributors, will be felt throughout 2005 and beyond.

For more on this topic, see The Program Group Puzzle in the June issue of Counterman or on counterman.com.

The Rising Cost of Fuel

What do a pizza shop and a parts store have in common? Delivery, and all the costs associated with it. While consumers find ways to handle the rising cost of fuel (driving less, carpooling, using smaller vehicles), the solution is less clear for parts distributors whose very livelihoods depend on getting parts to their wholesale accounts ASAP.

The question of whether to pass on the additional cost to the customer is a tricky one. Some distributors are doing it openly, with varying degrees of success. Others have found that customers are more willing to pay a delivery surcharge, but only if the cost is buried deep in the invoice. Either way, costs must be absorbed by the distributor, the customer or a combination of the two.

While it’s tough to find a silver lining, rising costs, such as raw materials for manufacturers or fuel for distributors, force efficiencies that may have otherwise been ignored. Both customers and distributors must now take a harder look at how they deliver products, adding efficiencies and eliminating unnecessary trips and avoidable errors that would normally be chalked up as another cost of doing business.

To see how others are addressing the rising cost of fuel, see Cost Crunch in the November issue of Counterman or on counterman.com.

Sourcing from the OE Dealer

Why do techs increasingly source from the OE dealer? There are many reasons, including part availability, perceived quality advantages and the increasing importance/preference of the OE brand.

Technology advancements, such as telematics, are already directing repairs and service away from the independent aftermarket and into the dealership bays, which already benefit from the cachet of the ‘factory trained’ technicians and OE-branded parts.

This is not a criticism of dealerships. Rather, it is a recognition of their strengths and how those strengths expose some of the aftermarket’s weaknesses.

For a technician’s point of view, see Why Do I call the OE Dealer for Parts? in the November issue of Counterman or on counterman.com.

Motor Vehicle Owners’ Right to Repair Act

A recent House subcommittee meeting encapsulated the industry’s take on the Motor Vehicle Owners’ Right to Repair Act: The industry cannot decide if it’s a good idea or not. One side argues that legislation is unnecessary because a perfectly good voluntary agreement exists that allows independent repair facilities to access the same repair information as OE dealers. The other side, just as passionate, says without legislation, vehicle manufacturers are free to back peddle on any voluntary promise they might have made.

What is not argued, however, is whether the independent aftermarket service providers need access to OE repair information or not — they must have it if they are to succeed today and in the future. The question at issue now is how to best arrive at a solution — a voluntary agreement or the hard-line approach of law enactment. Members of Congress are watching this issue closely, and their collective opinion of the aftermarket may hinge on how the industry presents itself to them: divided or united.

For more information on this topic, see United We Stand in the May issue of Counterman or on counterman.com.

Employee Recruitment

The aftermarket of tomorrow is only as good as the new employees it attracts today, and the industry isn’t doing a very good job on either side of the counter. There is a desperate need for technicians, counter professionals, WD personnel and drivers, and the recruitment of these people — good people who influence the very future of the aftermarket.

There are efforts within the industry to attract and recruit talented young people to the aftermarket. However laudable these efforts may be, they are limited in scope and depth. The industry, if it wishes to influence the market in significantly positive ways, needs to do a better job at illuminating the masses about the many, many fulfilling and interesting careers the aftermarket can provide.

To read about one company’s efforts to impact industry recruitment, see Progress Through Partnership in the October issue of Counterman or on counterman.com.

Cataloging

New part numbers don’t do much good when those working the counter can’t find them in their eCats. This, however, happens every day on parts counters across the country. What’s most troubling, is that in many cases the part is available; the eCat had just not yet received the update.

At the heart of this problem is the speed at which parts, carryovers and errors are updated within eCat systems across the industry. The time it takes is getting shorter and shorter, but with each delay, a sale is lost. Ecat companies understand the catalog latency problems and are working toward shortening the time it takes to get new numbers into their systems. In the meantime, lost sales as a result of catalog latency will continue to be a strong influence on everyone who makes, sells or installs automotive products.

For more information on this, see No Record Found in the Jan. issue of Counterman or on counterman.com.

Image

Do you think most people would encourage their children to become a parts professional or technician? Think hard about the answer. If you said ‘no,’ then you understand the vast image problems the industry has.

The industry’s image problem affects nearly every facet of what we do, from how we interact with customers, how we price jobs and the way we recruit prospective employees.

The parts and service business is an industry built upon customer distress. How the industry solves that distress in all its forms — customer service, technical knowledge and honesty — will ultimately determine the degree to which our image helps or hurts us.

Technician and Store Training

Quality training, whether for technicians or store personnel, greatly affects the overall health of the industry. It is well documented that properly trained technicians, for example, are more efficient (make more money) and return less product.

There are many fine training programs within the industry, but unfortunately, only a small percentage of aftermarket professionals take advantage of them. No one can really blame them: Who wants to sit in a classroom after eight hours of turning wrenches? However, if the market wants to raise the bar of professionalism and technical knowledge, training must become more widespread, and most importantly, used.

To read more about training programs, see the Training series of articles in the March, April, May and June issues of Counterman or on counterman.com.

OE Technology

OE technology has moved vehicle power, fuel economy and emissions reduction to new levels. But it’s also created new challenges for the aftermarket that must learn how to service and repair these vehicles, as well as find parts for them.

New vehicle technology drives the aftermarket, and it must keep pace with this changing technology, both from a training and parts availability standpoint. If the aftermarket loses its reputation for offering better-than-OE parts, installed by competent technicians, then it loses one of its most important and influential assets.

Access to vehicle repair information is certainly one solution (See Influence #4 — Right to Repair). Getting the training and right parts is another facet of this complex equation.

For more information, see Is the Aftermarket’s Future Safe? in the September Issue of Counterman or on counterman.com.

The Counter Professional

He’s the hero behind the counter, and all too often the job he does is taken for granted.

However, no one would dispute the influence a good counter pro has on his store and customers. Today’s counter professionals can make or break a store. He can make a good technician better. He can make a struggling store profitable. He is at that critical point between repair shops and manufacturers.

Developing less experienced ones, keeping the good ones and attracting new ones are some of the ongoing challenges the industry faces. How well the industry does this will influence manufacturers, warehouses, program groups and technicians for years to come.

For more information, see The Right Call, on page 36 of the December issue of Counterman or on counterman.com.

Read more AMN Top Ten features:

R. L. Polk & Co’s Ask the Industry: Industry Execs Comment on the Top Ten Issues of Year