Evolution or bust

Paul Black, CEO of sales-i explains why independent garages must adapt to the changing face of the automotive industry

By Paul Black |

Published:  03 January, 2018

The global automotive industry is experiencing significant growth: a study conducted by PwC found that worldwide sales increased by 5% in 2016. But we must always be cautious not to mistake growth for health or security: a complex, multi-faceted international market will always face some challenges.

The test for the automotive industry will not be how big it gets, but how well it adapts to the issues in its path – whether they happen to be older, seemingly-intrinsic issues, or newer, technologically-driven problems
and obligations.

When the industry is feeling the squeeze, it really feels it: trends that impact the upper end of the supply chain inevitably trickle down to local garages. Independent businesses, especially those in the aftermarket, must do more than ever to catch
up – and even more to stay ahead of the game. But which challenges are the most pressing, and what can garages in particular do to tackle them?

Adopting e-commerce Digitalisation has had a transformative effect on many – if not most – industries. Amazon’s rise has led to the decline of bookshops; Blockbuster had the chance to acquire Netflix, and was instead destroyed by it. Examples are innumerable and varied.

Automotive parts and services are no exception, though it’s perhaps taken longer to arrive at this point. Traditional field sales are losing ground to e-commerce, and it’s not hard to see why. Those who embrace this approach are only getting stronger. Productivity, market reach, and customer service are dramatically improved by it.

When a business can serve a customer without sacrificing an employee’s time, it has immediately made a considerable cost saving. When a business can resolve queries online, it can ensure that employees spend less time on the phone. When a customer analytics function can be integrated into your e-commerce platform, it makes it far easier to identify and justify up- and cross-selling opportunities using real data, rather than simply guess at them.

This is not to say that e-commerce will not come with challenges: the wide range of parts and services available and the continuously evolving nature of technology should preclude any transition from being completely smooth. That said, the principal obstacle for small garages will be their reluctance to embrace it. Many will see e-commerce as an experiment; ‘nice to have’ instead of critical to their business model. This will invariably lead to the competition – with no such hesitance – earning more market share and stealing an insurmountable lead.

The internet is the single most important consumer channel. Even if they don’t complete a transaction online, customers will often conduct research and compare prices on product websites.

Small garages must promote their brand or risk alienating their customers. E-commerce can be an opportunity for success or failure. Businesses need to embrace it, but it will only serve them well if they throw all their weight behind it in the long and short term.

Establishing competitive differentiation
Commoditisation is rife in the automotive aftermarket. In some respects, it’s understandable: a customer may not easily be able to tell the difference between the very best version of a particular part and the most affordable. In response to commoditisation, many simply opt to slash their prices: customers, after all, are apt to snap up a bargain. This impulse should be vigorously resisted.

For one thing, a garage can only offer the lowest prices for so long: bigger, more moneyed competitors will sense that they’re losing business and simply lower their prices – eating their losses until the garage goes out of business. For another, lowering prices greatly diminishes brand reputation and perceptions of quality. If a business becomes a discount brand, it cannot easily ascend to the high-end or midmarket. Discounting assures it of a lifetime in the bargain basement.

Garages must therefore look for other ways of diversifying their offering and increasing its appeal to customers. Where a company cannot compete on price, it can compete on value. Bespoke maintenance and repair plans, free consultations, add-ons: these things can matter as much to customers as the regular retail price. If a garage can offer free tyre comparison guides, if it can cultivate a reputation for excellent service, if its staff are the very best, it will build faith in its brand and in the expertise of its people.

Improving delivery and personalising an offering are a better way to differentiate a company and forge strong customer relationships than slashing prices.

Improving productivity
Though we have already mentioned digitalisation in the context of
e-commerce, it would be remiss to forget its application to back-office functions. The administrative tasks that characterise this function are mundane, repetitive, and occupy a lot of employee time: reporting, accounting and financial management, scheduling, and even some customer service functions.

Garages that hope to remain competitive must begin to automate as many of these tasks as possible using software systems – another key asset in the digitalised world. Productivity has a direct impact on profit: the less a company spends on simply running, the more it takes home. Time diverted from mundanities can be redirected towards strategic, value-adding operational tasks. Business management software can manage day-to-day activity such as reporting and financial planning. Customer relationship management software can help companies drill down into the patterns, trends, and preferences that characterise a target audience.

In 2018, the automotive industry will face a world where digitalisation is abundant, technology is rapidly evolving, and competition is fiercer than ever. How they face this world is ultimately up to them, but they would be well-advised to move with the current. Garages that stay abreast of wider automotive industry challenges are better placed to tackle them, and those which keep ahead of the times are unlikely to be overwhelmed
by them.

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