Tuesday, September 11, 2012

Express Service: The Parts Impact

One of the most "debatable" topics that I have heard from dealers and managers this year has definitely got to be the idea of automotive dealers offering their customers "Express Service", even though each manufacturer has their own "tag name" for the process. The question is..."How does it impact the Parts Department"?

Though "Express Service" is not really new in our dealerships, a few manufacturers introduced this concept or process as far back as the late 80's and early 90's. Much was learned in those early years, some good and some not so good as well as the overall impact that it had from the beginning.

I believe that one of the biggest impacts that "Express Service" has had on our Parts Departments is the shift in the main three customer pay sales categories. These categories are usually defined as Competitive, Maintenance and Repair and for years, we have seen percentage breakdowns led by Repair, followed by Maintenance and Competitive carrying the lowest percentage of the customer pay sales mix.

Today, we are seeing many dealerships experiencing a "total reversal" of their customer pay sales mix shifting over to the Competitive and Maintenance category. One of the most obvious reasons is the quality of the vehicles manufactured today versus "yesteryear" has significantly improved. We are also seeing this trend by watching our warranty parts sales diminish slowly year after year.

So how does this all play out for the Parts Department and what is the next step? I believe that the old phrase "go with the flow" has to be the number one "brutal fact" that we have to deal with. We have to realize this shift and rethink once again where we need to focus our marketing strategies, profit margins and most importantly...our support to the "Express Service" Department.

Even though I see many dealers now offering this service, they seem to forget that if "competitive" and "maintenance" are now the leaders within the overall customer sales mix, why aren't they competitive?

In many cases, parts managers are still pricing these competitive and maintenance items much like their repair or "captive" customer sales with the exception given to the oil & oil filter. Many parts managers seem to have it "bred" into them that they have to retain at least a 40% gross margin on all customer pay sales.

I realize that in many cases, price is not necessarily the issue, but I DO believe we need to be at least "in the ballpark" on these prices. I have performed many pricing comparisons as part of the training I provide and I have personally seen prices vary on the SAME parts and services up as much as 100%!

In an "apples to apples" comparison, that would be like paying twice as much for that same apple! People will notice and then it becomes a "trust" issue and they will feel like they are being taken advantage of. Many more of our customers are doing their research and may know more than we think they do.

One of the best ways to get our prices in line is to have all these competitive and maintenance parts "weighted" to one price and at a "competitive" price. We should accept a lower gross margin on these items even though we don't want to be the cheapest, we DO want to be the best with the right quality parts.

Here's a question I have..."Why is it that many parts managers are okay with  "wholesale" gross margins anywhere from 18% - 22%, but don't have that same belief in these "competitive" customer sales?" Are we not in "competition" with our wholesale customers? Why not "wholesale pricing" to the public on these "competitive" parts and services?

Lastly, we all know that no matter how well the vehicles are manufactured today, they will still break down at some point. The average vehicle ownership is surpassing ten years so the "repair" side of the mix will always be there.

The question is, do we want to offer the best service and price on the first two categories in order to gain and earn that customers' "repair" business? Or, do we "price" ourselves out of the opportunity in the first place, only to lose that "repair" business down the road.

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Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com