|Dealerships have always had customers who consider their vehicles to be an extension of their personality. Recently, however the desire to have a vehicle accessorized to match the buyer’s personality has exploded. Aftermarket accessories are no longer just whitewall tires.|
Now, 20 and 22 inch rims, affectionately called dub deuces by the urban dictionary, are almost a requirement for a new car purchase. If it’s not rims, it’s a lift kit or a mobile video system. The question to ponder is: Who is going to make the money on this potential profit center – dealerships at the point of purchase or independent aftermarket accessory companies?Frank Kent Motor Co., of Fort Worth, Texas, is a prime example of a dealership capitalizing on the explosion of the aftermarket accessory craze. Owned by Will and Corrie Churchill, the dealership opened a separate company called Frank Kent’s Pit Stop in 2000 and have been customizing ever since. The introduction to their Web site sums up the purpose of the Pit Stop.
“Where Stock Ends and Custom Begins.”
Frank Kent Motor Co. has a finger in both the independent and the manufacturer pie. Not only do they customize externally for customers, they also became a General Motor Corporation Accessories Distributor (ADI). Frank Kent’s Pit Stop generates an 18 percent return on investment with sales approaching $2 million a year.
The 25,000 square foot shop offers services from accessory installation to paintless dent repair, auto detailing, express oil changes, nitrous installation and window tinting.
Churchill’s desire to keep potential dollars spent on aftermarket accessories in their store instead of their competitors sparked the opening of Frank Kent’s Pit Stop. “We really started thinking about the accessory industry in 2000. Dealers weren’t quite tuned into the accessory market, so we wanted to capitalize on that,” said Churchill. So, they started their own accessory store. “We saw that there were a lot of independent companies out there that were making money by adding accessories to vehicles that we had sold.”
Jim Spoonhower, vice president of Market Research at SEMA, stated the total industry of aftermarket accessories generated $34.28 billion in revenue in 2005, with new vehicle dealers accounting for 10.1 percent of specialty automotive products sold in the US. The annual sales for automotive aftermarket accessories increased from 7.5 percent in 2004 to 10.5 percent in 2005.
These numbers are garnering attention from dealers around the nation who are looking to boost their bottom line. Some have recognized the fact that they have a captive audience in the aftermarket accessory industry and seized it by marketing aftermarket parts for both new and used vehicles.
Tube steps and suspension lowering kits represent the highest volume of products that Frank Kent’s Pit Stop sells, but the majority of their business and the highest profit margin are tires, wheels and mobile video systems. Their shop didn’t even sell mobile video systems two years ago, but the demand dramatically increased, making the video systems a must-have for the Pit Stop.
Their ability to stay ahead of their customers’ desires is what has made them successful in the aftermarket business. “It’s an ever changing industry, and the easiest way to describe it is that it’s a fashion business,” said Churchill. What’s hot today is not what’s going to be hot in a year or two. It requires work to stay abreast of the changing trends in this sector of the industry. Many of those trends filter in from the West Coast. Athletes and celebrities drive some of the industries hottest items, fueling the consumer infatuation with personalization.
The key to successfully merchandising aftermarket accessories is showcasing unique vehicles that will appeal to the customer; appeal so much they will want their own customized vehicle.
Dean Sellers Ford of Troy, Mich., is a dealership fully vested in the accessories aftermarket. They started accessorizing vehicles because of a desire to meet the growing customer demand for aftermarket accessories, the constant need to challenge their competitors and most importantly, to increase their bottom-line profit.
There are several ways of developing this type of profit center in a dealership – in-house or by subletting. According to Liz Sellers, general manager, Dean Sellers Ford uses “a select few vendors and installers. Plus we install accessories that are available from the manufacturer in our service department.”
One challenge that dealers face is choosing which aftermarket accessories to utilize in their shop, more importantly which accessories to install on specific vehicles. Choose the wrong accessories and you not only have your cash investment frozen, you may have a vehicle that will be difficult to sell.
Another challenge is the warranty and liability issues attached with adding aftermarket parts to new vehicles. “If a dealership wants to go strictly into the aftermarket side of the business and not use OE products, be aware that there is a ton of liability issues to look at,” said Churchill.
Just because an accessory manufacturer looks reputable doesn’t mean they are. If dealers work outside of Original Equipment (OE) products, they should consider the reputation and reliability of any outside accessory manufacturer.
Manufacturers are now more knowledgeable and respond quicker to the changing market of aftermarket accessories, though they still have issues. “They know what the trends are, and they could respond quickly enough. The problem with manufacturers is that they have liabilities issues to deal with. They have to make sure the products meet federal highway standards, EPA guidelines and that it isn’t going to harm the vehicle in the long run,” said Churchill. The manufacturers are refusing to cover problems or repairs that result when vehicles have aftermarket accessories.
On the other side of the debate is the aftermarket accessory company who can see a trend, bring a vehicle in and have it prototyped within a week. This quick response comes at a cost. These companies, often, don’t perform the rigorous testing or review potential liability issues that go with marketing a product. Just because it is fabricated, mass-produced, on the market, fits and looks good doesn’t mean it will hold up over time.
Independent accessory manufacturers can create some additional liability concerns. Companies that may look reputable can be small operations that will close up shop quickly for a variety of reasons. If you buy warranted parts from an aftermarket accessory manufacturer, even those with lifetime warranties, that goes out of business, you could be responsible for a warranty claim.
Churchill believes they will most likely focus heavily on the ADI system in the future. “Before, manufacturers did not do a good job of capturing the accessory business. They didn’t have the products, the prices were too high and dealers weren’t tuned into it.” Now dealers are becoming more aware of the profit potential, the prices are competitive and the quality of the products is excellent. Churchill’s local market is shifting. He said, “Fewer customers are coming to us for installs because manufacturers and dealers are working together to install the accessories at the point of the vehicle purchase.”
Properly training sales staff to sell accessories is imperative. Staff members who are involved in the design of the accessorized vehicle have a vested interest in selling accessories. Churchill’s Cadillac dealership actually allows employees to accessorize their demos. “They take ownership and pride in it.”
Having a vehicle that has custom rims, tube steps or bed liners on the lot definitely helps in selling the products. According to Sellers, the sales staff can be very effective at promoting aftermarket parts, but “having the products installed on vehicles on display automatically leads customers to ask our sales people about the products.”
“When you first buy a vehicle, GM will residualize their accessories. They obviously know that there is some benefit to accessories. All of our showroom vehicles are customized. The demos and even some of our vehicles on the lot have accessories,” Churchill said.
He stresses that just presenting a customer with a product catalog or showing them a wheel rack isn’t an effective accessory selling strategy. The accessory business is a unique market. Customers usually become interested in a product if it is on a vehicle. They are also more likely to buy an accessory if they see it on the vehicle, rather than on a display rack.
According to Sellers, when showcased on a vehicle, “the products really speak for themselves.” At Dean Sellers Ford, the general sales manager is directly involved and extremely knowledgeable about the products offered. He is available to assist salespeople with whatever questions they or the customers may have.
Financing these accessories can often be conveniently added to the loan or lease program. It allows customers to leave the lot with the vehicle of their dreams. “Most aftermarket products are financed or leased in the car deal. Ford Motor Credit, through its Red Carpet lease program, offers an aftermarket residualization program that makes putting accessories on vehicles attractive even for lease customers. However, some accessories are purchased after the vehicle sale and are paid for by check or credit card,” Sellers said.
Sellers’ advice to a dealer thinking about adding customization as a profit center is: “Make sure you have a dedicated and committed champion of the accessory business. Be aware of your customers’ wants and needs and price your items fairly and consistently. Only sell items of quality that are valid under your manufacturer’s guidelines and warranties.”
If you can stay on the cusp of ever changing trends and have a champion salesperson in your dealership interested in aftermarket accessories, you might just combine the two to uncover your next profit center.
Vol 3, Issue 11
Recapturing lost revenue is the first step toward fixed ops profitability. Use this four-step process to reduce or eliminate wasted tech hours, declined services, inefficient scheduling, and lost tire sales.