Vol. 1, No. 3, Winter 2006          A Quarterly Report on Product Information Management


Action & Investment Needed to Remain Competitive

Parts Proliferation, OEM Dealers Threaten the Independent Aftermarket Like Never Before, says Pricedex CEO

Manufacturers and resellers in the North American automotive aftermarket are headed for serious trouble if they don't face up to reality of parts proliferation and OEM dealer competition and invest in updated technology that can help them match what the new car dealer already has.

That's the viewpoint of Terry O'Reilly, president and CEO of Pricedex Software, Inc., a leading provider of product information management solutions.

"There is no question that this market has changed dramatically in the past decade, and will continue to change in the next few years - probably faster than most businesses can keep up with it," says O'Reilly.

"It was not that long ago that we only dealt with Detroit's Big Three. Now the Big Three are GM, Toyota and Ford - and there about a dozen European, Japanese, Korean companies behind them, and Chinese automakers coming along as well."

This is causing a huge influx of makes and models of cars and trucks of all sizes and shapes, says O'Reilly. And while overall sales numbers will remain around 17 million vehicles, sales of individual models will decrease. This "model proliferation" will drive parts proliferation, reduce profitability and drive automakers and their dealers to go after more parts and service business to boost revenue.

Parts Proliferation

According to Automotive News Databank, there were 910 model vehicles sold in the U.S. in 1995. Ten years later, that number had risen to 1590. And a recent SEMA research study says that 60 or so more new models are on the way in 2007.

OEM Make / Model Proliferation
  1995 2000 2005
Cars 480 463 591
Trucks 430 662 999
Combined 910 1125 1590
Source: Automotive News Market Databank

And it's not just cars and trucks. There are more engine types (gas, diesel, hybrid, and in-line and V 4, 5, 6, 8, 10 and 12-cylinder models), more transmission types (3,4,5 and 6-speed manuals and automatics), and more electronics and safety features than ever before, he points out.

"In the face of this parts onslaught, the independent service installer or retailer doesn't stand a chance - unless his suppliers including manufacturers and WDs alike provide him with the systems and tools he needs to compete to sell their product lines," says O'Reilly, "just as the OEMs support their dealers."

OEM Warranties and Dealer Service Add to the Challenge

New car dealers aren't standing still. Vehicle manufacturers are extending their powertrain warranties, with GM now at 5 years/100,000 miles and Ford at 5 years/60,000 miles. They're also planning more niche vehicles, special editions, and exploring special option packages to drive sales and bring in customers. Hyundai, for instance, is considering a safety package that would appeal to older drivers.

The domestic automakers are also pursuing lucrative service and parts business to boost revenue.

Hyundai plans to introduce a prepaid maintenance program and an extended warranty to boost sales - and it plans to extend the longer warranty to its used cars as well.

A few years ago, GM appointed an executive director of accessories whose assignment it is to develop aftermarket accessory lines that dealers can install. The group has come up with 100 accessories for the Chevrolet Silverado and GMC Sierra full-size pickup - and they have developed the system to deliver these parts within one day of the order (it used to take 7-10 days).

GM also is committed to driving up revenue in service and parts and is looking to extend customer-dealership loyalty through the lifecycle of the vehicle. The company says it will focus on dealership productivity, expense management, use of technology, throughput and customer care - all in the service area. The company also wants to add more quick-lubes to more dealerships.

Chrysler is installing a new computer-controlled Motion Point of Sale video in its dealers' service waiting areas to let consumers know about service and parts specials, and how inexpensively they can get their cars serviced at the dealer - instead of elsewhere. This is being done specifically to counteract the consumer belief that dealers charge more for service.

Volvo has initiated a program whereby parts are pre-ordered when a customer calls in to schedule an appointment - so there's no delay when the customer comes in for service.

And Ford dealers in the Detroit area have been running radio spots for service and tires - just like traditional aftermarket service companies do.

Can the Aftermarket Compete?

"It's not going to be easy, and it's not going to be cheap, but the independent aftermarket can and must compete or some may find themselves out of business," says O'Reilly. "To survive, this industry has got to start investing in the tools, training and technology that will keep it viable and profitable going forward."

A key to success will be for manufacturers and resellers to adopt fast, flexible, open product information management systems that will allow them to regain control of their inventory, pricing, catalog and publishing management and more.

"The systems are available today for any manufacturer or distributor or retailer to cost-effectively implement a robust, powerful product information management solution that will truly improve their competitiveness through better parts data management, more effective pricing, and better customer support and response time.

"The associations serving our industry have been talking about this for many years, numerous studies have been done that have identified the problems and solutions, and now it is time to move forward - quickly - before any more market share is captured by dealers," warns O'Reilly.

  

Specialty Equipment Third Quarter Forecast Substantiates Increase in Model and Part Proliferation

The new "Trends and Forecasts" study from SEMA is both a good news/bad news report.

The good news? Specialty retailers continue to enjoy a growing market with growth in consumer expenditures for specialty products, and with the introduction of hundreds of new products and accessories.

According to the report, sales of automotive appearance accessories, suspension and handling, and performance products grew 9.68% at the retail level from 2004 to 2005, reaching $34 billion in 2005. This significant growth was attributed to new consumers entering the market, new vehicle models from the OEMs, and new products developed by manufacturers.

What isn't so good is the burden this proliferation of makes and models - and parts and accessories - places on both manufacturers and resellers alike.

The report documents shifts in buying preferences among the various vehicle categories, and an increasing number of new model entries.

The report quotes an article from Wall St. Journal that says the 2007 model year will be the "busiest year ever for new vehicle launches" because 61 new models are planned for introduction. By contrast, only an average of 35 new models per year was introduced by automakers between 1987 and 2006.

In addition, more hybrid vehicles and diesels are coming, along with more high-tech transmissions, electronics, computer chips, keyless entry systems.

All of this means increasingly heavy demands on manufacturers to provide not only parts to their resellers, but inventory systems; comprehensive training; product, part and pricing information in a variety of forms and media; and much more.

The question is: Are you ready? Can you handle all this? You can if you and your resellers are working quickly to adopt ACES and PIES standards, and implementing a robust Product Information Management (PIM) system.

Copies of the report titled "2006 SEMA Trends and Forecasts Quarterly Update Q3" are available online from SEMA (www.sema.org).