As most of us know, the wholesale parts business is a segment of the auto industry that is literally "dog eat dog." The competition can be fierce, and in order to compete you have to offer better pricing, availability and services than others. Essentially, the basic premise is that whatever you are lacking in gross profit percentage can be made up in volume.
In order to increase wholesale numbers, you need a wholesale plan of action. First and foremost however, before you even get started on your action plan, an aggressive and knowledgeable outsider that's not afraid of cold calling is needed to contact prospective customers. This outside sales person also needs to maintain existing accounts and be empowered to make decisions in order to immediately resolve any concerns the customer may have.
Once these steps are complete, you are ready to create your wholesale plan of action. The following are some considerations that must be addressed in order to have a successful action plan.
Even though there are many aspects to getting new customers, and more importantly retaining them, the first thing you need to look at is your pricing strategy. Since primarily, most customers look for you to have better pricing than your competitors, it is important to price things in such a way as to attract new customers. To do this, you need to have a policy of determining the bottom line. In other words, what is the maximum discount that you are willing to give? Note that this does not however translate into every customer receives the maximum discount.
Once you've established your bottom line and begin making your cold calls, there's absolutely nothing wrong with asking prospective customers what it would take to get their business, making it clear what you are willing to do to get it. As an example, you can state a certain discount (one that is not yet the bottom line) and see if that will entice them to give you a shot. If the discount you offered them isn't sufficient enough, don't shoot another figure at them but instead, simply ask, "If that's not enough to earn your business tell me what it will take."
You need to decide on the area that you will concentrate your wholesale efforts on. First take a look at what area you are currently doing the most business in. Do you want to concentrate on that area or do you want to expand into other areas? Often the best way to increase your wholesale business is to expand into a new area. If that's the case, is it better to expand one's radius or to simply choose a certain area of concentration?
Expanding your radius can be difficult because it often requires more resources, such as drivers or counter persons. Often the better choice in order to best service your customer is to pick a particular area that's more concentrated with potential customers. As the old saying goes "You don't want to bite off more than you can chew."
The diagram below illustrates expanding into an area that's concentrated along an interstate route in one direction. As an example, you may want to instruct your outside person to concentrate 75% of his/her time making cold calls along this predetermined route to drum up new business.
Along with your pricing strategy you want to arm your outside salesman with services that go above and beyond the competition. For instance, you may have a dedicated driver specifically for this new route that makes more deliveries a day than the competition.
Other considerations that could entice new business is to let your potential customers know that if you don't have a part in stock that they need right away that you'll do everything possible to get the part to them that same day. Give your outside salesman a cell phone and include the phone number on his/her business card. Let the customers know that they can call at anytime with any concerns they may have. You may even consider giving the customers direct access to the Parts Manager. An occasional call from the Parts Manager is another good way to show the customer that you truly care about their business. Make sure your outside representative makes follow up calls to ensure that they're being taken care of.
Meet with your inside counter people and let them know what you're doing. Your inside people can make or break your wholesale efforts. Even though your customers may have a strong relationship with the outside rep, more often than not customer relationships are even stronger with the counter people. Let them know that they have to be proactive when dealing with customers. If there's a problem with getting parts to them, call the customer before the customer calls you. If the customer has to call to find out what's going on with his or her order, you've fallen below what the customer is expecting.
Returns on special orders are often a sore subject with a lot of parts managers. If you want to retain wholesale customers you have to be prepared to unequivocally
accept the fact that your wholesale customers will return parts that you don't want. As part of your service to your wholesale customers, you have to put on a big smile and happily take back all returns.
Down the Road
Once you've established your wholesale plan of action and put it to work you should periodically analyze each wholesale account. Never look at sales of each individual
account. Instead, look at what each individual account is doing for the profitability of your department. How much gross profit is each account generating? What's their return rate? Do they return a lot of unwanted parts? Look at their receivables. Are they a credit risk? You may decide that certain wholesale accounts do not in fact add to the profitability of the department and adjustments in pricing, returns or credit terms may be necessary.
Down the road you should look at the new wholesale area as a whole and see how profitable your new venture is to the department. Once all your efforts have materialized you may consider a new venture proposal and expand into new areas. Look and see what worked for you in the past, and correct the things that didn't work.
When it comes to customer retention you need to create what the automotive industry refers to as the "wow factor." Go above and beyond what the customer expects. Pricing may be the inroad for new business, but service is what's going to keep them coming back. Happy selling!
By Jim Clausen