Dealers could both save and generate billions of dollars by transforming their parts businesses and reaching out to new customers. Other industries have pitched in with new tools and technologies to aid dealers who now stand on the edge of a world of profit possibilities.
Dealership revenues slipping
Depending on the franchises represented, 2007 may or may not be the best year to be running a new car dealership. But it's far from the worst.
In 2006, according to NADA figures, dealership service and parts sales were slightly more than $80 billion. That's down from $85.2 billion in 2005 and $85.5 billion in 2004. However, service and parts accounted for a larger part of dealer revenue: 77 percent, a 16 percent increase over 2005. That's due to weaknesses in the front-end, not improvements in fixed operations.
An obvious fit
On paper, dealer attraction to the accessories market should be obvious. According to the Specialty Equipment Marketing Association (SEMA), the specialty automotive industry generates over $40 billion annually. SEMA statistics also show that consumers, on average, spend more than $1,000 on accessories after a new vehicle sale. Automobile dealers capture less than 20 percent of these dollars.
In essence, dealers order, stock and prep a product they turn an average $750 profit on - only to turn that product over to another business which will pull $1,000 or more from the same sale. If they want to, dealers could sell and install these same accessories. They also can make accessory purchases more attractive to customers by working their costs into vehicle financing and by covering accessories (to some extent) with the vehicle warranty.
Dealer associations and carmakers are advising dealers on how to sell these products; OEMs are getting in on the act with products that help dealers sell accessories.
Factories get into the act
For example, Mazda hopes to give its dealers some help with a new virtual showroom, called Retail Revolution Centers, where customers can build their own vehicles and shop for accessories. Mazda believes the new, wired multimedia showrooms help build excitement and boost sales because they allow customers to shop more comfortably and confidently by letting them control the flow of information.
The automaker additionally offers a special line of accessories, Mazdaspeed, apart from its Mazda line, to give customers more options. Aimed at buyers of Mazda's sportiest vehicles the RX-8, Mazda6 and MX-5 Miata Mazdaspeed products boost performance and allow buyers to individualize their vehicles at the dealership.
The online market
Perhaps lost within the plethora of stats and information produced by NADA is the following figure: nea-rly 100 percent of dealerships now have a website. Dealers are using the web to boost sales of both vehicles and parts.
One tool to help boost online business is the Loyalty Driver e-newsletter, produced by IMN. IMN customizes e-newsletters for its clients. The newsletters include vehicle and seasonal news items, technical tips and coupons. Dealers are reaching out to their customers with these newsletters, which are proving to be more popular than traditional marketing materials.
"We've found that 20 percent of the customers on a mailing list will open it. That's far more than the 1 or 2 percent who will look at traditional mailings," says Brian Epro, of IMN, adding, "Even more impressive, less than 2 percent choose to opt out."
Brian explains that dealers typically draw their e-mail lists from the addresses of recent customers. He also notes that the e-newsletter helps create a "club atmosphere" where dealers can maintain continual contact with customers after a sale.
And when consumers use the Loyalty Driver e-newsletter to link their way to a dealer site searching for parts and accessories, they may end up using a product called StoreMaker X. Developed by Reynolds and Reynolds, StoreMaker X is a virtual parts store that allows both wholesale and retail customers to order parts from dealers over the Web.
StoreMaker X effectively makes a dealer's parts inventory and its accessories available to customers anywhere in the world. Consumers can search for parts by year, make, factory part number or keyword. They can add parts to a shopping cart; select a shipping method; and pay by a credit card, PayPal, COD, or via a Purchase Order.
Indeed, as vehicles become more technologically sophisticated and the aftermarket struggles to build its own options for expensive, cutting-edge parts like drive-by-wire systems and alternative fuel power plants, the future for dealers seems bright.
But franchised dealers are moving slowly and cautiously. With profits slipping on new vehicle sales, they realize all too well how easily dollars are made and lost in their industry. Widespread interest in Internet and electronic options punctuates this point further due to the fact that these options remain rather inexpensive and help roll in areas like parts and accessories with new car sales.
In short, dealers aren't using these tools to create new or separate identities as a neighborhood parts store. They're still gauging just how much business they can attract, along with how much they're willing to invest and what industries they intend to battle for revenue.