By Andrew Marsh
Engineering Director, Auto Industry Consulting Ltd
We are all too familiar with the OEM retail store.
Huge glass-faced atriums full of little more than air, salespeople who are too busy all the time to see many people, and that OEM logo appearing on the floor, on the desks, on the glass – even in the water closet. For consumers, these places are mostly intimidating, and the reason they are there is because the car/the finance deal/the need overrules the dread of the whole retail experience.
Yes, there are exceptional dealers and sales staff, but these are usually much closer to their target audience than some corporate marketing strategy thought up somewhere else in the world.
Can you think of one repair centre that functions like an OEM retail palace? No, I couldn’t.
For years, this chaser of imposed rules, imposed signage and – best of all – getting the franchise holder to obliterate their own identity as well as paying for the whole show, has been justified by ‘marketing.’ No ‘marketing,’ no budget, no sales. Really?
The whole house of cards is about to come crashing down. OEMs typically make around four to six percent net margin before the vehicles get sold into the distribution chain. They have mostly failed to access the post warranty retail repair work, and to an extent, subsidize the warranty period. Those who invest in the auto industry look towards Porsche with 20 percent plus net margin, but then look towards Apple with 50 to 60 percent net margin. One can see four to six percent net margin is in the land of a social employment scheme rather than a powerful global industry.
Few OEMs can get to subsidize this system if they don’t make profits somewhere, and that is the crux of the issue. They really, really need to concentrate on design/development/manufacturing of vehicles, since that is the primary product from which a rather large market depends. So if the OEM distribution system collapses, who will fill the space? There is only one possible group of companies small enough to understand lack of profit equates to doom, specialized enough to have the biggest skill range under any single automotive sector roof and wise enough to exploit new opportunities: the collision repairer.
Retail is moving more and more into people’s everyday lives. We don’t need to go to a special place to purchase many things, so why shouldn’t the vehicle come to the customer rather than the other way around? Suddenly we don’t need glass palaces, or fixed salespeople. Indeed all we need is an administrative base for our colleagues to call home whilst they work.
If there is any doubt, look at the blue chip investors that have decided to buy up collision repair shops when ‘the wise’ say it’s time to get out. You can bet they can see the under-priced value in collision repairers, and the huge potential to expand that business model way beyond fixing vehicles. Now that’s what I call a good news story.
About Auto Industry Consulting
Auto Industry Consulting is an independent provider of technical information and consultancy to the global collision repair industry which was formed by Ben Cardy and Andrew Marsh in 2011. Of the many services we offer two of our key products are:
Auto Industry Insider uses in-depth research to identify the relevant key industry challenges and their effect on the vehicle repair sector – seewww.autoindustryinsider.com.
Ezi-Methods provides OEM based repair methods and information via our web service, now sold in the UK, USA, Australia, South Africa and New Zealand. For further information, please visit www.ezimethods.com