Dealers make inroads in vehicle accessories market

New car dealerships are expanding their accessories sales in an effort to further boost profits. Foresight Research released its 2015 Accessory Immersion Report this summer, which indicates more dealers are pushing accessories. The report is part of the company's annual Channel Immersion and Perspectives (CHIPS) study.

Dealers would like to gain a bigger slice of a growing accessories market. In 2013, SEMA pegged the accessories sales at $33 billion, a 6.7 percent increase over 2012 and the fourth consecutive year of strong growth.

In its last report on accessories, Foresight Research found that nearly half of new car and truck buyers accessorize their vehicle, with average accessory expenditures increasing by one-third between 2011 and 2013. The aftermarket has snagged the biggest share of those sales, with dealers only recently targeting accessories as a potential revenue stream.

"Accessories offer large and lucrative profit potential for new car and truck dealers," says Nancy Walter, vice president of business development at Foresight. "Our research shows that buyers who do accessorize their vehicle will spend an average of almost $2,000, with certain demographics spending as high as $4,800. However, two-thirds of new car and truck buyers report that their dealer did not initiate an accessory conversation during the sales process and only 36 percent of accessory buyers obtain their necessary accessory information from dealership personnel. Given that total average accessory spend doubles when a sales effort actually takes place, this represents a lot of profit walking out the dealer's door."

For the current round of research, Foresight surveyed nearly 7,500 buyers who made 3,908 total accessory purchases. They evaluated sales of 72 different types of accessories.

While the number of vehicle owners that had already installed accessories was relatively flat from 2013 to 2014, the number of owners who intended to install accessories increased from 19 percent in the previous study to 26 percent in the current data.

"Part of that is because millennials have come back," Walter says. "They tend to plan ahead a bit more."

The number of older buyers has been growing for the past several years. This year, however, younger buyers have come back into the market. "The proportion of younger buyers has really jumped," says Chris Stommel, Foresight president. "That has major implications across the spectrum of the study in terms of behavior, motivations, and the action those buyers will take in the future."

Younger buyers tend to spend more – $1,216 versus $497 for buyers older than 55. Hispanic buyers likewise outspend Caucasians on accessories.

Sporty cars, pickups, and luxury vehicles tend to be the most accessorized. According to Stommel the biggest growth in vehicle sectors was among pickups and minivans.

In terms of accessory types, top sellers like Bluetooth technology, iPod/MP3 systems, and satellite radio have seen their share of the accessories market fall as OEMs make those features standard in more cars. Tinted windows now lead the pack with 56 percent of buyers purchasing them, along with custom floor mats (54 percent).

Opportunity for dealers

Dealers have more to gain than just accessories revenue. Foresight's 2013 data indicated that four in 10 buyers were influenced to purchase their vehicle from a particular dealership because of the availability of accessories. That figure has dropped to 32 percent, but accessories could give dealerships an edge when it comes to snagging more new car business.

Dealers do have to overcome some negative perceptions in the market, however.

According to the current survey data, the Internet is considered to have an advantage in terms of price by 44 percent of respondents, compared to 22 percent for the aftermarket and 16 percent for dealers. The Internet and dealers were even on availability at 33 and 32 percent respectively, while dealers led in quality perception at 47 percent (compared to 12 percent for the aftermarket). Dealers also led on installation, with 56 percent having a favorable perception, compared to 16 percent for the aftermarket.

Dealers have traditionally not focused on accessory sales in the past because margins on vehicle sales were higher. Now, dealerships rely more on parts and service revenue for their profitability, and accessories are getting more attention.

Foresight recommends a number of best practices for dealers to follow in order to increase their accessory sales. Dealers should promote accessories and feature in-store displays. They can also promote their ability to install the accessories using certified technicians.

The number of dealers attempting to sell accessories to survey respondents increased from 32 percent to 43 percent, while the number of dealers displaying accessories in the showroom increased from 14 percent to 21 percent.

"Dealers are stepping up on accessory sales, but price perceptions need to be addressed," Stommel says. "There's a big push in the service bay to connect with each buyer for ongoing service, and the same is true of accessories.

The Foresight Accessory Immersion Report was published in June, and includes accessory installation rates for 72 key auto accessories by brand, segment, geographic and demographic groups, as well as spending trends.

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