Parts pricing and the Internet

Jan. 1, 2020
The last couple of months, I have been writing about some of the issues that the Internet is introducing to our “traditional” business models.
The last couple of months, I have been writing about some of the issues that the Internet is introducing to our “traditional” business models — issues such as WDs providing drop ship fulfillment for Internet retailers, pricing problems inherent in disintermediation (the practice of eliminating intermediaries in a supply chain) and the bold, experimental nature of Internet resellers like Amazon with their current same-day delivery test program. My intent has not been to shock or arouse anyone, although some of the feedback I’ve gotten indicates I have done a bit of both. My purpose is just to get us all thinking more than casually about the impact the Internet is having now on well-established aftermarket businesses. 

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Recently, one of the most profound impacts is techs reporting that some of their customers have becoming increasingly savvy about what parts cost. I’m not talking about oil filters, antifreeze or other parts that are traditionally advertised to consumers by parts stores. They say they’re being challenged on the prices of parts like fuel pumps, sensors and brakes. Moreover, techs say consumers’ ideas about what these parts cost is usually very close to what they themselves pay their suppliers. Clearly, their customers are researching prices on the Internet.

I got a personal glimpse of this phenomenon recently when a friend of mine called for some advice. He was astonished when his local repair shop told him a new fuel pump would cost him more than $500, plus labor. He called me to ask if his tech was trying to rip him off. Seems he had been online and found he could buy any major brand (including the OE brand), for less than half that amount. I explained to him that most techs have traditionally doubled the cost of the parts they install as a means of keeping their hourly labor rate low. He wasn’t sure what the shop’s hourly rate was, but I explained that if his stated hourly rate is $75, it is not enough to cover the high costs of running a decent shop these days, thus the high price on parts to compensate. What I was trying to tell my friend was that he should look at the price of the total job, and if it seemed out of line, he should get a quote from another shop that he trusts. I really wasn’t prepared for his response.

“Maybe I should just buy the parts online and take them to him to install.”

The issue of people supplying their own parts has been around since jobbers opened their doors to the public in the 1950s. There is always someone who will try to cut auto repair costs to a minimum, regardless of the time they invest in the process. The scary difference with this scenario today is the Internet. The most recent polls indicate that 78 percent of Americans use the Internet regularly and that number is climbing rapidly as Generation Y replaces the Boomers.

How much impact is the ubiquitous Internet having on aftermarket parts prices?  Where are we headed with the combination of flowing price information, a tough economy and a stale pricing model at the point of installation? Will it become a common practice to do just as my friend suggested? That is, will consumers price shop online, buy the part from the lowest price supplier and take it to someone to install? Will installers who traditionally have refused to use customer-supplied parts break with tradition?

I realize there are a lot of issues underlying these questions, some of which shake the foundation of our current business models. No consumer could ever anticipate every component that would be required for his repair. Although they may divert a substantial percent of the parts cost on an average repair ticket, what financial impact will this new process have on the traditional aftermarket supply chain (WD, jobber, installer)?

So I’m compelled to ask — are we seeing the birth of a new category of consumers? In addition to DIY and DIFM, are we now confronted with a third category of consumers: BYOP (bring your own parts)?

Think about it and we will pick up the discussion next month.

About the Author

Bob Moore

Bob Moore is a partner in the consulting firm J&B Service that specializes in the automotive aftermarket.  Moore who chairs the SEMA Business Technology Committee and is a member of the SEMA board of directors, can be reached at [email protected] or follow him on Twitter @BobMooreToGo.

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