Service and parts sales became even more critical to auto dealers during the recent recession, and dealerships got creative in finding ways to keep existing service customers and bring in new ones – everything from expanding to an all makes/models strategy, to offering aftermarket parts options, and expanding their operating hours.
Most of those efforts were focused on service; parts sales have actually dipped for dealers according to the most recent industry report from the National Automobile Dealers Association (NADA). According to the association, parts sales were down industry-wide for customer mechanical repairs, warranty work, wholesale parts and sublet work.
One dealership in Austin, Texas, is trying to expand its parts sales beyond mechanical/warranty work and local wholesale parts sales. Mac Haik, a new and used Dodge/Chrysler/Jeep dealership, has expanded its own local delivery operations and launched an e-commerce site in a bid to become a national OEM parts distributor.
Launched in the fall of 2013, the e-commerce site offers national customers access to a full inventory of Dodge/Chrysler/Jeep parts. "It's an additional sales channel we weren't taking advantage of before," says Ben Stapleton, Internet client relationships and digital information manager at Mac Haik. "With the prices we are able to offer as a dealership, we felt we could be competitive in OEM parts sales."
The dealerships hired RevolutionParts to help build the e-commerce site, and has marketed the online service using Google product listing ads. "Anybody who Googles a part number specific to one we carry, we show up in that listing with an icon and a Mopar logo that will take them to that part in our catalog," Stapleton says.
Stapleton says the response has been up and down so far, and the dealership is still working out the kinks for the new site. Customers have purchased everything from rubber trim pieces to airbags and ignition switches through the online portal. The parts department now carries some additional inventory to accommodate online sales.
"Parts we have in stock go out immediately, or within 24 to 48 hours," Stapleton says. "With more than a half million parts, you can't always see what's on back order. We have to communicate with the customer so they know what is on back order, and they can make a decision if they want us to ship the part for them, or we can connect them with a dealership that has the parts in stock."
Margins for online sales are tighter than in-store sales, Stapleton says. "We're competing against folks who have a 'low as you can go' approach to pricing," Stapleton says. "We offer the parts as online specials only. If someone comes into the dealership, there is an overhead cost to working with them in person. Online, the customer is doing that work themselves so they are being rewarded with a lower price."
He says the biggest challenges in setting up the e-commerce site were establishing payment processing functionality and setting up an account specific to online parts sales. Parts manager Kyle Henning suggested adding PayPal as an option as well.
"We've found customers are more apt to use PayPal, especially with companies they aren't familiar with. That is a little expensive for us at times because of the fees, but we've found it's worth it just because of the sheer number of people who prefer to use it," Stapleton says.
"We also didn't consider things like hazmat shipping, which can increase freight charges," Henning says. "We have to be competitive on shipping, so it can be difficult to keep those costs in line."
One counter employee handles all Internet orders, but Stapleton says it takes a team effort to coordinate the online business. "People expect immediate gratification online, so we have to work together to make sure communication happens in a timely manner," Stapleton says. "If there's a refund, that has to happen quickly, and we have to explain the status to the customer."
The parts department also now offers free deliveries to homes or businesses within a 15-mile radius of the dealerships. "We've offered retail delivery here in Austin, and we've expanded our wholesale delivery area now as well," Henning says. "We already had the delivery vehicles, so we've added extra hours for each driver to accommodate the extra volume."
According to Henning, the dealership does approximately $120,000 a month in wholesale parts sales locally, along with $15,000 to $20,000 a month in retail parts.
Stapleton says he hopes to add a second e-commerce site in the near future. "We can compete against ourselves in some respect, and push our competitors further down in the Google searches," he says. "After that, we want to expand to additional makes and models. Group 1 Automotive actually has a strong online presence, and they sell parts for all the makes and models in the group. That's where we got the idea to expand into other manufacturers, or at least try to provide drop-ship service for those parts."
Stapleton also wants to add more high-resolution parts images to the site, although he says getting the images from Mopar has been a challenge.
"Other companies have a media-rich catalog where you can see images of the physical part, and that's what we're working on now so we can provide the customer with as much information as possible," Stapleton says. "We initially are focusing on the parts that are being viewed the most often by customers."
Subscribe to Aftermarket Business World and receive articles like this every month….absolutely free. Click here.