When it comes to making annual predictions, shops face an interesting dilemma. On one hand, the clock turning hands from 2020 to 2021 means very little. The forces driving the repair market over the previous 12 months don’t simply reset. The market that’s been in place for a while will remain. Also, as COVID-19 proved, sometimes immense disruptive forces that no one saw coming can turn the industry upside down.
On the other hand, making prognostication is a big part of succeeding in business. If you don’t analyze the forces shaping the repair market to see where it’s headed, you’re not going to be able to make the necessary changes needed to survive. The question everyone is left asking is then: How do I decide which changes are most likely to affect my business? The answer is pretty simple. Go to the experts. Reach out to industry leaders who have a strong track record of building their businesses correctly betting on change. From there, take their advice on how you can do the same.
Here’s a look at what to expect in 2021 and the steps you should take to win big in a year fraught with new challenges.
COVID-19 will continue reducing job opportunities
With vaccines available for COVID-19 and some projections showing wide-spread distribution by June, the current pandemic looks to be coming to an end. But that doesn’t mean shops should look to a return to “normalcy” at any point. First off, the national economy has been profoundly damaged by the pandemic. Recent studies show that small businesses have borne the brunt of the pandemic. A small-/medium-sized business survey conducted this past fall by the CBIZ Main Street Index showed over 43 percent of respondents reporting a “significant to severe impact.” Online reviewer Yelp Inc. released data showing that from March thru July more than 80,000 businesses permanently closed, with nearly 60,000 being local businesses or those with fewer than five locations.
Determining just how many of these businesses are collision repairers and how the pandemic has hit the repair industry itself is difficult. But with profit margins remaining tight and many shops fighting to keep their heads above water under traditional circumstances, it’s easy to imagine a number of shops shuttering. Throw in the fact that millions of Americans have lost their jobs (the current unemployment rate is just under 7 percent or roughly twice what it was a year ago) and therefore aren’t going to be able or willing to pay for repairs, and prospects for a quick recovery seem dim.
Now consider what your daily commute should reveal about the struggles in the auto service industry. Chris Scully, Client Relations Manager for DRIVE, lives in Los Angeles county, the most congested vehicle area in the nation, and sees significantly less traffic, which translates into significantly fewer accidents/repair opportunities.
Further, even as life in the US gradually returns to pre-pandemic form, some changes will remain. Many businesses that moved to telecommute/work-from-home environments will maintain this change after it proved both to work (no drop in productivity) and produce savings in offices that showed prodigious drops in utilities and other costs. Also, a number of Americans have transitioned to lives where some form of social distancing is the norm and life at home is much preferred over hitting the road. Miles driven, and therefore repair opportunities, could remain depressed for some time.
As if all that weren’t enough, experts have begun looking to potential new pandemics, meaning a return to COVID-like protocols that restrict travel business and personal interactions is possible.
That doesn’t mean repairers should look towards 2021 with grim resolve. Just the opposite (as this article will indicate). Some good news is on the way. “For the collision industry specifically, the market is recovering, but the unknown is just how long will it take to return to pre-COVID numbers,” says BASF Vice President Joel Johnson.
Farzam Afshar, founder and CEO of VeriFacts, predicts 2021 will be a great year for shops – namely for those that can adapt to change.
The influence of OEMs will grow as insurer influence diminishes
Behind some of Afshar ‘s optimism is disruption in the OEM and insurance markets that should benefit shops. In September, State Farm acquired GAINSCO, a regional nonstandard auto insurer that provides state mandatory minimum coverage, allowing it to greatly expand its geographic coverage. Afshar believes the new year will see more such consolidations and, in other cases, some insurers closing their businesses.
The relationship between insurers and OEMs also will continue to change as the two groups seek to leverage each other’s place in the market. In 2020, Ford built relationships with Allstate and Liberty Mutual who will offer discounts to owners of connected Ford vehicles. Ford customers who agree to allow the insurers to collect telematic information can receive discounts on premiums based on safe driving habits. The arrangement benefits both groups since it allows Ford to offer reduced insurance pricing while insurers gain access to new customers. Toyota has signed similar agreements with Liberty Mutual and Nationwide, the latter of which promises to cut premiums by as much as 40 percent.
“It just makes sense for drivers to be able to purchase insurance at a dealership,” says Afshar.
As the number of insurers shrinks due to consolidations and closing, Afshar sees the same process happening with OEMs. He believes some manufacturers will consolidate businesses in 2021 while others go out of business. A number of new brands, “some you’ve never heard of,” will hit the US market.
Henri Rich, senior services consultant at AkzoNobel, notes the same: “New vehicle manufacturers outside of the big traditional domestic and foreign brand names that we know will become more common. Names like Bollinger, Byton, Lucid, Fisker, Faraday, Polestar, Rivian, NIO, Kandi and many others will all need automotive services.”
Afshar says the product of all these changes is that OEMs will have greater say in how vehicles are repaired. Specifically, there will be a greater push to fully return vehicles to pre-accident condition using OEM repair procedures, something many shops have pushed for over the past 20 years when they accused insurers of cutting corners to cut costs.
Yes, shops may be on the road to repairing vehicles the way they’ve always wanted to.
Technology will advance further faster
There’s an old military adage about the process of continually preparing for actions that appear hopelessly delayed: Hurry up and wait. That saying also could be applied to the entry of new tech into collision repair or any number of other industries. Technological change can be slow as businesses struggle to adapt and adopt. That is – until some external force (this time it’s COVID-19) forces them to ramp up their efforts with all due haste.
As noted earlier, telecommuting tools that many businesses have used very little or intermittently for years have allowed them to move entire workforces to remote status for the short and long term. Those tools have been greatly enhanced over the past nine months as these businesses have requested more options from vendors.
In the collision repair market, shops have adopted more tools such as software that allow them to communicate and operate more efficiently with smaller staffs. With fewer repair opportunities, upgrading to newer equipment that allows them to work on newer models is no longer something that can wait. Indeed, many of the repair issues that shops have been told to prepare for over the past decade or two have to be addressed now. There is no more waiting for the right time to invest in progress.
2021 action list
Now that you know what to prepare for, put these steps to work
Step 1. Reach out to consumers like never before. Sitting back and waiting for your DRP to bring in customers or hoping a lukewarm marketing campaign attracts business is a formula for failure.
Tim Ronak, senior services consultant with AkzoNobel, declares that “shops must own the relationship with the vehicle owner” and provides three examples of how they may do just that.
1. Direct-to-consumer marketing – A lot of shops think about marketing only during slow times where they adopt a “market so you never get slow” philosophy. It’s time to get back to Marketing 101 - determine the unique selling proposition for your shop and market the heck out of it by using direct mail, local signage, local digital or print advertising, social media, etc.
2. Consumer education – Help the customer understand what to expect during the claims process – from the estimate through disassembly for repair planning through the return of a flawless vehicle to them. Managing customer expectations through education is a critical component to consumer relations.
3. Face-to-face interaction – Even when wearing a mask, there is no substitute for face-to-face interaction when it comes to building relationships with consumers. Have designated people at your shop to spend time talking with customers
Steve Trapp, North American strategic accounts manager for Axalta, says providing every customer with white glove treatment is critical, as is exceeding their needs. “Maintaining good customer relationships will ensure repeat business throughout 2021 and beyond,” he adds.
Trapp also believes shops should adopt other procedures, that along with the introduction of touchless virtual claims, can be taken prior to vehicle check-in to guarantee a smooth customer experience. This includes requesting images of the vehicle’s damage, pre-writing the estimate, gaining online approvals and pre-ordering critical parts to arrive before the scheduled service.
Afshar encourages shops to take a more active role in their communities. Not only does this give them more precious personal time with potential customers, doing so also provides an accurate picture of the types of vehicles most popular in a community, which in turn provides valuable insight into which certification programs a shop should pursue.
Step 2. Make more from your existing business. For years, experts have encouraged shops to blueprint repairs, use lean techniques, write more accurate estimates and use any number of products and techniques to cut waste and increase efficiency. With fewer work opportunities available, more than ever shops need to squeeze every possible dollar from each repair.
Tony Larimer, director of sales and marketing at Dan-Am Company, notes that shops need to focus on reducing errors and cutting wait times and material loss wherever possible. That starts up front with blueprinting and writing an accurate estimate. “Some colors can take a while to order,” he says. “The sooner you discover that the sooner you can place an order so a vehicle isn’t sitting around for two weeks.”
He also suggests using affordable tools like color matching lighting, mil gauges to determine finish thickness over sensors and clean compressed air to help shops apply an accurate, perfect finish the first time. “Re-dos can cost somewhere between several hundred dollars or over a thousand dollars, he says. “You always want to paint the car just once.”
Larimer recommends combining these savings with cost-cutting efficiencies such as UV coatings that reduce finish application times, spray guns specifically designed for small jobs and disposable mix cups that reduce product waste and disposal costs. Those suggestions are echoed by paint companies like BASF and Sherwin-Williams Automotive Finishes (SWAF) who tout the abilities of their latest offerings to significant cut application and drying times.
Ted Williams, global director of business services focus for SWAF, says further efficiencies can be found by optimizing use of your staff, specifically finding what issues may be hindering techs from repairing cars. “The most common focus areas are scheduling based on available skills and capacity, proper damage analysis, parts correctness and in-process quality that focuses on elimination of common redoes,” he says. “These don’t require huge capital investments yet reap huge rewards in business improvements for shops and their customers.”
Step 3. Focus on employees. Speaking of staff, keep in mind that they remain your most important business asset. “A bad team won’t make you money. You can get by with older equipment, but you need a good team,” says Scully. “And you need to demonstrate that you support them.”
He notes that a big part of that support is making sure employees have the necessary training to make them successful. During the pandemic, training has been limited due to restrictions on public gatherings. Many vendors, particularly paint companies, have responded with virtual training. Others have significantly upgraded their video offerings. Larimer says his company’s videos (available on YouTube under SATA by DanAm Company) cover a wide range of topics, including the proper cleaning and care of spray guns, which can significantly extend their usable life. He also points out that the down time many shops have been experiencing is the perfect time to dedicate to learning.
Beyond training, Rich suggests right sizing your organization for the long term versus the short term; find ways to keep staff on hand since they will be needed during business recovery. He also recommends spending time developing and documenting your staff’s career paths, salary tables, incentives, etc.
Trapp adds that shops should concentrate on offering a steady flow of work, competitive benefits and OEM-approved equipment while also maintaining fair pay.
Step 4. Upgrade your tech. Investing in cutting-edge equipment during a down time may seem counter intuitive, but not doing so creates even more problems. Shops need up-to-date equipment to repair modern vehicles. Cutting your investments here reduces your chance to capture much needed revenue. When the market does rebound, you’re even less prepared than your competitors to grow your business. Fortunately, you don’t need costly purchases to keep pace.
Areas to target include software technology that improves communication, eliminates errors and accelerates decision making, says Williams. Afshar says shops should upgrade all their wideband to 5G to ensure employees throughout their operations have the best possible internet connectivity. He also says shops need to pursue certifications that would best benefit businesses.
Certification may seem like an expensive proposition, but Afshar notes that most charge around $3000 annually in fees. As for any required equipment, he says shops need these pieces anyway and savings can be found by investing in those that satisfy multiple certification programs. Further, when it does come to investing, he says repairers should always spend a bit more if it means upgrading to a better product since these purchases will have to be replaced with newer models less often.
Looking for ways to raise money for investments? Trapp suggests selling older equipment.
Both Williams and Afshar recommend shops invest in programs offering Apps that provide repair help. Earlier this year, SWAF introduced Collision Core Quality – a fully mobile app to provide in-process, time-stamped, peer-to-peer quality verification and validation assurance throughout the reconditioning process. The app is designed to build strength and stability into the core of a business — removing silos and connecting data, refining and validating processes, optimizing labor and resources, educating and engaging employees, reducing waste, and identifying route cause and effect.
VeriFacts Automotive offers an App that provides shops with real time face-to-face repair help that permits its coaches to view a repair and work through any issues with OEM procedures directly with a shop. Issues that may once have taken significant time for a tech to work through (while potentially spinning off course and making mistakes) can now be efficiently resolved.
Step 5. Prepare for EV, sanitization and new OEMs. While determining which of the new vehicle brands will offer sufficient repair opportunities will be difficult, shop can adopt a mindset to remain open to new possibilities.
Afshar says the growth of electric vehicles (EV) represents the next big change in the repair industry, with these vehicles grabbing 10 – 20 percent of the automotive market. He expects this share to grow significantly in 2021 as “companies we’ve never heard of enter the market” and recommends shops spend time training to repair these vehicles. He notes that shop certified to repaired EVs will have a significant advantage marketing their services to insurers, dealerships and the marketplace.
Along with EV certification, Afshar suggests shops be certified in sanitization programs. Returning vehicles free from COVID-19, bacteria, viruses and other pathogens will continue to be significant throughout the new year and potentially beyond.
Step 6. Get help. One big change that could benefit a number of shops is reaching out for assistance. In a volatile, changing market receiving additional guidance is not just a nice option, it’s a critical choice. No owner or management team is going to have all the right answers or best insights. Don’t hesitate to reach out to those who have a different perspective or experience that could benefit your situation. Vendors and consulting firms can help you make informed decisions, as can your industry colleagues. Both Williams and Trapp tout the importance of joining performance groups, with Williams calling their assistance “invaluable” during these challenging days.
Step 7. Adopt a positive attitude. What’s the most significant decision you can make in 2021? Scully says it’s adopting a positive outlook, which he says makes survival far easier.
Indeed, if there was one point the contributors to this article shared, it was a belief that 2021, as challenging as it may be, also offers extraordinary opportunities for shops to thrive. Historically, businesses emerging from disruptive events or economic downturns have great potential for growth since many of their competitors either have shuttered or are too weak to gain ground.
In 2021, vehicles will still need to be repaired. Business will return. Those shops that have prepared for the new year or adapted their businesses will be well suited to grow. They won’t need to take extraordinary steps to do so. Simply by taking much of the advice they’ve been given for years to upgrade their operations and by identifying the trends at work in a post-COVID landscape they can look forward to brighter days ahead – and much sooner than later.
