Wholesale: Techs want the best value
It's no secret that the rise of "big-box" merchandisers over the last 25 years has directly affected the way jobbers conduct business, even on the wholesale side. Original equipment manufacturers, who sell to both business-to-business and retail outlets, have slashed costs in order to stay competitive in the market.
Chuck McGee, sales manager for Town and Country Auto Parts in Huntington Valley, Pa., notes that many of the name-brand suppliers are dropping the price of selected products for retail to at or below jobber prices.
"It gets to the point when the installers can't make a profit off a name-brand product," he says. "They look to us to find a compatible substitute in an 'off-line' that can deliver similar results for about the same price."
David Wilkins, general manager of ABC Auto Parts in Longview, Texas, agrees that technicians are interested in getting the best value for their dollar, even if it means using parts that aren't American-made.
"The quality of the product continues to be important to installers," he explains, "but the mind-set has changed. Customers used to be a lot more brand-conscious, I think. But they're not having the quality problems they'd expect to have when the part says, 'Made in China.' There's a lot less pushback."
Wilkins attributes the attitude change to a few things, not the least of which is that technicians trust their wholesale distributors to sell them well-made, working products regardless of manufacturer origin.
"We're both an ACDelco and Motorcraft distributor, so I certainly don't want to downplay the importance of brands," he says. "It's still a big piece of our product offerings. But even a certain percentage of name-brand parts are imported."
The bottom line, Wilkins says, is that all of the industry — manufacturers, distributors and technicians — "need to survive as business owners, too."
McGee says he is frustrated by the trend of some manufacturers selling products on the retail side for less than what a wholesale distributor can purchase it, let alone sell it, for.
Not only does this practice alienate distributors who are active on the wholesale side, he says, but it also hurts the technicians because their margins are less — and they're left to increase prices on the labor side.
"So who wins in this?" he asks. "The distributors lose due to lost profits; the manufacturer loses because few distributors who service the installer carry the lines anymore. Only the major retailer wins."
Retail: Gas costs have ripple effect
On the retail side, the costs of doing business seem to be holding steady — with the exception of fuel prices.
Stan Robbins, president of Dover, N.H.-based Robbins Auto Parts, quips that "the best thing that could happen for us is have gas prices come down below $2 a gallon."
Not only is it an expense on the wholesale side, with a fleet of delivery trucks on the road daily, but it's an increased burden on employees as well. As David Wilkins, general manager of ABC Auto Parts in Longview, Texas, notes, "It's very frustrating for us to see employees struggle with gas prices.
"I feel the pressure on payroll has increased because of the general cost of living," adds Wilkins, whose company is about 40 percent retail. "When gas prices increase, we need to build that into the price of the part. It's part of the cost of doing business, and we do have a mechanism in place for that."
Keeping good employees is a balancing act overall, Wilkins notes, because paying too much compromises the long-term health of the company, but so does paying too little — in terms of turnover rates and employee morale: "We are careful to try to pay the market rate," he says.
Regardless of business costs, says Robbins, distributors must keep the customer happy. "We're a member of Federated, but lately we've been drifting to outsourcing the parts just to stay competitive," he adds. "The prices are cheaper offshore, yet the quality is about the same."
Wilkins says the "Wal-Mart mentality" of consumers carries over into the auto parts store aisles. While technicians have a better understanding of the old adage, "sometimes you get what you pay for," many do-it-yourselfers are intent on finding a quick and cheap fix.
"They lack experience in repetitive use of the part," he points out, although he agrees with Robbins that off-brand parts are coming up in quality.
Sandra Taylor, vice president of customer service for Rock Auto in Madison, Wis., believes the industry is in a good place these days. Between Rock Auto's brick-and-mortar store and online presence, RockAuto.com, Taylor points out that her company's customer service rating is at a record high. She doesn't see any sacrifices to be made in light of current economic pressures.
"We're certainly aware of the financial problems some parts manufacturers are having, but the support we've seen from them has actually been improving," she says. "Maybe they're realizing that the aftermarket is a more important market than they thought — or maybe it's because, unlike GM and Ford, we pay our bills on time!"
Wilkins sees the industry as leaner than it was a decade ago, although the trend is not necessarily a bad thing. He uses incentive programs as an example, pointing out that promotions are geared more toward brand awareness than price reduction these days.
"There's a little less fluff on the margin," he says. "It's more about how you spend your money and what your return on investment is. But I think that's a good thing. It's important to watch how you're spending. Ultimately, it's about value for the consumer — the person driving the car is the one paying for it."