The CAT opinion formers panel

THIS MONTH’S QUESTION: Where will the industry be in five years time?

“I think that it is generally agreed that the future of the industry is going to become more challenging for various reasons; including complex vehicle technology, longer service schedules, customer service expectations and political influences on competence and accountability, all these issues will reduce the number of Independent Repairers able to work on the modern vehicle.

There will be number of key influences that will drive the need for more professional business management within the aftermarket. These include Euro 5 & 6 legislation, the BSI, ATA accreditation and the Motor Industry Codes, enhancing both the business and the individual. For those within the industry who embrace change will survive

• Economic situation can only get better
• Customers looking for true alternative to dealers
• Smaller garages not investing  – more work for others
• Recruitment – opportunity to find skilled personal
• Continual investment in personnel and equipment
• Parts & equipment suppliers offering better deals
• Passion for excellence and customer service – believe in what you do

How does it need to change?

It needs to explore what other successful businesses outside the automotive arena are up too and absorb some of the practices and strategies used to recruit and retain customers. It needs to place the customer at the beginning, middle and end of any business plan!”

Andy Savva

Owner, Brunswick Garage

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“There’ll be a lot of people out of it because they just won’t be able to cope with stocking and technology.

It will be interesting to see which of the big boys are still around. You might think that they’ll all still be here, but history teaches us otherwise.”

Brian Spratt

Chief Executive, IAAF

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“I believe the future is very bright for the industry PROVIDED it adapts to the customer needs and gives the very highest levels of service. Yes, cars are becoming more complex but that’s been the case for the last 20 years and all garages have had to adapt even if the industry doubters had Independent garages written off! As much as a challenge as technology presents it offers opportunities too, franchised dealers seem unable to train their customer facing staff to the customer needs and the good independents out there should take full advantage of the disgruntled motorists looking for brilliant customer service away from the dealers. The days of the one-man band operations I think may be numbered as motorists need customer service and I feel that even the best technicians can’t offer this whilst making a living actually working on the cars.

Opportunities include more motorists looking to save money against franchised dealers and receive better levels of service and care. With the MOT frequency now confirmed all testing stations can sleep easy knowing that the safety of motorists and the security of regular MOT income is secure. With motorists keeping privately owned cars for longer the amount of work we are able to offer our customers obviously increases and there is danger of them getting pulled to an all inclusive service package on a new car. The independent garage industry has an opportunity to lift its game to force a compulsory scheme membership with government backing which should be followed up with technician licensing similar to Corgi for gas fitters etc – these would result in improved confidence in the motorists eyes and drive the cowboys out of business.

Challenges it faces include manufacturers forcing radical technology onto their cars – hybrids although complex aren’t a major concern as there are so few purchased but with the search for improved efficiency by all manufacturers we have to hope that the solutions generated allow independents to thrive and not die. Other challenges in my opinion are the myriad of so called garage schemes all offering X, Y or Z but in essence all they achieve is greater confusion in the motorist’s eyes potentially pushing them to the security of the franchised dealers!

MOT testing standards & quality must be a priority and a mandatory price introduced. We need to educate motorists on the vital nature of the test and eliminate the discounters who simply test vehicles with a view to recouping their discounted price by dubious failure points! The VOSA guidelines also need rewriting to allow testers to pass or fail with confidence as the current wording can be easily misinterpreted. We simply must introduce a government backed COMPULSORY quality scheme that is recognisable by all motorists – currently the strongest scheme with the most members has the worst name and the worst scheme with sales driven membership and dubious criteria has the best name! We also need to look forward to the licensing of all vehicle technicians in a similar line to Corgi etc so that motorists can rest assured that the car they drive is safe and maintained by a skilled person.”

Chris Meredith

Owner, ABP Motorsport

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“So let’s focus on the Independent Automotive Aftermarket retailer.  Right now, the next five years could seem a daunting prospect. Not only is the economic climate endlessly miserable but just when everyone had stocked up with winter products there was barely a frost!

“We all know what the challenges are going to be – supermarkets taking a bigger share, declining footfall in the High Street, large multi-site factors making hard parts very competitive, and those annoyingly entrepreneurial hand car-wash people stealing what used to be bread and butter shampoo and wax sales.

It is easy to predict the steady decline of the smaller automotive retailer.

“But it doesn’t have to be that way. There is opportunity. Wiser heads than mine will talk about harnessing the experience and expertise of the staff, providing advice and knowledge that the multiples can’t, adding services that create value and convenience for the customer, not trying to compete on price alone.

All of that is vital, but wasted without communication.

“Customer loyalty starts with the retailer. Find out who your existing customers are. Capture e-mail addresses. Build a database. Talk to them.  Involve them.  Decide what makes you unique in your locality. Promote what you have to offer.

“Find ways of extending your market reach through existing customers.  Be creative about expanding your audience.  Use the technology that is all around you and is largely free.  Never before has personalised marketing been cheaper or more effective. This is today’s world.  Those that embrace it will prosper.”

David Kent

CEO, Saxon Distribution

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“Despite the consolidation in the industry we’ve witnessed over the last few years, there is still over-supply at many levels of the distribution chain. Therefore it is likely that there will be further consolidation, particularly amongst suppliers and distributors.

Consolidation requires major funding, which means that either the big European distribution companies or more private investment companies such as LKQ or H2 will come into the industry to provide the financial backing these mergers/acquisitions will need.

Inevitably some traditional brands that operate in localised markets will disappear as a result of this market globalisation and it is likely that some ‘British’ brands could well be among these casualties.

What are the opportunities and challenges it faces?

The biggest challenge for suppliers to the independent aftermarket is to maintain their market share in the face of increasing competition from the original equipment suppliers (OES). Accurately cataloguing their parts will become an increasingly difficult process because access to the raw catalogue data from the vehicle manufacturers is so hard. Therefore parts manufacturers will have to join forces and work together alongside a cataloguing system such as TecDoc to remain competitive.

For the workshop vehicle diagnosis and the training of technicians are the major issues, but the tough economic climate is likely to lead to an increase in the average age of the car parc, which will bring with it additional aftermarket business.

Other opportunities for the industry will come from the new technology employed by hybrid and electric vehicles and the new products that will need to be serviced and repaired by workshops willing to make the investment required to tap into it.

How does it need to adapt?

It is vital that the repair side of the business develops new concepts to ensure that there is a large enough skilled workforce that is equipped with the knowledge and technical qualifications to be able to carry out the work that will be required.

On the supply side, an effective cataloguing platform is crucial.”

Milko Wolf

Dayco Regional Sales Manager, North Europe

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“There is gathering momentum towards a much better, and publicly recognised, accreditation for independent garage technicians. Government legislation and garage schemes are making bold efforts to raise the profile of the independent sector and the distribution chain should use this momentum to help raise the standard for the consumer, and help to provide longevity for the independent installer.

Consolidation of the various accreditations that currently exist with a view to raising the profile of the independent sector. A public awareness campaign should be planned, funded and executed with the aid and support of the distribution chain to ensure the independent aftermarket  has a sustainable future. Too much uncertainty with regards to consumer choice still exists, despite the existence of essential legislation, such as BER.

Today the market is faced with growing price challenges with an increasing demand for lower prices for good quality products. The market relies upon installers supporting the distribution chain and offering the consumer quality products and real value. It is too easy to take cost out for the consumer where this may not exist in reality. This can then lead to lower quality products at lower prices. The benchmark for independent installers is the OE sector so cheaper maintenance does not need to become a reality.”

Nick Racklyeft

Regional Manager, Gates

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“We plan to be thriving, vibrant & growing of course!

OK, so I’ve always been a little optimistic but I believe that independent car accessory stores who can adapt to a market where added value & service provides differentiation will prosper. Those who are determined to race to the bottom on price will struggle to compete with internet retailers and online channels like Ebay & Amazon.

There will be less pure car accessory stores and those that still remain will have found other niche areas to compliment their offering. That could be in leisure products, cycles, motoring related toys etc. Even stores who retail and factor will find it hard to compete against protective car dealerships, extended warranties and the investment needed to cover the car park.

Opportunties for stores prepared to change and adapt and provide ‘fitted services’ will be sought after as a result of a generation who are generally far less able to ‘DIY’ either because of the complicated nature of electronics on the car or because basic practical skills are no longer taught in schools.

The major challenge will not only come from the internet but also from a supply chain who no longer see the need, can afford or are geared to service small independent retailers.

In order to survive these retailers will need to be in a thriving group like A1 Motor Stores of course!”

Glenn Mason

Co-Director, A1 Motabitz

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“This is not an easy thought to contemplate, but here goes.

My first though would be as long as politicians etc do not have anymore hair brain ideas like the scrappage scheme that affected the aftermarket in a big way by reducing MOT testing and servicing older vehicles, things might be ok.

I am finding that being in a recession is actually good for my business as my turnover is increasing , we are gaining many more customers who would of normally changed their cars every three years.  We have also found customers have remembered the last recession and how costly it was for them by not servicing their cars.

The opportunity we face now is to in still confidence and good value for money in the independent aftermarket trade so as we slowly come out of the recession and people once again start to buy new cars they will remember you don’t have to take them to a dealer to get good honest service, with that in mind I intend more training for my staff and keep my eye on the ball for new equipment to deal with new technology”

Julian Glover

Owner, Anglo Continental Cars.

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“I think it’s difficult to predict what’s going to happen in the market with all the problems that are about, the cost of fuel is one problem, and also the fact that cars these days are leaving the factory with so much equipment on them.

My word of advice, particularly for retailers, would be to keep doing what they’re doing – keep doing well, and keep offering customers that extra level of service.

You also need to be on the lookout for new ideas, don’t be afraid to do something new. For example there’s a growing sector of the market that’s starting to feature retro or classic cars – suddenly it’s becoming all the rage to own a classic Mini or something like that.

The beauty of that sector is that when people buy classics there’s an increase in what they’re prepared to spend on it. That means a lot of extra business for the local retailer, and I can see that increasing in the coming months.

With that in mind I would also say to get yourself along to the various classic and retro shows that are coming up. Even if you don’t exhibit there go along and start talking to owners, they could be your next customers.”

Joe Elliott

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“Could technology be our biggest threat and opportunity over the next 5 years?

February 2011 saw Toyota unveil its latest attempt of an automated vehicle powered by Google, is this future of the automotive aftermarket? Well maybe not in 5 years but it could certainly be a real possibility in 10 years time. Whatever happens, technology is changing the face of the humble motor car and we are seeing massive leaps in the development sector when it comes to the design and manufacture of vehicles.

Technology is a real threat to the aftermarket, for vehicles to be repaired knowledge and understanding is prime, garage owners need to embrace technology and training rather than looking  at it as if it is a two headed beast from the world of unknown. Tackled correctly it’s no more of an obstacle that the once feared BMW service light, a cutting edge feature of its time but one now regarded as being simplistic.

Technology offers great opportunities to those willing to invest a little time and money in training, whether you are a car parts distributor, vehicle mechanic or parts adviser, training in the understanding and methodology underpinning the vehicles workings will allow you to better service the needs of you customer, this in turn will aid the independent aftermarket in keeping its market share in the parts and repair sector.”

Damian Milling

Group Marketing Manager, Mill Auto

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“There are three current trends that will set the agenda over the next twelve to twenty four months and contribute significantly to the market size and dynamic over the next five years.

The first of these is the fierce price competition at all levels that many in the industry are currently engaged in; this is driving down margins and profitability. The need to compete is creating the second trend with many companies turning to the introduction of lower cost parts and even the introduction of recognised brands sourced via low cost countries, both of these will contribute to destabilising and devaluing the market. The final trend is the unrelenting expansion within an already over subscribed market with larger groups seeking new sites and determined to keep up with noisy neighbours.

The market size is unlikely to grow significantly over the next five years and the current number of outlets at every level is unsustainable; it is inevitable that their will be a number of casualties  and these will not be restricted to small independent businesses.

The impact of the internet will also have a profound impact, once the issue of first time accurate application of parts is achieved this will quickly take off and take market share.

In the nineties one of the big buzzwords was ‘disintermediation’ whereby supply chains were shortened and links in the chain removed. Twenty years on the technology exists and the need to compete will mean fewer larger distributors and a move a way from delivering the parts before the garage has had a chance to put the phone down. Coupled with this will be new product ranges and technologies and a resurgence in Vehicle Manufacturer presence in the market.”

Peter Cox

General Manager, Motaquip

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“In February, Transport Secretary, Justine Greening, set out clear directives for the garage industry to move forward and to meet the expectations of motorists. She said, and I quote, ‘our garages are crucial to ensuring that Britain’s garages continue to be the safest in the world’.  She also said: ‘Most are doing a good job but the latest data shows there is room for improvement.’

In order for garages to give motorists the very best information about their performance and to improve, they need to fully engage with their customers and use feedback to continuously enhance their services.  I see in the coming years, good garages and Dealers – even the small ones – increasingly using the latest feedback systems, online bookings for MOTs and servicing,  and digital communications technology, such as social media tools, Facebook, LinkedIn and Twitter, not only to build a loyal customer base, but to find out what customers really think of their garage experience.    Thankfully, there are accessible training schemes offering immediate benefit to garages and their customers, and cost effective tools readily available to start putting processes in place.

In the course of my work, I have spoken to and visited hundreds of garages and Dealers and have found the good ones are ready to adapt, evolve and face the challenges ahead.”

Rachel Greasby

General Manger, Forte UK & Good Garage Scheme

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“In five years time the advances in technology should make it easier to access a wider variety of technical information through cheaper and more versatile diagnostic tools.

Whilst it may appear that things will have improved I fear only the most commercially aware garages will flourish in such an environment.

Garages that offer a quality service, customer satisfaction and charge a price that matches the quality of the workmanship will prevail in an environment where cars will be much more reliable and go even longer between services.

The challenge’s will lie in the ability to evolve with the changing technologies, to continually learn about the changing technologies and the systems attached to them and to ensure that they are keeping up to date with government legislation. If a garage can do this the opportunities will rise from the amount of garages that won’t be able to evolve at the same pace. Competition will be much smaller.

Considering that fuel is expected to be in excess of £2 a litre we anticipate alternative fuel vehicles and more cost effective modes of transport to be thriving. We expect vehicle manufacturers are likely to be focusing on hybrid vehicles rather than electric vehicles. Garages need to adapt ensure they can work with the broader range of vehicles that are likely to pass through their workshops.”

Stuart James

Director, IGA

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“The UK public have an insatiable demand for personal mobility, limited only by motoring costs and availability of convenient and affordable public transport alternatives. So cars continue as the preferred option for 75% of our growing population. Total aftermarket value continues to increase slowly, but with many changes.

New car sales staying low. Average age of the parc increasing. Owners of older cars tend to favour local independent garages. Despite the best efforts of the vehicle manufacturers to make their cars difficult for independents to repair, it will be hard for dealers to compete from high-cost premises designed for new car sales. Their share of the aftermarket will continue to decline despite rearguard actions with extended warranties and dealer service plans.

The UK car parc, already the world’s most diverse, will not get any simpler. The long-predicted consolidation of world car manufacturers shows no signs of happening soon with at least 6 Chinese VMs entering our new car market.

High motor insurance premiums and excesses will cause an increasing number of motorists, guarding their no-claim bonuses, to have minor collisions repaired privately. We could even see the return of garages offering both mechanical & body repairs.

A much greater emphasis and awareness of cost by the motorists: the marketing of servicing, MOT, bra kes, tyres and other ‘user-definable’ jobs – predominantly over the web – will be largely price-driven. The independent garage’s ongoing task will be to sell the benefits of regular servicing and preventative maintenance.

Garages must adopt multiple labour rates. Low margins on the basic jobs – but high margins on complex jobs electronics, diesel & petrol injection, turbos, exhausts etc. This will fund their essential investments in equipment, training, signage & branding, web marketing, IT etc.

The task of the parts distributor is to assist the independent garage to embrace these changes and grasp new opportunities. This means holding very high levels of range, availability, delivery and price competitivity on basics items. Additionally, the required stock range for specialised and slow-moving items will continue to explode – Euro Car Parts already stock 120,000 different parts and we lare adding nearly 1,000 new parts every month. The smaller distributor will have difficulty in financing these stocks and much larger groups, probably pan-European, will predominate.”

Sukhpal Singh Ahluwalia

Managing Director, Euro Car Parts

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“Life is pretty tough for all of us in the independent automotive aftermarket at the moment and, frankly, it’s not going to get any easier anytime soon, so we’d all better be prepared to stand up and be counted if we want a successful future. Cars are getting more and more complicated, customers are getting more and more savvy, dealers are getting sharper with their marketing and are having some limited success in attracting older cars back into their service bays.

The chances are that if you bury your head in the sand for the next five years, when you eventually extract it things won’t look much different on the surface but if you think standing still really is an option, be prepared to find yourself so far behind in the race that you’ll never catch up.

But it’s not all doom and gloom, there are huge opportunities for all of us if we are prepared to work closer as an industry.

Manufactures need to sell product to distributors (Factors), Factors need to sell product to garages and garages need to have a constant flow of vehicles passing through their workshops to survive. Oh, and we all need to make a profit. So we’re all relying on Mr Consumer to choose the independent aftermarket when he needs work on his car.

In my view there are three key points we have to address:

• The erroneous belief that new car warranties will be affected by allowing anyone other than a dealer to look after your car during its warranty period. We all need to get behind the IAAF’s Right 2 Choose campaign but we also need to give consumers confidence that we really can look after their car, that we know what we’re doing, we won’t cut corners and that they’ll get everything that a dealer can offer for less money.

• The crazy idea that we all have to give product away. There’s a belief (in some quarters) that customers won’t pay for quality any more. We are all feeling the squeeze on margins and we really don’t have to! Consumers will pay for quality products and quality service. I’m not disputing that there are drivers, usually with older vehicles that want cheaper parts but that’s OK, we can do that too. We have to be confident in our skills and we have to be prepared to charge a reasonable price for those skills.

• The idea that we can muddle through with little or no training – and by training I’m thinking technical, marketing and customer service. Without training we are going nowhere, any of us. Just over 30 years ago, a young, naive, Richard Swann emerged from the University of Salford with an honours degree in Vehicle Engineering Science tucked under his arm. At the time I knew (in a lot of detail) how a car worked but think how things have changed in the intervening years – and some of us haven’t! It’s not just technical training though; customers have become significantly smarter, they expect to feel good when they part with their hard earned cash these days. If we do nothing else as an industry, we must embrace training and in particular technical training. Otherwise we might as well pack up and go home.”

Richard Swann

Sales Director, GSF

NEXT MONTH: We ask the panel for their thoughts on consolidation in the aftermarket