Friday, September 23, 2011

Survival of the Fittest – Fast-Fits Are Fitter Than You Think - by Stephan Brackertz

Every now and then we take a look at what is going on in Europe. And there is an interesting story unfolding right now we wanted to share… Carlisle recently conducted a major survey of over 5,000 European automotive end-customers in 5 countries. What we found was a mix of “we knew that already”, some “surprises”, as well as some real “bombs”. Bombs are more than surprises… they are things we didn’t know at all or things where our common knowledge is actually wrong. One of the things we learned – and this is a real bomb – is that Fast-Fits are on their way to eating the dealers’ lunch. All indications are that Fast-Fits are stealing dealer customers away and are doing so successfully.

How is this happening you may ask? Here are some survey insights:
  • About one fifth of customers already go online to search for Aftersales related information.
  • Customers that are online are about evenly split between dealer loyalists and aftermarket workshop loyalists (independent workshops and fast-fits).
  • Prompts from the independent aftermarket tempt them to try a different repair provider (25-45% of online customers change repair provider based on what they find on the Internet).
  • The prompts typically come from fast-fits. They are sucking dealer customers and independent workshop customers in to try fast-fit services.
  • A sizeable portion of self-declared “dealer loyalists” are already defecting to Fast-Fits.
  • This issue is big enough to notice in Europe, and huge enough to panic in the United Kingdom.
So what? A typical response to this may be, “we OEMs don’t have to worry because Fast-Fits deliver awful customer satisfaction; our dealers are far better.” Not so. In fact, our survey data shows that ‘dealer defectors’ are satisfied with their service experience at fast-fits. This is a big deal after all.

“Why didn’t I know about this?” may be the next question. That’s mainly because we underestimated Fast-Fits in the past and their ability to evolve and re-invent themselves. This is happening below our radar. And if we look back we can understand how we underestimated Fast-Fits.

Let’s backtrack a bit, to the way it used to be…
Fast-fit chains like ATU, Speedy, Midas, and Mekonomen grew to a significant presence in Europe with many hundreds of outlets. Private equity firms saw a good business model and many fast-fits were bought by private equity investors that loaded up the capital structure with debt. Fast-fits became marketing masters – bombarding consumers with low price messages in print fliers, TV, and radio. They pulled a lot of customers into their workshops and then bungled things up by not delivering service quality. Worse, poor employee compensation plans ensured that up-selling glided into phony repairs and rip-off territory. These plans would have made Amway proud.

As a result, Fast-Fits were like jet engines – they sucked in a lot of customers, squeezed them, burned them up and spewed them out at high
speeds. Most of the customers didn’t “stick” due to the poor service experience – but loyalty didn’t matter in this business model. As long as there were enough fresh, unburned customers around to suck in, the jet engine could keep spinning. Over the years OEMs became less and less worried as enough customers spread the word that service quality is awful and business practices are frivolous. When the recession and the debt crisis hit we thought we could write-off Fast-Fits completely and focus on other threats.

The recession was like a near-death experience to Fast-Fits:
  • Customers clenched up and spent less, delaying service and repairs
  • Older cars were being pulled off the road by cash-for-clunkers programs
  • Rolling over large gobs of private equity debt became tricky
Let’s fast forward back to where we are today and where we will be if we don’t react…

Fast-fits are back and are snapping away at our “dealer loyalists”. The enabler for this is the Internet. A brilliant and comprehensive plan to take advantage of the Internet is helping fast-fits back from the brink of destruction. We underestimated the fast-fits. The experience shows that they are damn good at evolving. If it’s survival of the fittest out there, fast-fits may be fitter than we think.

Let’s compare some of the DNA of fast-fits and OEMs. Two very different animals, but wouldn’t it be nice if we could splice out some of those fast-fit genes and integrate them into our OEM genome? Especially the genes about Internet strategy and speed to evolve?

So fast-fit DNA explains much of what we are seeing. And the natural environment is also changing in their favor (how Darwinian). Customers are moving into the online world. Fast-fits have already adapted to this change quite quickly. To stay fit, OEMs need to be ready to make the next evolutionary step into this space.
There’s lots more interesting aspects to this story – ask us for the details or a look at some of the scary survey data.

P.S.: Oh, and how did fast-fits fix the customer perception problem with workshop quality so quickly? Wouldn’t we love to splice out and implant that gene into our DNA?

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