Monday, August 3, 2015

Carlisle Body Shop Survey – OK, How Well Are We Doing With Our Most Important Wholesale Customer Segment? – Carlisle Scrapbook
by David P. Carlisle

A few weeks ago, we finalized our first national Body Shop survey. We conducted this survey as part of our Summer Associate Program to better understand the role of genuine parts in the collision repair process and to support and validate qualitative research results.

The objectives of this survey were four-fold:
  • Understand the perception of genuine parts vs. independent aftermarket (IAM) parts
  • Understand the parts selection process and major factors influencing the parts buying decision
  • Understand OEM discount and direct repair programs (DRP) and their impact on the body shops’ parts buying behavior
  • Assess how OEM and IAM parts suppliers are currently communicating with body shops
Overall, 249 body shops completed the survey. Let’s talk about some interesting findings.

We need to know four things about the dealer collision wholesale parts business:
  1. It is very important to dealers and OEMs.
  2. Everybody knows that the aftermarket is generally regarded as the low cost spread.
  3. Insurance companies exert a huge amount of control on parts sourcing.
  4. Hands down, body shops prefer to use genuine parts.
Price is incredibly important in this segment – low aftermarket prices drive insurance company behaviors, and impact market shares. So, it seems easy – all the OEMs need to do is match aftermarket prices and they win, right???

It is not so easy. Price matching is like stepping on a bubble under the rug; you can never quite stamp it out. That’s why OEMs create wholesale discount programs to get closer to aftermarket. Getting within 15% seems to be the sweet spot. The above “Price Difference Perception” chart shows how far body shops perceive the OEMs to be from aftermarket prices (by monthly shop revenue). About half of the body shops think that OEM genuine parts are in “spitting” range of the aftermarket.

The good news is that roughly 70% of shops indicated that they participate in at least one OEM discount program. The bad news is that the actual OEM-specific penetration rate is still fairly low. If you look at the chart “Participation in Discount Programs by OEM” you can see huge variability, across OEMs, in program participation. I only show GM because it was the clear leader in the survey … and I did not want to embarrass any of the others with bars not so tall.

Bottom line: The key issue here is “participation”, not how low the price is. It’s not matching a ridiculous price for a “comparable” junk car part or just junky part. For a program to be effective it must be embraced by its target audience, and it must get at the core of the problem: price.

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