Profit Booster: Tapping the Specialty Equipment Market
April 2013, Auto Dealer Today - WebXclusive
Pictured is General Manager Larry Hook and the parts department at All American Chrysler Jeep Dodge of Odessa, Texas.
The parts and accessories market has undergone a sea change over the years. Dealers are now incorporating accessory sales into their sales processes, and they’re leaning on technology to help buyers customize their newly purchased vehicles — all in the hopes of improving the buying experience and capitalizing on the $30 billion specialty equipment market.
Larry Hook, a 20-year industry veteran and general manager of All American Chrysler Jeep Dodge of Odessa, Texas, recalls a time when vehicles didn’t come with carpet. He even remembers when some Chevrolet trucks didn’t come equipped with either a front or rear bumper, and how Dodge trucks came with school bus-like steering wheels.
“Things have changed, no question,” Hook says, pointing to the wheel craze of a few years ago when consumers began buying bigger wheels and tires. “We used to have to apologize for our product. Now, we can open the door and not say much. Our product has come forward leaps and bounds.”
If a buyer wants to further customize his or her vehicle, the store tries to make that experience as smooth as possible. “If we don’t make it easy and convenient and have the product in stock, then they’ll go and accessorize their vehicle somewhere else,” Hook says.
The All American store, which is part of Medford, Ore.-based Lithia Motors Inc., has staffers dedicated strictly to installing accessories. There’s a technician who concentrates on window tinting and a heavy truck accessories specialist for handling larger items, such as grille guards.
“We have to stock those types of accessories,” Hook explains. “We’re in oil field country, and these guys like to have their vehicles a certain way, so we try to stock those types of items.”
One of All American’s most popular items has been a pre-installed Electronic Vehicle Tracking System (EVTS) developed by Mopar, the accessories division of the Chrysler Group. Hook says the product penetrates at a 50 to 60 percent clip each month. He adds that the product’s three protection packages Mopar allows his F&I office to upsell, which can include anything from a one-year service plan to concierge services and 24/7 emergency dispatch, also provide a boost to his dealership’s bottom line.
The device offers GPS tracking to help customers recover a stolen vehicle as well as track other vehicle behavior. For example, if a young driver exceeds 60 mph, the system will send an e-mail noting the fast driving, Hook says. The EVTS also has been a boon for the dealership, because it can signal if there’s a vehicle being driven off the lot when it shouldn’t be. It also notifies Hook if a vehicle is being driven beyond a preset circumference.
In February, All American, which consistently ranks in the Top 10 for Ram truck sales nationwide, averaged about $660 per vehicle in parts and accessory sales. That added up to $47,000 in additional revenue for the month, Hook says.
Keeping that much inventory in stock does require shelf space, but the dealership’s warehouse remains about the same with enough stock to cover a couple of weeks’ worth of sales. Hook says that’s because most products sell within 90 days. And if a product is needed from a vendor two hours away, or even five hours, the dealership will send someone to get it.
“We don’t want a customer to wait on us with a brand-new vehicle ready to go,” Hook says. “We should be the ones making that extra effort. The customer is the focus of our day, not the interruption of our day.”
Auto dealerships that are willing to likewise invest in their parts and accessories offerings will be joining a multi-billion marketplace on the rebound.
A 2012 Annual Market Report released in March by the Diamond Bar, Calif.-based Specialty Equipment Market Association (SEMA) found the specialty equipment market experienced 5 percent sales growth in 2011, with annual sales totaling $30 billion.
Specialty auto parts manufacturers, according to the report, sold most of their volume to specialty stores (28.2 percent), chain stores (17.6 percent) and mail-order companies (17.1 percent), with an estimated 4 percent of products sold through franchised dealers.
A December 2010 SEMA report titled, “Influence of Accessories on New Vehicle Sales,” found that accessories sales influenced more than 1 million new-vehicle sales each year. The report found that 14 percent of new-vehicle buyers planned to accessorize their vehicle and about one-third of them were influenced to buy a particular model based on the availability of accessories. The report also found that about 8 percent of new-vehicle buyers were influenced by seeing an accessorized vehicle.
Choose Your Option
Showcasing an accessorized vehicle in the dealership has been a solid sales tool for Adrian, Mich.-based Venchurs Vehicle Systems, which specializes in creating expedition versions of SUVs and trucks, says Mark Merriman, the company’s marketing and sales coordinator.
He recalls how an undisclosed dealership’s sales manager said he wasn’t interested in a demonstration Jeep outfitted with hardcore off-road items. That was until the store’s owner pulled up and asked how he could get more of them.
“We have consignment vehicles on the lot so people can see what’s on them,” Merriman says. “You can have pictures and talk about it all you want, but when they actually see it, that triggers it.”
From Merriman’s observations, it seems that regional trends tend to drive the decisions behind acquiring accessories. In the Southwest, for example, consumers have been buying accessories to enhance Baja-looking, off-road vehicles. In Texas and Florida, a young generation of workers has found employment in natural gas mining, which has given them enough disposable income to buy and accessorize their vehicles, Merriman notes.