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Survival of the fittest

5th May 2011, Page 45
5th May 2011
Page 45
Page 46
Page 45, 5th May 2011 — Survival of the fittest
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Which of the following most accurately describes the problem?

Selling parts to fleets with their own service and to independent workshops is a ruthless activity – so how do dealers survive and stay on top of their game?

Words: Steve Banner Selling truck parts to transport leets with their own service and repair facilities and to independent workshops is a ferociously competitive activity for dealers to engage in.

“It’s an absolutely ruthless business, and has been for the past two years,” says Steve Afleck. As regional director of dealer group Imperial Commercials, he is responsible for its MAN, Hino and Isuzu activities across a whole swathe of East Anglia, with sites in Norwich and Peterborough.

It’s an activity dealers cannot afford to ignore however, says Tim Strevens, joint MD of Leicester-based DAF dealer group Ford & Slater. “It’s highly competitive, but it’s also an important revenue stream for us,” he observes.

Not surprisingly in the current economic climate, much of the competition centres on price.

“Operators are tightening their belts and are deinitely shopping around more,” says Afleck. “We’re receiving a lot of inquiries from people who simply want to know how much we charge for certain items.” Armed with that information, callers can keep ringing around until what they perceive to be the best deal is secured. “They’re probably calling at least six people before they place an order,” says Steve Crick, parts director at Midlands DAF dealership Greenhous. “I think in some cases they’ve got the time to make these calls because they’re not as busy as they were.” Much of the competition comes from factors – independent parts wholesalers who are especially adept at offering keen deals on fast-moving items such as oil ilters. One weapon dealers can wield against them, however, is the warranty they can offer along with the support they can provide if things happen to go wrong, says Afleck.

“If I sell, say, an MAN part to an operator in Peterborough, the truck it is itted to goes up to Aberdeen, the warranted part then fails at 3.00am and the driver happens to have 20 tonnes of perishables on board, then a dealer will come out and ix the problem,” he observes. “Because there’s a warranty in place, it won’t cost the customer anything. You’re not going to get that sort of support from a local factor.”

A comprehensive warranty is key

The warranty may also cover any damage done to other components on the truck by the part’s failure.

To combat all these factors, dealers also have to do what their rivals have traditionally done, and provide a irst-rate, highly eficient delivery service.

Greenhous runs 11 delivery vans out of its Willenhall, West Midlands site alone. “None of our customers around here would accept one delivery a day,” says Crick. “These days they expect deliveries four or ive times daily.” Customers may get a truck into the workshop, igure out what parts it needs, then call the dealer with their requirements and expect the spares to arrive in 20 minutes.

With diesel prices sky-rocketing, the cost of operating such an intense delivery regime is ballooning. Dealers would love to charge local customers for providing it, but it remains unlikely that they will be able to do so.

“The cost of diesel is a killer, but the irst business to impose delivery charges in a competitive area of the country like ours would ind its sales plummeting,” Crick observes.

One way in which many dealers have been able to play factors at their own game is by offering a manufacturerbacked all-makes parts programme covering trucks other than the make they sell, as well as trailers and general workshop consumables. DAF’s TRP programme is a prime example. “It’s been an enormous success for us,” says Strevens. “We’ve seen it record double-digit growth year-on-year.” Crick adds: “TRP is a success so far as we are concerned.”

Beware of the risks

Andrew Jamieson, MD of West Bromwich, West Midlandsbased Scania dealership Keltruck, is not entirely convinced about the virtues of a franchised dealer offering an all-makes scheme however. “To do it properly you need to carry a really big stock and you risk running into all sorts of stock-management issues,” he observes.

One area of activity he does support, however, is the sale of recycled parts, which Keltruck is deeply involved in. It does not detract from the company’s sales of new spares as hauliers who buy recycled items would probably not be buying too many new parts anyway.

“Where recycled parts often come into their own is in the immediate availability of non-safety-critical items for accident repair,” he says.

“You can buy a recycled cab off the shelf,” he points out. “If you order a new one, then you may have to wait several weeks before it turns up.” There is also the point that the former will be cheaper than the latter; and recycling is of course an environmentally desirable practice. Despite the competition, Af�eck’s parts sales have risen over the last 18 months, with 43% of them being made direct to operators and independent workshops.

“Unfortunately, we’re not making the same sort of margin as we did in the past,” he observes. “That said, around 25% to 30% of our proits still come from parts.” Keltruck is enjoying healthy parts sales too, says Jamieson, despite the demanding trading climate.

“Over-the-counter sales went really well in 2010 and so far this year we’ve exceeded our budget expectations,” he states. “Availability has helped; in fact it’s critical,” he says. “We’ve been achieving a irst-pick rate of around 96%.” “We increased our total over-the-counter retail sales by 24% in 2010,” adds Strevens.

The next few years could be even tougher for parts suppliers as sales of new trucks start to rise again and the spares-hungry older ones they replace – trucks that were not swapped before now because of the recession – are taken off the road.

Because they will be more reliable than their predecessors, the newcomers will require fewer replacements parts, demand for spares will shrink, and the scrapping for whatever business remains is likely to become ever more intense.

So while dealers may wish it were otherwise, there is no indication that the level of competition in the parts aftermarket will diminish any time soon.

That’s bad news for them, but it’s very good news for cost-conscious operators. ■


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