2020 Trends Threatening Fixed Ops Revenue

No matter what business you’re in, strategizing to get ahead of the curve means understanding trends and speculating on how they’ll impact your business now and in the future.

Many trends are updated versions of issues that have affected the auto industry for years (the economy, how long people hold onto their cars, etc.).  Now, however, some trends are emerging for the first time thanks to cutting edge technology.

In a recent panel discussion, RevolutionParts Co-Founder & CEO Ibrahim Mesbah points out the issue emerging for dealerships in regards to their wholesale collision business.  

Tough Competition for Collision Repairs

While collision avoidance technology and public safety awareness have improved, it has also put a dent in collision business for many dealerships.  In addition to collision detection systems and a more proactive and safety conscious public, FIXED OPS DIGITAL Co-Founder and CEO Owen Moon points out the sharp increase in collision centers.  

“In the last five years,” he says, “the big four collision centers have doubled the amount of actual brick and mortar buildings they have around the nation.  If you look at ABRA, Boyd, Caliber, and ServiceKing, they've gone from 400 total facilities to over 1,750 since 2012.” -Owen Moon

Fewer cars in need of collision service, plus a more competitive market for what remains?  Dealerships are feeling the squeeze from all sides.

Adapting to Hit Target Absorption Rates

In response to this squeeze, it’s up to dealers to get flexible. Bozard Ford Lincoln Fixed Operations Director Ed Roberts is all about flexibility as it’s a big part of his strategy to improve Absorption Rate.  His motto is “One hundred percent Absorption Rate is 100% attainable.” 

“One hundred percent Absorption Rate is 100% attainable.”  -Ed Roberts

Attainable doesn’t mean easy, though.  Ed is quick to point out that understanding the dealership has to move to meet the customer instead of trying to force them into traditional roles.  That means expanding into different services and enhancing how you connect with customers.

Online Parts Sales Competition

Another area of growth in fixed ops is online parts sales, according to Ibrahim.

“Online parts sales are growing at about 12% year over year, so we’re at about $12 billion for 2019 - that’s the estimated total sales online.” -Ibrahim Mesbah

With around $8 billion in parts sales through Amazon alone in 2018, there’s a booming market that dealers are missing out on at the bricks and mortar level. 

Key to a dealer’s success with retail parts is embracing the online marketplace. Whether it’s to liquidate obsolescent parts or to increase parts turnover, dealerships have an opportunity to get into the online parts industry before it’s too late. 

Warranty ‘Test Drives’

A 2018 Cox Automotive Service Industry Study points out that 7 out of 10 “consumers who purchased or leased from a dealer did not return for service in the past year.” However, new vehicle warranty remains a driving factor for customer loyalty. 

Owen explains,

“What we have to understand is that we have that opportunity under warranty for that free money, in the way that it’s easy for the customer to come to you. Late ownership services is one of our driving points. When the warranty is up and we now have a chance of that consumer to leave and defect to an independent, we as a dealership have been promoting some of those late ownership services the whole time.” 

That may be long interval items like tire replacement, timing belt replacement, or smaller items like a cooling system service. The customer ‘test drives’ the dealership’s service department during the warranty period, but it’s up to the fixed ops departments to sell the store’s benefits once warranty is over. 

Content Quality Over Quantity

That’s where getting the right data to drive traffic to the right areas can make a difference. Boosting relevant content not only attracts users who are ready to do business, it boosts ranking through search engines organically.  Content is king, but quality is still more important than quantity.

Once you’re connecting with customers, it’s time to deliver what they actually need.  Moon drives home the importance of thinking outside traditional roles by highlighting specialty services like his Late Ownership Services.  It’s essentially a way to extend that Honeymoon relationship customers have with dealers while the car is still under warranty and they are the focus of special deals by going through the dealership.  

Ultimately, maintaining and growing a business in the 21st century is about giving customers what they want and being as up front and transparent as possible in the process.  Today’s customers are beyond savvy - they scope out a dealership online through social media and their website long before they ever set foot in the store. But all that research doesn’t mean they always know what a dealership can actually offer.  That’s where educating the customers, and expanding services, comes into play.  

“There's a lot of pressure on the collision side, including independents [...] being more aggressive,” Ibrahim says, “So, [dealers] should continue to squeeze everything they can out of that space and improve service levels on the collision side.  But, also there's a big opportunity online and on the mechanical side. Online is big, it's $12 billion today and it's growing."

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