If your map for business success shows a fast track route to the automotive aftermarket what does the future hold?
So you're a petrol head with one ambition - to make money from your passion. Franchising might seem like the perfect solution but are you service oriented, dedicated and innovative? For above all else it is those traits that will continue to drive successful franchisees in the automotive aftermarket sector, according to key players in the industry.
Included in the aftermarket franchise arena are tyre and brake services, mobile detailing, paint services, upholstery providers, replacement glass businesses, audio and accessory retailers. Yet whatever the company focus and whatever the structure, whether or not a business is franchised, for established firms the major challenges they need to face revolve around the two key issues of staff and innovation, suggests Hamish Murdoch of UltraTune. And innovation can start at the workplace, insists Murdoch. "Our established franchisees are constantly looking at new ways to improve systems, increase productivity and exceed customer expectations. When they are proven, we pick them up at head office and spread the word across the country as quickly as possible."
Adam Gillick, group marketing manager at Pedders Suspension, agrees with the need for differentiation. "Every franchisor needs to set themselves up and continue to reinvent themselves to be able to differentiate their product and service offering from the competition. In our particular franchise system we have done just that by having the ability to offer specialist fitment advice on our products at both wholesale and retail levels which is something that our competition can't really offer."
Of course the danger can be in chasing what he calls the new craze or latest sensation at the expense of the core business. Getting the performance and innovation balance right is vital as The Tyre Factory group general manager Mark Luciani stresses. “Factors like hard work and excellent customer service will always be integral to any business. This coupled with keeping in touch with market trends and finding the best way to communicate to the core market will help ensure that franchisees are continually building the awareness of their brand.”
Last financial year Pedders grew sales beyond its expectations. “We did this by diversifying in a market that is truly saturated by so many options. We expand our range of products to include more under car and steering parts. This strategy worked well. We changed our core focus in our media campaign and moved to a more general target audience. While all of this diversification took place we also improved upon what we currently do. This is a mandate for any automotive franchise. Change to our products, marketing, operations, staff, training even our warehousing and offices!"
So is the market saturated? Murdoch believes not. "The car servicing market in Australia is not saturated nor is it likely to hit saturation given the rate of growth of new and used vehicle sales versus service centre availability around Australia. The market is now, as it has always been, simply a battle between motor vehicle manufacturers who would prefer all vehicles serviced and repaired by themselves - with no competition and therefore carte blanche on charging, and companies like Ultra Tune."
With reports from the Australian Automotive Aftermarket Association that the DIY approach to car maintenance is on the decline, assisted by the more complex engine constructs today that prohibit tinkering, vehicle owners will increasingly need to get professionals to service their cars. But what makes a customer choose one service outlet over another?
Keeping the focus on the customer and never over servicing them is critical to maintaining trust and integrity in the industry, Murdoch insists.
"We deliver open and transparent car servicing so that the customer has confidence in our ability to assess and recommend appropriate diagnostic remedies when required. By ensuring that customers are not over-serviced, the industry should therefore keep pace with motor vehicle ownership which is expanding year on year and recently topped one million new car sales for the first time."
By far the single most important factor influencing motor vehicle owners when it comes to deciding if, when and where they should have their car serviced - is convenience. Or more accurately, inconvenience, he says. The more inconvenient it is, the less likely a motor vehicle owner is to have their car serviced.
"Saturation of our market isn't the issue. Lack of customer service by way of convenience is and this means customers are demanding more choice; more locations; more available times to suit them to have their car serviced. Growth in this market will come first from meeting the customer's need for convenience and a fair/reasonably priced service where the customer can have trust that they are not being over-charged or over-serviced." The expediency factor is reiterated by The Tyre Factory group's national manager, Angelo Bellissimo. "Much of our research and experience would show that there are a number of factors that consumers take into consideration when having their car serviced. These include location, price, past experience, promotion and the ability to have the work done when the consumer wants it done. People are time poor and location plays a part in that. But brand awareness plays a big part and this helps franchisees."
That a customer ends up in one forecourt over another may more often than not be down to geography and timing. But the decision can be influenced by other factors, and the power of recommendation cannot be overestimated.
Pedders has discovered that the social leader has a big say in how people choose their service on their cars. "In fact we tend to find that we get a lot people in our stores telling us that their mates told them to bring their car to us because we are experts in suspension." But Gillick doesn't want to downplay the role of marketing in directing choice. "We pride ourselves on promoting safety in our own cars and that of our customers' cars. It's so important that every car leaves a Pedders store performing to its potential in terms of comfort handling and safety."
He continues, "We take our marketing very seriously here at Pedders Suspension and no doubt many other automotive franchisors do too. You have to have your own identity that sets you apart from the opposition and that's what ultimately attracts customers to you. Our consumer promise of "Straight advice, specialists you understand and ... No Bull" is a testimony to this." Gillick counts the marketing aspect as a major conduit for the company to move forward. Another is internal communication which he describes as marketing from the inside out. Complementing the regular comprehensive company newsletter are intranet and a marketing cd rom. Both of these multimedia applications present information to the group on several topics relevant to getting on with the day to day business. "Incentives are another aspect to our internal communication.
This year I have been asked to "Pimp Out" a Mitsubishi Triton 2 x 4 Ute to give out to one lucky store. This has been the most sought-after internal communication that we have ever done." Marketing and branding cannot be judged without considering image: the look of an outlet is now more important than ever, suggests Bellissimo. "How well a store is presented is now more and more important. At some workshops, I'm thinking of Mercedes for instance, they are so clean you could eat off the floor. Everything is up to date." This is nothing but an advantage to franchisees, he believes, who tap into the brand development and sophisticated imagery on offer from go-ahead franchisors.
Take Goodyear. With 120 stores, 108 of them franchise based, the iconic tyre brand has just undergone a rebranding exercise in the service sector of its business. Now bearing the mark Goodyear Autocare, the refurbished service centres blaze the corporate yellow and blue colourway across the exterior, displaying a simple icon based guide to the services within. At the heart of the revamp, which costs $70,000 per store, is consumer appeal: a professional, friendly environment has been created with education boards and tip cards explaining the workings of a car, supplier gift bags, the return of parts removed, and in a direct reach to the female driver, Women With Drive workshops.
There's even an illustrated spanner-wielding mechanic who is the new face of the brand. "We want to try and own the customer," explains Frank Scotta, national franchise manager, "we want to get them coming back. The challenge is consistency and looking after the customer." He is adamant job cards are vital to ensure the vehicle is checked and the customer happy — no-one is making money if not, he insists. Goodyear makes its money not from franchisees but from their sales of tyres, Scotta asserts, highlighting the importance of securing distribution points. To support the franchisees at the front line the company has improved communications; a $1 m investment in re-branding and IT has seen the installation of PoS, an extranet and ABSL platform.
Heidy Muir, franchise development manager at Kwik Fix International has a simple response to building growth: rise above the opposition. "Maintain the quality of your brand by providing quality repairs and excellent customer service," she advises. And she has a useful tip to pass on: "Co-branding with other technicians (not in your specific industry) is essential."
But how exactly does the market shape up with global trends focused on environmental and efficiency issues, a greater complexity of technology demanding increased knowledge and skill requirements and a heavily branded arena?
It will look very similar, predicts Automasters' Nigel Warr, but there's good news for the franchises. "Our market moves quite slowly. I think we will see more stand alone businesses closing and groups like our growing. I think our style of business will continue to become more and more professional."
Given the on-going rationalization of dealer networks by the major manufacturers due to the fundamental shift in new car buying patterns within Australia to smaller, more fuel efficient vehicles, there will be an increased requirement for service providers, believes Murdoch. "In the next 10 years, we would anticipate an increased number of consumer choices with regard to vehicle manufacturers, makes and models where it is unlikely that manufacturers will have the economy of scale (financially) to provide extensive and Australia-wide service options."
Muir agrees that consumer choice will broaden. "There will be a larger gap in the consumer marketplace between cheaper imported cars and quality prestige cars. Purchasers will make a choice between affordability and quality."
As executive director of Australian Automotive Aftermarket Association Stuart Charity's prediction is that the biggest threat to service centres will be extended warranties to keep customers with dealers for longer. And he adds, "What you'll see is more consolidation, for instance in repairs, with cars becoming more technical. The set up is costing more with diagnostics and computers. Independents will find it hard to keep up and suffer declining profitability."
However Bellissimo sees spin on costs for the franchisee entering the business too. Ten to 15 years ago a franchise could cost between $30,000 and $50,000; now the investment has jumped to $100,000 up to $160,000 he says.
The flip side is there is less to do when it comes to maintenance — changing spark plugs will no longer be an annual event. But there is more need for stock, finances and knowledge at the franchise. "I think that's started to happen. DIY has declined over the last 10 years. When you open a car bonnet now you can't see the ground."
So is technology going to direct how the arena will look in five or 10 years time? Absolutely, believes Kim Elliott of international think-tank Autopolis. "Technology is inherently much tougher and manufacturers are getting a free kick because they can restrict the distribution of diagnostic systems or go into overpricing. Technology is overtaking the repair industry."
But for the 4WD specialist like Tony Shaw at Opposite Lock,solution based fitment and supply is proving an excellent growth model. "Technology is working in our favour. We have the opportunity to enhance vehicles, with our tuning chips, for instance." Offering high levels of service and product knowledge is the key to making this 24 franchise business effective in its competition with two manufacturing based retailers. "Complications for us come with products that are vehicle specific. We source worldwide but sometimes we might have to contract manufacture."
Certainly today's consumer is more aware of a company's products and services before they even pick up the phone so the onus is on the business to have appropriate systems in place suggests Gillick, whose marketing team's focus on internet marketing recently won Pedders Suspension the AAAA industry award for best website.
But he highlights another aspect that will play on how the market looks in the future: the baby boomers. "This group of Australians control about one third of the country's wealth and it's expected that their spending will rise to just under two thirds within the next decade. Age based employment will also increase and smarter automotive brands will need to harness this trend to gain a competitive advantage. Aftermarket brands will need to draw upon a diverse workforce that reflects the target market segment. We are already doing this in our stores and are progressively achieving this in the stores that don't have this strategy."
Shaw reveals a plan for 16 more Opposite Lock franchises over the next three years will take the company to saturation point in its current model. Of course changing the target market is always a possibility, but for now the product base is proving a winner. "Retailing for us is very strong, we're breaking all sales records in some of our stores." Western Australia and Queensland are booming, the Victorian and NSW franchises showing weaker figures. "We're taking a proactive stance with our people, with the presentation of stores - upcoming stores will have a different look and feel - and with the delivery of technology in websites, for example."
For retail focused Autobarn, which last November underwent a restructure with one shareholder now holding an 80 per cent stake, capital investment has been spent on compliance. "We had a family atmosphere and now have to be more strategically corporate," explains national franchise manager Steven Woodward. "We have 97 strong willed business people," he adds. The company maintains 60 administration staff to offer a fully structured P & L for all franchisees, web training and IT support, and growth will come from growing profitability."
This article appears courtesy of
Autobarn.
25-Sep-2007