We all know what’s going on as far as the economy is concerned. After all, we seem to be getting a daily dose of gloom and doom. What we could use is good, solid information on how our businesses can survive in the coming months. We asked a number of people in very key positions for their take on how we can all do better in these tough times and those to come. But instead of a cheerleading exercise, we asked specific, sometimes, tough, questions to get candid and specific answers.
What our industry people offered as to what 2009 – and even 2010 – will hold is quite telling.
Where’s the money?
Our first question was the toughest one: How will the economy affect discretionary spending throughout 2009 and into 2010? That is, who might comprise the strongest demographics of buyers? Consider such demographics as age. We’re talking 20-somethings, no kids; family- and mortgage-bound 30-to-40-year olds; retirees with some discretionary income; and geographical- South vs. Midwest vs. West Coast vs. Southwest vs. New England, etc.
Mark Heintskill, marketing director for Steffens Enterprises Inc., Caledonia, Mich., says, “Regardless of demographics, I believe the majority of people will continue to be very cautious with discretionary spending through 2009 and into 2010. The dramatic drop in fuel prices [in December] helped accessory sales slightly, but the underlying concern that energy prices will rise again, along with the general instability in the economy, is affecting consumers’ decisions about every purchase they make. We have experienced the largest swings in sales in the Midwest.”
At Restylers’ Choice in Cincinnati, company president Doug Jacobs agrees with Heintskill when he says that “the weak economy is already affecting discretionary and non-discretionary spending.”
“People,” Jacobs says, “may need new cars, or even traditional durable goods, and they are unable to buy them for a multitude of reasons: one, lack of available credit; two, job security concerns; three, loss of home value, etc., etc. If these mainstays of the American economy are being hurt but this “perfect storm” then there is no doubt that discretionary spending is also being affected.
“That being said, I think the younger the generation, the less they are affected. Teenagers who work in entry-level positions have not been as affected by recession. They also have less financial responsibilities, thus giving them more access to cash that older, more entrenched groups have. Those with higher-paying jobs, with mortgages and families to feed, are more at risk of losing their jobs and have more financial responsibilities that are affected by the economy. Therefore, they are much less likely to spend money on discretionary items than the younger generations.”
Moreover, Jacobs continues, “geography seems to have been little affected on the situation gripping our country and even the world at this point. There are pockets of an ‘OK’ economy that we see across our customer base and there are also pockets of a ‘really bad’ economy, as well. But overall, the entire country has been affected and our industry has suffered worse than many.
“First it was high-gas prices that stymied truck/SUV sales. Now it is the lack of available credit, or the decrease in the value of their current car, and the job security issues that are keeping vehicles on the lots and not in the customers’ hands. On top of that, the customer who is buying a car and can get financed can rarely get the right financing that will allow them to add accessories to the vehicle purchase price. Consequently the amount of work being done on new vehicles prior to sale has dwindled considerably. The reduction in available aggressive lease pricing has also limited the purchasing power of the end consumer, which limits the money available to spend on discretionary accessories.”
Chuck Deringer, from Automotive Concepts, Horsham, Pa., narrows it down: “The economy will affect everyone. Simcons (simulated convertible tops) will slow down. Younger people like bells and whistles, and those will be stronger. Older people won’t spend as much as the 20- to 40-year-old buyers. The aftermarket will be strong with the right products.”
So, what products are appealing?
Our second question was, Without touting any specific brand, but targeting your specific aftermarket niche, what types of aftermarket product(s) will appeal to the aftermarket vehicle restyler and his/her clientele? That is, what will consumers want and why?
“I believe that as the downturn cycle of the economy continues through 2009 and into early 2010 many restylers and their customers will put off the expense of a new vehicle, instead improving the vehicle they currently own,” says Steve Falk, vice president of sales and marketing at RKSport, Murrieta, Calif. “By changing their car’s appearance, through the addition of a restyling kit from RKSport or others, they will renew/update the look of their car while increasing its resale value.
“By providing the client a turnkey ‘upgrade package’ including paint and installation, the restyler can remove the reservation a consumer may have in their trying on their own to order, paint and install a restyling kit or accessory.”
Jeff Boettcher, St. Paul, Minn.-based 3M Automotive’s market development manager, says that “more than ever before, restylers are looking for ways to expand their offerings and find other sources of income. For example, tint installers may choose to pick up paint protection film. As evidenced by greatly reduced new vehicle sales, we know that people are keeping their vehicles longer, so maintenance is more important than ever. Products and services that can help preserve the look and finish have great potential for sales. Headlight restoration, for example, is a smart business add-on for aftermarket restylers and installers. In an effort to make a professional first impression, restylers can look to their suppliers for top-notch marketing materials that help give them credibility and make the selling process easier.”
Deringer from Automotive Concepts hit the hot list, saying, “Custom grilles, chrome accessories, spoilers, leather interiors, sunroofs, video systems, nav systems and remote starters” will offer opportunities.
Jacobs from Restylers’ Choice adds, “Chrome accessories were very hot the past several years on trucks and SUVs. We see that trend continuing to the car and crossover market. We also see an uptick in the demand for spoilers and paint protection kits.
“The big thing will be providing a value for the new car buyer. As for the retail accessory buyer, these items, along with products like vinyl graphics that allow them to dress up and change the appearance of the car they already have, provide a ton of opportunity. If they are going to be holding onto their car longer there is no better way to ‘make it new’ again than by adding some inexpensive graphics, a spoiler and a nice molding.”
Heintskill from Steffens says that “tonneau covers and step tube products provide both a functional benefit as well as an aesthetic improvement for pickup truck and SUV owners. Consumers will continue to purchase products that enhance their ownership experience and make their vehicles more convenient to use.”
New tech toys to sell
Our third question was about what new technologies will appear on newer cars that aftermarket restylers will be able to offer to clients (e.g., remote starts, back-up cameras and other driving visual aids, video installs, performance products). Jacobs answers, “Tough to say. Remote starts, seat heaters, back-up cameras are all decent sellers in the electronics business. But as restylers, there are few ‘new technologies’ that are going to affect the restyling aftermarket.”
Brian Lounsberry, sales manager for Motovicity, Madison Heights, Mich., adds, “I believe you will see a lack of technologies this next year. Dealers are ordering cars without cruise controls and other convenience features to keep costs down, which is a great opportunity; the customers that couldn’t spare the cash at the dealer have only one option -” aftermarket. We offer all of these convenience items here at Motovicity, and we have seen an increased demand for these items this year.”
Deringer notes that “companies like Audiovox are coming out with new technologies all the time. Visit shows and read Restyling magazine to find out what’s new. Dealers want new products.”
Future cars alteraftermarket mix
Our fourth question queried, Will the kinds of cars Detroit makes later in 2009 and 2010 change the types of aftermarket products that manufacturers will have to create? And how fast can the aftermarket suppliers have new product ready to go to retailers and their customers?
“This is a very interesting question,” says Jacobs. “With the mix of vehicle sales changing, and changing in an ‘overnight’ fashion, the aftermarket has to react. However, the ‘perfect storm,’ as they like to call this economy, has hampered those efforts. It is difficult for aftermarket companies to spend money on tooling for new accessories for this whole new class of hot vehicles. They are facing drastically reduced sales, growing inventories and slower payments from customers. This is the ‘perfect storm’ for any business that results in reduced cash-flow and, consequently, less capital to invest in new applications. Traditionally, the aftermarket would have responded quickly to these changes’ demands. Today, however, it will (require) more time and investigation before companies invest in risky new designs.”
Deringer says that “we will most likely see many new models in the next two years. “Obviously, trucks and SUVs will be smaller and lighter, along with hybrid, electric and alternative-fuel drive systems. As the capabilities and size of these vehicles change, it will be important for aftermarket manufacturers and retailers to continue to provide products and services that improve the vehicle owner’s experience and fulfill his personalization needs. Companies that take advantage of these opportunities will strengthen their position in the marketplace. Taking advantage of measuring sessions arranged by SEMA can help speed new products and applications.”
Mergers, acquisitions, alliances
Our fifth question may have the most potential for restylers: Do you expect more companies serving the aftermarket industry to merge or form strategic alliances with others, be sold to other companies (competitor or other auto-related) or go out of business? Why or why not might that occur?
Heintskill tells us that “the current economic conditions will force the closure or consolidation of many established companies at the aftermarket level. Certain market segments will be affected more than others as the new vehicle population changes in 2009 and 2010. Companies that are able to diversify and meet changing market needs will thrive and grow.”
Jacobs adds this: “Change in the complexion of the aftermarket industry is undoubtedly going to happen – directly tied to the factors I mentioned earlier: decreased business, increased inventories and decreased cash flow. As was evidenced at the 2008 SEMA show, there will be many more mergers, buyouts and strategic alliances announced in the coming months and, unfortunately, you will see a number of aftermarket companies go out of business or be swallowed up by larger companies. It will be interesting to look back in 24 months and see what change has happened and how the landscape has changed.”
Deringer says, “With the economy not fully rebounding in the next few years, only the smart will survive. Reducing overhead is important. There will be mergers and closings.
“If you are a restyler, keep your expenses down, buy what you need, buy conservative, and watch your payroll, inventory and receivables. Try to keep cash on hand if possible. Buy from companies who will sell you one product. We have no buy-in requirements or minimums.
Motovicity’s Lounsberry says, “Yes to all of the above. I think we are just seeing the tip of the iceberg. Companies will have to be open-minded to new strategies to survive in the current economy.”
Our last question asked what is a good strategy for restyler retailers/jobbers to attract customers.
3M’s Boettcher says that “in hard economic times, stay with brands you can trust. Rely on your suppliers to provide more than just product, but technical support, testing, reliable warranties and leads for your business. You can use known and trusted brands to help you sell.”
Heintskill reminds us that “retailers and jobbers need to take advantage of every marketing tool available to them from the manufacturers and distributors they buy from. Use manufacturer’s websites for information and video content. Build a data base of your customers’ vehicles with an e-mail campaign or a direct mail campaign. When a new product is available for that customer’s vehicle, send a simple message that you have a new product available for their vehicle. Invite them to your store and tell them about any upcoming promotions.”
Jacobs offers us three steps. First: “Tough to do in this market, but I think they need to be focusing their efforts in two directions. The first would be to push the ‘value prospect’ to them. Pitch paint protection film, body side moldings, door edge guards – the things that help people protect the investment they have already made in a vehicle.”
“Secondly, they need to pitch the ‘make it new prospect’ to the customers. If a person is going to be keeping a car longer, they may want to restyle it and give it a fresh look. This is what the aftermarket was designed for: personalizing a car, making it ‘yours’. If you can’t afford a new car or are afraid to pull the trigger on another loan, then spending a few bucks to make your tired ride new again is a great idea.
“Finally, the retailer needs to use great customer service and satisfied customers to help grow its business. Use referral bonuses for existing customers who send in their friends or family. These types of marketing are much cheaper than traditional means, and in this economy can be a great way to get some new business.”
Adds Deringer: “Try to become one-stop shopping. Ask your customers what other things they are doing that you can get a piece of. At my company] we offer 100,000 products. We can get you anything you want at competitive pricing, quickly. Service is imperative.”
Lounsberry says that retailers shouldn’t wait for customers “to knock on your door, click on your website or give you a ring. Get involved with local events, and support forums that fit your business.”
“Compile customer lists.” He continues “so you can send out thank you cards or birthday cards. Send e-mails to your customers with sales fliers or free checkup service coupons. Do anything to get them in the door or logged onto your site.”
There they are- real answers to today’s (and the rest of this year’s) real concerns, and how to prepare yourself and plan well for tomorrow.