The New Accessory Solution Providers

Jan 10, 2011

Accessory sales are receiving more and more attention – as car dealerships work to increase shrinking profit margins. Dealers finding lower gross profits on car sales mean they need to find other revenue sources. Accessories for years have been relegated to an “afterthought” position, with a great deal sold simply because a customer has asked for them. Forward-thinking restylers have built solid businesses by assisting dealerships with promoting accessory sales. Unfortunately, it has not had enough impact.

“Dealerships need help integrating the sale of accessories throughout their departments,” comments David Stringer, president of Insignia Group, Rock Hill, S.C. “Getting these departments, who are typically disparate and traditionally adversarial, to work together in harmony is tough.”

Mike Martinez, chief sales and marketing officer of izmocars, San Francisco, cited some statistics: “According to SEMA, currently, dealerships are capturing only about 10%-17% of the $32 billion auto accessories market. Izmocars,” he says, “developed AOA’s in-dealership accessories solution specifically to help dealerships realize more accessories sales and, importantly, more profits -” and the results have been dramatic.”

AOA, or AddOnAuto, is a program to help dealerships sell aftermarket accessories.

“Recent numbers, “continues Martinez, “demonstrate that the average dealer using AOA is generating $500-$1,500 in extra revenue, per vehicle, representing a much-needed new revenue stream of $1 million a year. AOA-Web was created to further extend this accessories sales advantage to the dealership website.”

Dan Ciganovich, director, DSI (Dealer Services International) adds this perspective: “Many times the focus on accessories and the profits they can yield are not given adequate attention by dealership management,” he says. “The learning curve to achieve a successful accessory program can be steep, and the lessons learned expensive. However, dealerships can mitigate the pitfalls often associated with selling aftermarket accessories by partnering with companies that understand both the aftermarket accessory business in depth, as well as how to integrate into the new-vehicle sales process. These companies bring valued experience, proven processes, and insight which can help guide dealership personal, saving both time and money.”

The system is a solution

“Solution providers,” as they are called, have zeroed in on the nagging problem in dealership accessory sales: the lack of a system. While restylers often can provide highly skilled installation services – and might even help with some marketing – there needs to be much more “push” to consumers to generate the demand for purchasing accessories.

Solution providers help dealers by giving the dealer a selling system that allows the dealership to generate and/or capture sales of accessories. We asked the representatives of three companies to describe their systems.

David Stringer, Insignia

“Insignia provides car dealers with a point-of-sale accessories system, which enables sale staff and service writers to present a variety of OE and aftermarket accessories options. We serve dealerships in this way working with over 2,500 dealerships in an eight-year span. Our system features a vehicle configurator, sales management tools, order management tools, and becomes the central sales and information system within the dealership for accessories.

“In addition to supporting dealers, Insignia also supports the supply chain of accessories in several ways, including a new system launching to restylers the first quarter 2011. Insignia enables warehouse distributors and restylers to provide an easy-to-use system for presenting the accessories carried by the supplier as well as a simple way to order those accessories.”

Mike Martinez, izmocars

“izmocars’ AddOnAuto (AOA) in-store accessory solution provides a seamless consumer experience by integrating accessories shopping and financing with the car purchase, while making it very easy for dealers to get into accessories sales.

“AOA comes in two versions, AOA Point-Of-Sale for in-dealership sale of accessories, and AOA Web for accessories sales on the dealership’s website.

“AOA’s visual configurator offers customers high-resolution, interactive images of automobiles by year, make, model, trim level, as well as factory interior and exterior color. AOA can configure and show exactly how the vehicle looks with the selected accessories. Using the AOA Point-of-Sale product, buyers can then ‘add on’ the purchase of the accessory to their new-car purchase. Buyers using the AOA Web product are given an e-commerce shopping cart experience with the ability to shop for and purchase accessories directly from the dealer, with the accessory either installed by the customer, the dealer or an installer/restyler.”

“The AOA-Web product enables the dealership to develop an image catalog of virtual inventory specific to their dealership site, as well as the ability to modify pricing on the fly. Comprehensive sales and parts reporting, as well as large group reports and enterprise level controls, are also included.”

Dan Ciganovich, DSI

“Through our preload program, a DSI representative will consult with the dealership management team to determine what products and packages best suit their demographics. Vehicles are selected from existing inventory, and then DSI does all the work. The result is a front line of vehicles that is sure to drive traffic into the showroom, resulting in additional sales and profits.

“We are more than just a national warehouse distributor with competitive pricing. Since we install everything we sell, we are able to advise and ensure that the dealership orders and receives aftermarket accessories that not only fit correctly, but are compatible with each other and related OE components.

“DSI also offers an industry first through our certification program for dealership service technicians. This certification and training program ensures proper installation of all DSI-supplied products, and as an additional benefit extends our three-year/36,000-mile nationwide labor warranty to parts installed by certified technicians.”

Accessory sales at dealership level

Recently, the Specialty Equipment Market Association produced a Dealer Day program in conjunction with its 2010 show in Las Vegas. Hundreds attended and listened to a program that focused on accessory sales at the dealership level. I had the opportunity to speak with many of the attendees, and it became obvious that dealerships know accessories are an untapped gold mine. Many of them have put some effort into accessory sales but are not achieving the success they’d like to see. Chief among the reasons is a lack of sustainability with the programs, a lack of training and a need for “buy-in” by all departments. Solution providers assist with all of those areas.

The three companies interviewed here have a bit of a different “twist” on how they get their particular program to market.

Martinez offers this observation: “AOA automatically coordinates the purchase, financing and installation processes across the dealership. AOA gives dealers access to a virtual inventory system of thousands of aftermarket accessory manufacturers, eliminating the need to hold a physical inventory. AOA connects dealers directly to a large and constantly updated vendor database, giving them sales power without the expense.”

Stringer, of Insignia, explains how his system works with dealerships: “Insignia understands the demands and challenges in the showroom and on the service drive. The sales staff of a well-run dealership has a litany of processes and procedures during the vehicle sale. Similarly, the pace of work on the service drive has many demands. In order for accessories to be sold in either case, the integration has to be as seamless as possible but also, and very importantly, has to be as unobtrusive as possible. The last thing any manager wants to do is add one more step to an already in-depth process. So, Insignia integrates into the dealership process in these ways – seamlessly and unobtrusively. Then, it becomes a matter of using the system to manage that process of selling the accessories from the front of the store all the way through fixed operations.”

DSI has a slightly different approach. Rather than supply software and a system as do Insignia and izmocars, DSI offers “ready to sell” accessory packages. Ciganovich elaborates on it: “With the help of DSI’s field management team, in-house phone support and additional Web tools, each dealership has a host of ways in which DSI’s accessory packages can be integrated into the dealership. Be it the selling process, acquisition of product and/or installation or warranty replacement, DSI’s focus is strictly on dealerships and ensuring they experience successful and profitable accessory business.”

Where restylers fit in

Naturally, any restyler reading this is probably wondering, “So where do I fit into this picture?”

I asked the companies if their vision includes restylers. David Stringer is a member of the SEMA PRO [Professional Restylers Organization] Council Select Committee. Although he isn’t speaking for PRO in this article, his comments are valuable insight for those who want to plan ahead.

“What restylers must understand is their market is changing around them – and fast,” says Stringer. “Vehicle manufacturers are becoming more focused on their own brand of accessories. Accessories manufacturers are seeing this opportunity and are responding by attempting to be a supplier to car builders; and this trend is only going to expand.

“The traditional role of restylers to provide leather and sunroof installs will become constrained by leather and sunroof manufacturers seeking deeper relationships with vehicle manufacturers. Consolidation, slimmer inventory levels and the prospect for a slow economic recovery will make for smaller opportunities at the car dealership.”

“Already we have seen a reduction in the number of restyler companies unable to withstand the current economic downturn. That’s going to provide current restylers with a false sense of an increase in business – but long-term it’s going to catch up. One of two things will happen or a combination of both – restylers will begin to consolidate rapidly or they will have to diversify their product offerings to service dealerships with all the products not provided by the OEM or that are sold at a competitive price. Dealers like having the ability to provide their customers with a ‘good, better, best’ offering. Restylers can support that by diversifying their portfolio.”

Martinez, of izmocars, has this comment: “AOA is designed to create a community of support in the sale, manufacture and installation of accessories. We see the partnership between local restylers and dealerships playing a critical role, particularly for consumers who want to go beyond simple accessorization and are interested in true customization of their vehicle.”

“The dealership using AOA now has the ability to sell customized vehicles, but the local restyler is often in the best position to install those accessories as well as further accessorize the car and, often, offer the best, most highly skilled employees at accessories installation.”

Ciganovich, of DSI, offers a similar assessment: “Restylers know the market and keep up with the latest accessory trends. They possess a wealth of knowledge that every dealer should tap. For instance, what products perform best, which are most suited for a particular vehicle and what products will match the OE warranty term. Restylers can also install many products the dealership service department may not be comfortable with installing or trained on.”

All three are enthusiastic about having restylers participate in their programs.

Ciganovich expresses it well: “Yes, DSI has explored the idea of setting up a system of regional distributor installers (RDI’s). Today, we do business in 22 states and have a very well developed program for new-car dealers. However, there are parts of the United States where we do not have the coverage we would like. We believe an RDI program would not only extend the reach of our program but offer all our current dealership customers additional value.”

Stringer and Martinez are equally as supportive. Martinez says, “Absolutely. Local restylers have an important role to play in the accessories community we’re trying to build and we’re eager to engage with the restylers.”

Adds Stringer: “Insignia is launching a service to restylers that will help them sell not only the leather and sunroofs they sell now, but also provide the dealership with competitive products; so, yes, we want to partner with restylers to support local dealers. It’s a win-win-win.”

What’s the true payoff?

Do these programs really work? According to the representatives from these companies, the numbers are staggering to the average restyling company. Keep in mind we’re talking about business at single dealerships.

Martinez provides some statistics. “A nine-month study of 120-plus dealerships found that car buyers presented accessories through the AOA were dramatically more likely to buy. One in two buyers experiencing that process purchased accessories (up from one in 10 before), and the average dealership generated $400-$600 in accessory-revenue-per-vehicle-sold, up from $80-$120 before, representing a revenue gain of 500%.”

Martinez sites some actual numbers:

•    Acton Toyota has sold an average of $110,000 in accessories per month since AOA was installed 19 months ago, up from $40,000 per month in accessory sales before AOA.
•    Burien Toyota sold $51,000 in accessories in October 2010, up from $5,000 in August when it installed AOA.
•    Rick Hendrick Toyota has sold an average of $100,000 in accessories per month since AOA was installed 13 months ago, up from $50,000 per month in accessory sales before AOA.

Insignia’s Stringer points to similar success with the dealerships he works with.

“We have domestic dealers hitting per-vehicle sales of over $400 per car, and we have import dealers hitting as high as $600 per car,” he says.

Keep in mind this is an average of all vehicles sold. So, a dealership selling 100 new cars a month -¨will be generating as much as $60,000 a month in accessory sales with Stringer’s system.

Ciganovich also reports tremendous success. “DSI’s program is focused on assisting the dealership in showcasing complete custom vehicles, ‘halo vehicles’ as some would say. These ‘halo vehicles’ have in turn yielded several benefits for the dealership. First they differentiate the dealership from the competition and draw additional attention to the store front and, in many cases, stop traffic, generating real upsells. Sometimes the ‘halo vehicle’ sells from a drive-by, or a vehicle is sold off of it. Either way the dealership wins.”

“Second, they generate real profits. The obvious is through the added markup of the accessories; and if they are aftermarket accessories, the margins can be substantial. It’s common to have dealers report $2,000-$4,000 of additional front-end gross when selling a fully accessorized vehicle. We are again seeing many dealers sell multiple accessorized vehicles a month, and all at three to four times the gross of a stock vehicle. We even have a few superstars that sell over 30 fully customized vehicles a month, generating millions in additional gross profits.”

The soft business climate of the past couple of years has left many restylers wondering whether there’s a future for accessories. Ciganovich sums it up well: “No doubt accessories are a proven profit opportunity when done right. However, many dealerships have yet to truly tap into this very large market. There are many companies like DSI out there. Our advice is be diligent and do your homework up front when looking for an accessory partner. Done right, accessories will pay off many times over.”