Mike Bridge, business development manager at Transhock, an automotive parts distributor, believes that dealers could achieve gross margins of up to 40%, instead of the average of 20%.
“With ever increasing costs, dealerships can maximize their delivery service to garages by adding all-makes parts to increase their gross margins and make their parts departments more profitable,” says Bridge.
With the formation of the Retail Automotive Alliance (RAA) and the increasing size of some dealer groups, Bridge believes parts will play an increasingly important role in terms of profit in the motor retail sector. “It is only a matter of time before further acquisitions take place to enhance earnings and future growth,” he says.
The total market for car and light van components is worth £2bn annually and there are currently nine buying groups in the aftermarket that make up the bulk of the buying power in the sector.
However, one of the main problems facing dealers looking to join a motor factor buying group is that these are often mature businesses and, therefore, have few opportunities to become a member.
Bridge believes that by forming a central buying group for strong owner-drivers, this problem could be overcome.
“We need a group that comprises of strong regional dealership groups, having the same agenda,” he says.
Lookers recently entered the parts market in a different way, by acquiring FPS and Apec Brakes. FPS has seen considerable growth under its new ownership as a warehouse distributor, partly because it carries a wide range of marques.