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Insight: Parts choices will extend dealers' all-makes options

The traditional view is that franchised dealers and independent parts suppliers fish from opposite banks of the river, but are things really that simple?

The RMI’s franchised director, Sue Robinson, thinks not.

“Because dealers are incentivised by their manufacturers to buy OEM parts, most are chasing parts targets to obtain bonuses, which discourages them from buying parts outside the OE supplier,” she said.

“However, there are occasions when dealers will buy from other sources, for example, when servicing cars not from the same manufacturer as the franchise, and sometimes for older franchise vehicles.”

Indeed, whether it is by offering all-makes servicing or diversifying into factoring, dealers seem to be more receptive than ever to linking with independent parts suppliers.

Euro Car Parts’ new marketing director Bill Stimson is better placed than most to comment on this issue – two decades ago he was responsible for setting up the Vauxhall Trade Club.

“The one thing that has been a real eye-opener for me since being at ECP is the breadth and depth of the ranges,” he said.

“Some independent factors have a reputation for only stocking the fastest moving parts, but that is certainly not the case here.

“The diversity of OE quality brands is incredible, so there is a lot we can offer the franchised sector in terms of parts availability, for example, on catalytic converters and diesel particulate filters.

“More and more franchised dealers are turning to all-makes services to keep their workshops busy. Certain consumables especially may not be available at competitive prices from the vehicle manufacturers.”

As to whether parts targets make it difficult for independent suppliers to break into the franchised sector, Stimson is pragmatic.

“It varies, but manufacturers sometimes push their dealers for unrealistic levels of growth to stand still in terms of earnings rebate,” he said.

“For us the low hanging fruit are parts for vehicles that are not ‘home brand’, and from that point of view their targets do not come into it.

“We treat franchised workshops as a growing customer group – at the end of the day they are carrying out the same repair jobs.

“We always aim to give great service in terms of availability and delivery and that means we pick up the business.”

When talking about parts, the term ‘matching OE quality’ is never far away.

Problems persist with certain poor quality imported parts and counterfeiting also raises its ugly head from time to time.

On the other hand, many big name OE suppliers offer comprehensive and well-respected aftermarket ranges – in some instances the parts come off the very same production lines.

With its dual mass flywheels fitted to one in four cars, LuK is widely respected for its expertise in the clutch market.

Nigel Morgan, managing director at LuK Aftermarket-Service, said his company has plenty to offer franchised dealers.

For example, its three OE quality brands (LuK, FAG wheel bearings and INA tensioner sets) are supported by a fast-response technical hotline that deals with more than 600 enquiries a day.

“One of the challenges of getting into franchised dealers is that their parts targets and incentives mean they can be reluctant to step outside their OE supplier,” said Morgan.

“However, they often take part-exchanges against new vehicles that are not of the same brand, and these cars require parts.

“On occasion they may not have the required parts in stock and the delivery from a vehicle manufacturer could be too long, in which case they can buy matching parts same day from a wholesaler or distributor.”

Ian Jones, head of business dev-elopment at Hella, largely agrees with this view.

“Clearly the OE supplier will expect the franchise holder to maximise the opportunity to sell genuine parts, and this is unlikely to change,” he said.

“However, there is a niche opportunity for external parts supply when the genuine parts supply chain breaks down or, in the case of new vehicles, does not respond quickly enough.

“A further opportunity exists to supply parts for vehicles that are in the dealerships as trade-ins or for service or repair.

"The increasing complexity of vehicles and the increasing variety of the parc might drive the size of this opportunity upwards.”

Interestingly, Peugeot-owned all-makes supplier Motaquip reports a recent increase in business from franchised dealers.

General manager Peter Cox identifies three separate drivers behind this trend: Firstly, dealers looking to take in more all-makes servicing and only having direct access to parts for the franchise they represent; secondly, motorists looking to retain older cars and finding the dealer parts too expensive; and thirdly, dealers expressing a desire to develop trade business in their local area to supplement their franchised parts sales.

Cox said: “Most dealers already buy parts from motor factors to address points one and two and this is not, it appears, diminished by targets or rebates offered by vehicle manufacturers.

The key consideration should be the quality of the parts they are sourcing.

“With counterfeit brake pads recently in the news and other low-cost product being offered in the market there is a potential risk to their reputation and customer satisfaction rating.

"Many dealers take quality for granted and could in some cases be naive when it comes to purchase decisions.”

In terms of the potential in factoring, Cox added: “We have a number of direct accounts with main dealers who are actively factoring.

"We are able to provide excellent logistics, in most cases matching what they receive from the vehicle manufacturers.

"We offer service parts that meet or exceed ‘matching quality’, have a free-to-use online parts catalogue and a dedicated field team.”

Giving a word of warning, he said: “There are opportunities for dealers
to develop a trade sales business, but it takes more than stock and a van to be successful.

"Many are not resourced sufficiently.”

As in every area of parts supply, competition in the all-makes programme sector is fierce.

Unipart Automotive highlights the fact that its Express Factors programme offers a proven business model, with accreditation from the British Franchise Association.

As well as being a recognised name, the Unipart product range is also the largest all-makes brand in the UK.

Stuart Sykes, of Express Factors, said: “Many dealers are seeing the opportunity of serving a wider range of marques and of extending their service to older vehicles.

"The VM programmes do not meet these needs very well.

“With the Express Factors programme, dealers are able to get
off to a fast start, with an affordable level of investment.

"This helps to create a new business that complements the traditional business.”

Promoted as ‘the genuine alternative’, the Express Factors programme has attracted dealers holding Ford, Vauxhall, Land Rover, Fiat, Mitsubishi, Kia and Mazda franchises, among others.

For example, Express Factors Baylis of Cheltenham, part of a Vauxhall dealer group, added the Express Factors programme in 2006.

Initially, it saw it as a way to address the increasing number of other makes vehicles it was handling, while avoiding having to deal with a wide range of suppliers.

However, it has since developed into a fully-fledged and profitable parts factoring business.

Another company helping dealers to establish their own factoring operations is XPart.

All-makes manager Steve Godrich explains: “We are unique among independent suppliers in that our customer base is franchised garages.

Our main business is MG Rover parts, but we also have an all-makes programme which a number of our customers ‘factor out’ to the independent aftermarket.

“Our products come from recognised brands such as TRW, NGK, Sogefi and Bosal.

"Having the product available and being able to deliver it in an acceptable time is essential, but we also offer technical and marketing support.”

Godrich said: “The key benefit for dealers is extra revenue from an existing cost base with very little investment.

"The XPart all-makes programme was originally aimed at MG Rover wholesalers, but we now have Vauxhall, VW and Ford dealers who offer the factoring service as well.

“Everyone is under pressure on costs and we are getting more and more enquiries from franchised dealers looking to expand into this market.”

A dealer's view on factoring

One dealer doing well with factoring is Trinity Motors in Hinckley, Leicestershire.

The company holds Land Rover, Hyundai and Mazda franchises, and also has a big parts wholesaling operation.

General parts manager Rod Harris said: “Our parts division, Kaleidopart, is well-known as a factoring company in the Midlands. We keep all the top lines from XPart.

“The all-makes programme is a big part of our business – all the brands are names you can trust and being able to call for an overnight delivery is a real advantage.

We keep more than £125,000 of all-makes stock on the shelves plus £50,000 worth of MG Rover parts.

“We supply direct to the motor trade with a fleet of 12 vans and it supports our own workshop too.

"We have 12 technicians and do a lot of all-makes servicing, so having the parts in stock really helps.

“XPart also has a range of consumables, from screen wash, toilet rolls and latex gloves – the bits you sometimes struggle to find.”

On competing with ‘superfactors’ such as Euro Car Parts and Andrew Page, he said: “It is hard – the nationwide factors are getting bigger.

"They are springing up all over the place.

"However, we enjoy real loyalty from our customers.

“We have delivered the service for many years and we do a lot of promotions such as deals on volume buying and offers on things like Draper Tools, which we also supply.

“XPart is pushing the all-makes programme forward and it is good to know that if we do not have the product we can get it from them quickly.

The new Mini parts offering has also helped because there are plenty of those on the roads.”

Trinity Motors also has a retail shop to sell direct to the public.

Harris said: “We have a big retail outlet on the front of the dealership and because we are right beside the canal and marina we get a lot of passing consumer trade.

“We are open six days a week, usually 8am to 6pm and 8am to 1pm on Saturdays.

"People are not tinkering with their cars as much as they used to, but due to the current economic climate we are finding that people are trying to do more jobs themselves – things like oil changes or fitting new brake pads.

"This sort of business faded away for a while but it seems to be creeping back.”

Independent solutions

Mahle Aftermarket, the exclusive distributor for Victor Reinz gaskets and sealing products in the UK and Ireland, provides an interesting example of how independent suppliers can deliver solutions that are simply not available through the usual franchised channels.

Paul Grosvenor, engine components national sales manager at Mahle, said: “We offer products in the aftermarket which you cannot get through the dealer.

"For example, Vauxhall says the cylinder head on the latest generation Twin Port engines cannot be remachined.

"However, we have introduced a gasket which is a quarter of a millimetre thicker than the original part, which means you can take that much off the cylinder head. 

“This type of repair is suited to the aftermarket rather than the VM stage and it is a perfectly legitimate solution for cars outside of warranty.

"When you consider that a new cylinder head will usually cost the motorist a four-figure sum, whereas this solution might cost a quarter of that, it will certainly help dealers to retain customers.

“It also salvages a perfectly serviceable part and even Vauxhall dealers should see the benefit. It is a good option for anyone offering all-makes servicing.”

On the prickly relationship between independent suppliers and franchised dealers, Grosvenor says: “The problem is largely one of perception.

Many aftermarket distributors think of franchised dealers as competitors rather than potential customers.

From the franchised dealers’ side, many of them think aftermarket parts are inferior to their ‘genuine’ OE parts and are loathe to use anything that does not have vehicle manufacturer branding on it.

"However, from a gaskets perspective, Victor Reinz products will be ideal for franchised dealers in some instances.”

Trade club celebrates 20th anniversary

Vauxhall Trade Club, the first manufacturer-based trade parts programme, is now in its 20th year and currently has more than 50,000 members.

Justin Hawkins, of GM, said: “The Trade Club has experienced strong growth this year.

“At present 2010 is 16% up on 2009 and September 2010 was an all-time record month.

“This performance reflects the strong offer, good marketing and hard work and dedication of our retailer network.

"The main benefits to dealers are the quality of products and the peace of mind this brings, good value pricing, the ability to get the right parts delivered first time and the reassurance of a pan- European warranty.

“Vauxhall Trade Club has always experienced and welcomed competition from independent suppliers.

“We publish our retail and trade club prices to our members so we have a transparent offer.”

Other popular schemes include Ford’s Blue Oval Club and
Volkswagen’s Trade Parts Specialists (TPS).

Ford of Britain reports that it is in direct contact with around 22,000 independent traders and bodyshops who form the Blue Oval Club (formerly Ford Trade Register).

They benefit from the Parts Plus offers and regular technical support.

Ford’s Daniel Jones said: “It is all about the local dealer offering a quality service to his independent customer – fast, efficient identification of parts by trained staff, proven systems and processes, sales representation and trade offers (dealer and Ford-backed), with a delivery service to match.”

Meanwhile, TPS now boasts around 30,000 regular customers.

A Volkswagen spokesman said: “The strategy has proved successful, not only from a business and sales point of view, but also through allowing us to improve customer satisfaction thanks to enhanced parts availability.

The provision of same-day availability means dealers rarely step outside their OE supplier.”

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