December 26, 2013
This is Part 2 of Successful Dealer’s ‘State of the Dealer Market’ series. For Part 1, CLICK HERE.
While steady truck sales were tough to find for dealers this year, 2013 proved to be a great year for dealers in the aftermarket. Parts and service sales are booming.
The aging fleet population — a detriment in the new truck marketplace — was a significant benefit in dealer’s service bays. Older vehicles require more maintenance, and Keith Ely, managing partner and KEA Advisors, says dealers offering service and maintenance programs were able to thrive during the calendar year.
“When you can’t sell trucks you go back to what’s tried and true,” he says. “Parts and service, the fixed operations side of a dealership, provide a tremendous opportunity for growth.”
Mack’s Vice President of Marketing John Walsh says his OEM zeroed in on its service business early in the year as an opportunity for business growth. That remains a priority as the year comes to a close.
“Our dealer network continues to increase its service capacity and strengthen its focus on maximizing vehicle uptime through efficient operations and leveraging of technology,” he says. “During the past year, Mack continued our expansion of innovative customer support programs and productivity building products to grow our market share and drive customers to dealers.”
Ely notes that those customer support programs proved to be an excellent selling point throughout the marketplace.
“There are things certain OEMs are doing to streamline [operations] and dealers are finding them extremely valuable once they know how they work,” he says. “Dealers that use them well are seeing customer satisfaction and profitability going up.”
And not all service growth came from customers pulled to dealers. Ely also notes more fleets turned to outsourcing maintenance in 2013, providing even more available customers.
“There’s a high cost associated with fleets doing their own repair work, and dealers have started to see benefits from that,” he says. “This is not the same service business it was 15 years ago.”
Dealers taking advantage of these breaks should continue to see success in 2014.
Ely specifically points to service and inventory technology as a harbinger of success. With uptime becoming increasingly critical to all customers, dealers capable of using top-shelf technology to diagnose breakdowns, locate parts, communicate with customers and minimize time out of service will have a leg up in the marketplace in the coming years.
“Dealers who have embraced the idea of going outside of the traditional service model are seeing tremendous growth,” he says.
Walsh says Mack has taken steps to implement these programs, and has created a dealer channel dedicated to providing the best service possible. “Our dealers focus on delivering value to Mack customers through complete vehicle and service solutions,” he says.
Greg Althardt, CFO at Peach State Freightliner, says selling and servicing emission equipment is another way to grow parts and service sales.
Rusty Rush, CEO and president of Rush Enterprises, says his parts and service business out-paces truck sales revenues “six fold.”
“Ten years ago parts and service was about 40 percent of our gross profit, now it’s 60 percent,” Rush says noting the company’s continuous investment in its facilities.
Diesel Particulate Filters (DPF) have been required on new Class 8 trucks for nearly a decade, which means even with an older national fleet there a lot of them on North American roadways. And at some point, all of them need to be cleaned. Althardt says Peach State has added DPF cleaning to its preventive maintenance program to take advantage of that service boom.
Location and customer base also can offer specific opportunities to proactive dealers, says Dick Witcher, CEO at Minuteman Trucks at ATD chairman.
“I think that dealers can best be advised to diversify their businesses as much as possible,” he says. “The dealers I know are good, hardworking, smart business people and they are pretty well in touch with the markets they serve. They are working to maximize their customer’s experience.”
The biggest challenge to this growth, Ely says, is simply finding quality employees to do the work.
“Continuing to find young people is the biggest challenge facing this industry,” he says. “Younger people need to enter the industry and get involved.”
A shortage of quality technicians and salespeople can be found throughout the marketplace. Dealers are constantly on the lookout for new, young, exuberant employees.
Cultivating new talent is going to take more than just putting “Help Wanted” signs in windows.
“There needs to be continuous recruiting effort,” Ely says. “Dealers have to prepare for three years down the road today. It’s an added expense but [dealers] have to do it.
“There has to be a plan for bringing talent into in industry and allowing them to develop.”