Profiting from distribution opportunities

Part of this was attributed to the costs incurred as a result of block exemption but much of it can also be put down to businesses failing to take advantage of the opportunities the much-maligned regulation brings. Traditionally, when times are tough in the new car showroom, dealers turn to used cars where margins are more attractive. But the capital required is substantial, both for stock and display space. There is also increasing competition as more and more dealers take the path to used car nirvana. What is needed is a new revenue stream that is less capital intensive, offers a higher margin and uses existing skills and facilities. An increasing number of dealers from all sectors believe that one of the most attractive is an all-makes parts distribution programme. Dispelling myths To fully take advantage of this, dealers must first dispel the myth that there are two quite separate markets: franchised dealers and the rest. This is not true. We have seen the independent aftermarket rapidly improving in quality and commercial acumen, taking a lot of the business that is expected to stay on the vehicle manufacturers' side of the fence. We have seen far fewer franchised dealers winning business from independents to retain customers out of warranty and build independent parts and service businesses. Also 70 per cent of MoTs are now carried out by the independent sector. Many big dealers have a head start. They distribute parts for their brand to local independent repairers. How much more could they sell to the same customers if they had an all-makes offering? How many new accounts would they be able to win and support profitably if they could offer a comprehensive range? The answer is, often, quite a lot. The key to introducing an all-makes parts distribution programme is to join an existing, well thought out and supported scheme. This will provide the range, support and economies of scale needed to make it profitable quickly with little investment. A successful programme has to be based around top-branded components. Even though many unbranded products can be of reasonable quality, the confidence a respected brand confers is important to fitters and vehicle owners. The range also has to be close to comprehensive. A repairer does not want to make multiple phone calls before getting all their parts. And the service must be fast, accurate and trustworthy. Range of services Delivering product, though, is only part of the equation. The scheme should also provide a range of services that help to take the headaches away from the dealer and his customers. Everything from training, technical support, diagnostics and electronic trading needs to be available at the level required by each dealer. Poor inventory management can turn stock to financial dust, but a well-supported programme will prevent this. It is often overlooked, but sales training and marketing support is also important. It is easy to have a great range but no customers. Most successful all-makes operations will start by focussing on building their business with the independent garages closest to home, offering a rapid delivery service which is competitively priced. For customers further afield, only run timed deliveries, twice a day. This will mean as a second line supply partner, you will have the opportunity for higher margins. Work to these principles and you can achieve a gross margin of 30 per cent.