Dealer Mechanical Wholesale – The 7 Keys to Success

3NG Consulting Automotive Consulting Services

Mechanical Wholesale auto parts is the last growth market for car dealers and a gold mine for those who do it right. And with dealers only selling around 3% of an estimated $120 Billion marketplace there’s lots of opportunity.

And sales are not the only benefits.

  • Wholesale shops pay their bills fast, so your average wholesale receivables will go down
  • Gross profit margins are higher for mechanical wholesale than collision wholesale
  • The average customer is buying 5%, so small market share increases will result in big sales gains.
  • Shops with a good wholesale buying relationship will refer car sales to your store

Keys to Dealer Mechanical Wholesale Success

There are some keys to success that will help your dealership capture and retain shop business.

  1. Management Support. Successful Parts Managers have the dealership behind them, from the General Manager down
  2. Fast Delivery: Get the parts to the shop within 2 hours (New tools and services make this easier than you think)
  3. The Right Pricing: Use the power of your DMS to set market-based pricing
  4. Competitive Business Policies: If you want more business, create your own return policies instead of passing factory return policies on to your customers.
  5. Leverage Your Strengths: Your parts are the best quality available, and your team knows more than anyone else. Use this to your advantage
  6. Market Your Services: Build good service, make sure your people are telling your customers about it and don’t be afraid to advertise.
  7. Stay out of the Common Traps: Learn from other dealerships and scale your business

Get Management Support

Know Your Competition

Mechanical repair shops are not your competition. Your customer profile is very likely identical to most other dealers. This means customers as a group are moving to independent shops in the same way and at the same time as other dealers. This is not a coincidence. 

So, while you should advertise and work to retain service customers for as long as possible, you should also take care of those customers when they go to an independent shop for service.

Going Beyond Your Service Capacity

Your service department fixes around 15% of the cars in your PMA, and your service drive is probably at capacity. So, replacing warranty work with budget customers who are going to local repair facilities is probably not a good financial decision. And while your dealership should try to retain customers for as long as possible, most customers will eventually seek a more cost-effective repair facility.

Additional Services

Since independent shops service your brand, it benefits your dealership to support their business with OEM parts. And part sales are only the beginning of the potential revenue your dealership can capture from local shops. Your Service Department will likely pick up specialized services such as ADAS calibrations and hybrid repairs. And good relationships with an independent shop can often lead to vehicle referrals when their customer’s vehicle finally fails.

Deliver Parts Fast

Offer Hotshot Delivery

The most important Dealer Mechanical Wholesale service for a dealer to offer is last mile delivery. And the good news is that it no longer requires a big investment. On demand hotshot delivery services and good quality dispatch software now make it possible to offer fast delivery on a budget. Read more about using on demand delivery services to build your delivery fleet.

Stock the Right Parts

You can’t offer quick delivery on parts you don’t have in stock. So, if you are going to get serious about the wholesale mechanical business, you need to adapt your inventory policies. Start with the right seed stock, set up lost sales tracking, and build the right reordering parameters. And work with your controller to set up a line of credit so you don’t have dealership cash tied up in your parts inventory.

Answer the Phone

Make sure you take calls from mechanical shops quickly and don’t put your customers on hold or delivery time improvements won’t have the same impact. This will take some creative solutions such as hiring part time workers for peak hours or using outsourced call centers for overflow calls.

Set a Premium Pricing Strategy

Too often pricing for independent shops is set in a way that makes sense to dealers but not shop customers. Different pricing strategies applied effectively can lead to better results.

So instead of using matrix pricing try different types of pricing strategies that apply premium pricing to captive parts and economy pricing to competitive parts. This creates an overall competitive pricing strategy while allowing you to profit from higher prices when appropriate.

Quality Services for Dealer Mechanical Wholesale Sales

Return Policies

Automaker return policies are despised by dealers who then decide to pass those same policies to their wholesale customers. If you hate the factory policies, your shops will too. And unlike your dealership which is locked into the factory supply chain, wholesale shops can choose their suppliers.

You are selling against aftermarket suppliers that offer generous return policies. If you are serious about the mechanical wholesale business, you need to develop competitive return policies. And as your wholesale business grows, you will quickly resell returned parts, which reduces the risk of a market-friendly return policy.

Warranties

Aftermarket suppliers offer limited lifetime warranties with labor while OEM parts generally offer 12-month parts only warranties. Being a legitimate competitor means offering a competitive parts warranty. This can be done either by funding it yourself or by buying an extended warranty from a third party who will cover the shops’ repair costs in the event of a part failure.

Use your Strengths

Dealer Mechanical Wholesale Countermen are the top experts in the industry who can find the right part fast. This reduces parts returns and reduces the total cost of parts ordering for independent shops. If used properly, this expertise can lead to increased parts sales.  Some examples include:

  1. Shops often call the dealership parts counter to verify a part number. This provides the opportunity for your team to close the sale by offering good pricing and fast delivery.
  2. Shops need repair information and installation support. Your team can provide this high quality data, which can help close sales.
  3. You sell low volume parts that are not available in the aftermarket. That keeps you in touch with the shops and provides ongoing opportunities to set good impressions

Market your Dealer Mechanical Wholesale Services

Shops know their business and they have spent years building the perception that dealership prices are high, delivery is slow, and calling the dealership means spending a lot of time on hold. It will take you time to change that perception and establish yourself as a top supplier. Using the following steps can help:

  1. Grow at a Comfortable pace. There is no reason to be all things to all people. Tackle small geographies and specific shop types first and then grow your business once you get good at it.
  2. Improve service levels in key areas such as delivery and customer hold time
  3. Establish tracking so you can provide real time dispatch visibility
  4. Provide sales training for your counterman so they know how to close and capture related parts sales
  5. Advertise your new services with invoice flyers, local advertisements, and digital marketing
  6. Attend local trade meetings to introduce your new services to the local shops

Avoid the Common Dealer Mechanical Wholesale Traps

It is not uncommon for GMs and Parts Managers to describe failed attempts at the wholesale marketplace. And the challenges described often describe a very similar pattern with similar results. Below are some of the common reasons why mechanical wholesale programs are abandoned.

Don't Take on too Much

With modern tools, there’s no reason to be all things to all shops right away. Instead of investing big, target specific types of shops with consistent needs such as transmission shops or brake specialists.  This will allow you to expand your inventory slowly and build the specific expertise your customers need. 

And for urban areas, use computer aided dispatch software and focus on geographies close to your dealership.

Don't Over-Ramp Delivery

With today’s variety of on-demand hotshot services, there’s no reason to invest in a hotshot fleet until you have built some volume. And before adding hotshot drivers, purchase last mile logistics software. There are many systems available. We recommend Elite Extra as the top solution for car dealerships.

Parts Ordering is not a Silver Bullet

Online ordering systems are not a silver bullet. If your service levels don’t support phone sales, they’re not going to support online sales. So don’t invest in online tools until you have improved your service levels. Otherwise, shops will maintain their belief that your dealership offers high prices, slow “same day” delivery and limited return policies.

Get Help

Running a successful Dealer Mechanical Wholesale Parts Business requires a different mindset than supporting the service drive or Collision Wholesale. So, to kick start your success, hire a wholesale consultant to help you build your tools and hire experienced countermen from a local wholesale jobber.

Recommended Service Providers

Outside SalesAdvantage Parts Solutions

Consultinhttps://ng3production.wpengine.com/services/g3NG Consulting

DispatchElite Extra

Hotshot Delivery ServicesElite Extra, Revolution Parts

Schedule a free 1-hour consultation with one of our consultants.

Karl Krug

Karl Krug

Karl Krug is the Chief Strategy Officer of 3NG Consulting and specializes in automotive parts and service solutions and marketing. 

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