Dealer Mechanical Wholesale 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.
- Mechanical 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
7 Keys to Dealer Auto Parts Wholesale Success
There are some keys to success that will help your dealership capture and retain shop business.
- Management Support. Successful Parts Managers have the dealership behind them
- Fast Delivery: Get the parts to the shop within 2 hours with real-time updates
- Setting the Price: Set market-based pricing
- Competitive Business Policies: Set return policies that are right for your customers.
- Leverage Your Strengths: Use your parts knowledge to your advantage
- Market Your Services: Don’t be afraid to advertise your great service.
- Scale Your Business: Start Small and grow
Get Management Support
The Service Department offers larger margins, so marketing to service customers is more appealing than targeting the wholesale mechanical market. And Service Managers often see the IRF as competition. But there are many reasons why pursuing the wholesale mechanical business is good for the dealership.
Customer Lifecycle Management
Dealer service drives are excellent operations, but dealer repairs are expensive, and the process is impersonal. So, consumers seek more cost-effective repairs as their vehicle ages. This is why most dealers fix around 15% of the vehicles in their PMA.
Fixed Operations Managers who neglect the mechanical wholesale business are Missing out on 85% of the market. And since most service drives are at capacity, this philosophy does not increase sales. So, many dealers are neglecting 85% of a $128B business to pursue a competitive advantage that isn’t achievable.
Servicing independent shops benefits your customers and increases sales. Good wholesale dealers sell more parts and more service. And if done right, more vehicles.
Independent shops can’t support all services. And maintaining good shop relationships can capture advanced repairs.
Also, independent shops see customers as their vehicle ages. And they are in the best position to recommend a dealership when an old vehicle finally expires. So, building a good relationship with shops can bring sales leads.
Focus on Fast Delivery
Offer Hotshot Delivery
“Same Day” delivery is not fast enough for mechanical shops. They need their parts within a couple hours. So, he most important Dealer Mechanical Wholesale service for a dealer to offer is last mile delivery.
Fortunately, this no longer requires a big investment. On demand local 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 wholesale car parts you don’t have in stock. So, you need to adapt your inventory policies. Expand stock on a few targeted categories and tell the wholesale shops you have them in stock. Powertrain is a great place to start.
Answer the Phone
Answer the phone quickly and don’t put your customers on hold. This may 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
Standard discounts and cost-plus pricing don’t provide the pricing wholesales shops need. So, to be effective you should look at different types of pricing strategies
The best pricing methods to use are matrix and bundle pricing. This sets different pricing based upon part velocity. So, low turnover and captive parts are priced for profit and high turnover parts are priced to move. This puts you more in line with competitors pricing while allowing you to profit from higher prices when appropriate.
Quality Services for Dealer Mechanical Wholesale Sales
Automaker return policies don’t work for wholesale customers. Instead, set policies that work for your customers. And if you set a good wholesale focus, parts you accept on return will sell quickly to another customer.
Aftermarket suppliers offer better warranties than OEM parts. But OEM parts are more durable than many aftermarket components. Sell to your strengths. Ask your customers if they would prefer a longer warranty or a part that doesn’t need one.
Knowledge is Strength
Dealer Countermen are the top experts in the industry and are experts at finding the right part the first time. This is why shops call the dealer to ask what part they need for a repair, which creates a huge untapped opportunity.
Many countermen get annoyed because these calls don’t result in sales. But that’s because the countermen are not set up to capture the sale. Imagine the result if the counterman could quote immediate availability, fast delivery and a good price when a shop calls for “price and availability”
Market your Dealer Mechanical Wholesale Services
Bad experiences last a long time, so you will need to prove that your service has improved. Many dealerships have spent years reinforcing a reputation for high prices, slow delivery and poor part availability. Advertising and good customer service are both needed to change minds.
The illustration to the right provides a guide on how to successfully enter the wholesale Market.
Avoid the Common Dealer Mechanical Wholesale Traps
Wholesale Mechanical is a huge business and there’s no reason to be all things to all shops. Instead of investing big, target specific types of shops with consistent needs such as transmission shops or brake specialists.
Targeting will allow you to expand your inventory slowly and build the specific expertise your customers need. This is most effective for dealers who operate in urban areas.
Don't Over-Invest in Deliver
With today’s variety of on-demand hotshot services, there’s no reason to build a large hotshot fleet until you’ve built some volume. And when you do add a hotshot fleet, use a dispatch system to keep sustain your delivery times. We recommend Elite Extra as the top solution for car dealerships.
Don't Rely Entirely on Electronic Ordering
If your countermen aren’t selling a lot over the phone, they won’t sell a lot through the internet. So build your service levels then go online. This will delight your new customers and lead to more sales.
Hire an Expert
Running a successful Dealer Mechanical Wholesale Parts Business takes a different mindset than supporting the service drive. To kick start your success, hire a wholesale consultant to help you find the tools to meet your customer’s service expectations.
At 3NG Consulting, we have the consultants who understand the dealer and wholesale business. And we can help you capture a slice of the $128B Mechanical Wholesale marketplace.