What is the current state of industry consolidation?
The industry is definitely consolidating. There was a big rush with consolidation at the end of 2012, mostly due to some tax changes in respect to capital gains. There were real incentives and financial advantages to get deals completed by the end of 2012. Consolidation slowed down a little bit in the first part of 2013, but the pace is still pretty frantic.
There are conflicting reports regarding the current number of shops, however. Reports from the Romans Group, I-CAR and Collision Repair Education Foundation claim the total number of shops is decreasing. But data from the Bureau of Labor and Statistics (BLS) states that the industry actually saw an increase in the number of shops last year. The BLS projected a total of 500 new shops throughout 2012.
What consolidation trends do you see in the industry?
We’re now starting to see the second wave of consolidation. Large industry consolidators—including Caliber Collision Centers, ABRA Auto Body & Glass, Service King Collision Repair Centers and The Boyd Group—are using platforms of smaller individual consolidators to leapfrog into other states and instantly have a substantial footprint. Instead of buying one or two shops in a new region, consolidators are buying 10 locations. We’re going to see more of these platform acquisitions. We will still see single shops acquired periodically because they fill a desired footprint for an individual market, but the largest consolidators will continue acquiring several shops at once.
What can independent shops do to survive within this consolidating environment?
The industry is changing so fast from a technology standpoint, including things like telematics, accident avoidance systems, and more sophisticated electronic options that are available on modern vehicles. So we’re seeing a big transformation of the industry, or a disruption, based on technology. Fortunately, whenever there’s a disruption, there’s an opportunity to embrace it. Even in a consolidating market, there is still ability to grow a business by having a unique value proposition for customers.
The opportunity for collision repairers is to embrace uniqueness. That means we’re going to see specialization among repair locations. Local shops will have opportunities to excel very well, provided they choose to specialize. That could include implementation of multiple new initiatives, such as OEM repair programs, Tesla certification, Hybrid repair or aluminum certification. That is where small repair centers are going to have opportunity to thrive.
Recognizing that the industry is changing creates a path to new opportunity. But you have to find some way to offer specific types of value that customers look for, and that differentiates you from other players in the market.