Four Steps for Entering a New Market
With 38 locations, Craftsman Collision is the largest independently owned body shop chain in Western Canada. Its presence firmly established in the Canadian marketplace, owner Bill Hatswell shifted his attention to new markets: China and the U.S.
Four years ago, Crafstman became the first Canadian collision business to have a repair facility in China when it opened its location in Suzhou. The Canadian MSO achieved another goal last February when it opened its first location stateside in Long Beach, Calif.
Mark Greenberg, general manager of business development and China operations, was in charge of setting up the location in China and spent a year and a half living there. Now, he flies back and forth between China and Canada every quarter. Melanie Allan, VP of business development and sales, led the California opening and commutes back and forth between the U.S. and Canada. Both Greenberg and Allan found that they were able to translate Craftsman’s key values by following a few steps that helped ease the transition.
1. Find the Right Fit
The idea to open a shop in China came from an employee of Wedge Clamp, a Craftsman-owned equipment manufacturer, Greenberg says. The employee was moving back to China and mentioned there were a lot of opportunities for a collision repair shop. Hatswell liked the idea and the team began researching whether or not it could be pulled off. What they found was that the independent body shop market did not exist in China and that all of the collision repair centers were exclusively in dealerships, Greenberg explains. Most of those dealership shops followed very low standards, according to Greenberg, so Craftsman saw an opportunity to introduce a quality body shop. The team eventually decided on Suzhou, a city about an hour and a half west of Shanghai with a population of 12 million.
Greenberg and his team identified an opportunity to acquire an existing dealer facility, and operate it independently as a Craftsman location.
“There were a lot of factors that made it a good fit. In that city alone, there are 3,000 accidents per day. Bill just figured it seemed like a great opportunity,” Greenberg explained.
The decision to move to the U.S. was one that Hatswell had considered for a long time. Hatswell has a second home in California and was fond of the climate and the opportunities the U.S. market had, explains Allan, Hatswell’s daughter. The decision to move into the state had a lot to do with where Hatswell and Allan saw themselves eventually living, but the specific location was selected strictly from a business standpoint.
They chose Long Beach because of its access to L.A. and Orange County. While not exactly nearby, Long Beach was also an easy commute for Hartswell from the company’s nearest location (Vancouver), requiring no time zone changes and direct flights. Allan, who was finishing her marketing degree in Australia at the time, traveled between Sydney and L.A. to help her father scout shops. Eventually, they found an existing shop for sale—a 50,000-square-foot facility with roughly 4,000 square feet of office space, “which was perfect,” she says.
Takeaway: “If I look at areas, I want to know where it’s saturated [with competition] because I don’t want to go there,” Allan says. “I’m looking for gaps. There’s no rush.”
2. Make a Smooth Transition
Greenberg, who now speaks Chinese, says there weren’t too many differences between running a shop in China and running one in Canada. A major one, though, he says, was that body technicians in China do not do filler work. They only do metal work, and there is a specific, separate tech position dedicated to filler. Craftsman adapted in order to keep the team members in place operating in positions that best suited their respective skills and training.
It was a tweak to the company’s repair process and model in Canada, but it also allowed for a more seamless transition in adapting the rest of the business to the traditional Craftsman formula.
“It’s important that we incorporated the way they do things along with how we do them,” Greenberg says. “I wasn’t just going to come in and say, ‘This is how we’re going to do it.’”
Maintaining a shop culture and caring about the people in the shop already is something that is important to Craftsman Collision, regardless of the location, Allan explains.
The way Craftsman handled the acquisition of the shop in Long Beach was very similar to all of its previous Canadian acquisitions.
“It was like a slow handshake,” she says. “We kept the owner-operator on for a few months to help us transition. That helped us maintain existing relationships the shop had with vendors and customers. It took us four months before we actually changed the name. The whole transition took about six months. Three months into the acquisition we started implementing and training on our management system.”
Takeaway: “I think one thing we did that paid off was treading lightly,” Allan says. “When you acquire a shop, you’ve got people you need to worry about.”
3. Become Familiar with How Insurers Work
China’s relationship with insurance companies is very similar with the U.S., but there is one very notable difference: Chinese insurers don’t use an estimating system. They work off a matrix, which bases everything on severity, Greenberg explains.
“If there’s a dent on the door, that dent is classified as a 1, 2 or 3 with 3 being the most severe,” Greenberg says. “They then pay based off the matrix.”
China has “preferred suppliers” for insurance carriers, the industry’s version of U.S. DRPs. Greenberg established Craftsman as a preferred supplier for three insurers.
In Canada, there are no DRP shops. Before moving into California, the Craftsman team did research and was aware of how important relationships with insurance companies were in the U.S. When the shop first opened, Allan made establishing those relationships one of her top priorities.
“The shop that we bought had one DRP relationship, so to build on that I knew we had to push Craftsman’s strengths,” Allan says. “I learned how important it was for insurance companies that we hit KPIs in terms of cycle times. That’s a huge strength that we have that I pushed.”
Allan also pushed Craftsman’s customer service to the insurance companies and was able to solidify Craftsman Collision’s status as a DRP shop.
Takeaway: “It’s all about building trust and cultivating relationships,” says Greenberg. “We just had to prove ourselves.”
4. Spread the Word
The marketing process in China is completely different than North America, Greenberg says. Marketing in terms of billboards, broadcast and social media was basically not an option for Craftsman. Why? First, because it’s so expensive. Second, China is a Communist country so the use of social media is blocked, Greenberg adds, which meant he had to get creative.
China has cracked down on social media, but an area where it is not very strict is accessing information. There are no laws that prevent a person from going into a dealership and asking for all of the phone numbers of people who bought a certain type of car that year. So, that is exactly what Greenberg does and continues to do. Greenberg then sends out a mass text promoting Craftsmen Collision.
According to Allan, marketing in Canada is much different than in the U.S. because of how government insurance operates. Because there are no DRPs, she explains, there’s a huge emphasis on radio, billboards and other type of general media.
“Here [in Long Beach], I’m spending more time on personal relationships with insurance companies, our online reputation and community influencers,” Allan says. “I’ve found that in the U.S., if someone is given a shop name, they’ll Google it, which makes it so important to maintain a website. I think it’s more a one-on-one marketing relationship in the U.S.”
Takeaway: “Nothing beats word of mouth,” Greenberg says. “You have to prove yourself. Once you’ve done that, you maintain it and they’ll tell other people and here [in China], there are a lot of people to tell.”
Looking to the Future
According to both Greenberg and Allan, Craftsman plans to continue expanding in both the U.S. and Chinese markets.
“Right now, we’re focusing more on California,” Greenberg says about future plans for China. “If the right opportunity comes up, we’ll look into it. We would probably keep them in the same city because we have the population for it.”
“We plan on staying in California. In five years, I’d love to be at 10 shops here,” Allan says about U.S. growth plans. “I think that’s healthy. We’re not private equity so we don’t have a big bucket of money, but when we see an opportunity, we’ll take it.”