Success against OEMs is a matter of trust

Jan. 1, 2020
An Aftermarket Data Trust could be a formidable force against OEM competition.

When I first started in this industry back in the 1970s, Marty Brown, a warehouse distributor with a lifetime’s experience and a mentor of mine, told me, “Kid, if the OEMs ever decided they want to be in the parts business, they would crush us.” 

The OEMs may have decided that the time has come. They are mounting major aftermarket assaults for parts and service business. But unlike previous attempts, they have a new ally that has not participated in their previous attacks: their dealers. You see, their dealer network, awakening to want, has been called the 2-4-8 reality. The 2-4-8 reality refers to the fact that the typical OE dealership makes a 2-percent net profit on new cars, a 4-percent profit on used cars and an 8-percent profit on parts and service. Needless to say, with those kinds of numbers, dealer principals have signed on and are becoming more aggressive at pursuing parts and service business. They are making outside sales calls, aggressively marketing and promoting themselves, sharpening their pricing pencil and offering deliveries, even hot-shots in some cases. And the technician community is noticing and often embracing their efforts.

What I find to be most tragic is that even though OE dealers don’t need our help re-entering the parts business, they’re getting it.

It is my belief that the collective inability of aftermarket trading partners to effectively manage data is directing literally billions of dollars of replacement parts business to OE dealers. The $160 billion automotive aftermarket is driven by demand and fueled by information. That information includes application data like make, model and year, as well as manufacturer part numbers that identify parts to a specific manufacturer and product attributes that reveal the many characteristics of an individual item. This data is a precious, perishable asset that is vital to conducting business in a technology-enabled environment. Yet, as critical as this information is, it takes months to reach the point of sale after the supplier who created it releases it. I estimate that we collectively experience over $5 billion in lost sales annually in the greater aftermarket that is directly attributable to slow distribution of data.

And what happens when an independent technician or DIYer is told that a specific part is unavailable? Overwhelmingly, the next call is made to the OE dealer, often times at the suggestion of the counterperson; what bitter irony it is when our own counterpeople suggest that customers take that path. There is, however, another possibility of what happens to some of that uncataloged demand: some of it is simply being deferred because of the apparent unavailability of parts. It’s more bitter irony that we attribute a substantial piece of the $60 billion in unperformed maintenance to bad or tardy data while at the same time the industry is spending millions to turn that tide under the “Be Car Care Aware” campaign. 

Consider that while we flounder for months with getting data to the point of sale, the OEMs have real-time parts and pricing information that is often transmitted via satellite daily to their dealerships. It’s no wonder that technicians who are frustrated with having to order several aftermarket parts to find the one that fits are increasingly making the dealership their first call.

Our industry’s problem with “slow to market” data is sadly a problem that is shared equally by manufacturers, third-party eCat providers and resellers. Most manufacturers have an attitude that the care and feeding of their data is not a high priority. Also, many have been slow to adopt industry standard formats as a way to expedite data sharing. The result is a bottleneck. Next, too many eCat providers have clung to their proprietary formats and must spend significant time manipulating data for redistribution. Also, the fact that nearly all must burn and distribute hard media (CD or DVD) to update systems adds 30 days to the process. Resellers, who have generally accepted these methods and, until recently, have not brought pressure on their system providers to change, are reluctant to purchase new systems that are Internet-enabled, propagating the need for the hard media distribution of data. Everyone is a part of the problem and everyone needs to be a part of the solution.

Fixing our collective data problems requires a collaborative effort from everyone in the industry, as well as a method of getting complete, accurate and standardized data to the point of sale as quickly as the OEMs can.

So what is required?

There is a grass roots constituency of aftermarket “concerned citizens,” dubbed the Aftermarket Data Trust, who want to see the aftermarket clean up its own data mess and move forward. Their vision is to create a centralized repository that can be used as a single distribution point for all application and product data that aftermarket parts resellers need to sell parts. The idea is to create a single electronic location where those who need vendor’s data (either electronic catalog companies, wholesalers or even retailers themselves) can go, and with appropriate security and permissions, get all the standardized data necessary.

That rather simple definition of what many would call an “industry data warehouse,” or IDW, requires a lot more explanation to fully develop what its creators have in mind. I will get back to some of what it is (as well as what it is not) in a bit.

First, let me address how such a centralized repository would address some of the problems that are currently confronting us. Most significantly, an IDW would eliminate the “data lag” to the parts counters. By creating a single point of distribution for standardized data, eCat makers and/or resellers have one place to go to get the most current data available. Because it is in the industry standardized format, it can be quickly loaded into point-of-sales systems, resulting in increased sales and reduced migration to OEM dealers. This, in and of itself, would resolve around 50 percent of the problem we have with getting new part number information to parts counters on par with the speed of the OEMs.

When such a centralized, industry-approved distribution point is created, the industry can eliminate the redundant and nonproductive costs of mapping data, thus saving resources — money, time, people. And because this is an industry-owned model, it will allow manufacturers to control their data, which will result in more accurate data being available on a more timely basis to be used by their trading partners more efficiently. Finally, by making more data available to more places, better access to market is created for everyone, enabling everyone to sell more. Selling parts is why we are all here.

So what is it?

I mentioned earlier that ADT would be a centralized repository that can be used as a single distribution point for all application and product data that aftermarket parts resellers need to sell parts. Let me expand on that.

When I refer to a centralized repository, I do not necessarily mean that there would be a physical place with a bank of computer servers where every aftermarket company will duplicate their data files. Rather, it is more likely that there will be a website that acts as a registry or a directory. When users log in, they are recognized by a sophisticated security program and are granted “permission” to access certain data, based on the approval of the owner of the data. Once that secure connection is made, the user can download any new data updates that are available for their lines. It’s probably easier to comprehend via an example. Let’s say that the O’Reilly system automatically logs into the ADT site for a pre-scheduled update. The ADT system first confirms that it is, in fact, the O’Reilly’s system that is logging in and knows which manufacturers have granted O’Reilly’s access to their data. In checking for changes that have occurred since the last update, the system finds that there is new data available from Wix. Because Wix operates its own data warehouse, when the O’Reilly system “requests” the data update from Wix, it is redirected to the Wix server that contains the data O’Reilly will need. Once connected to the Wix server, the system “learns” of 15 new Wix filters that are available and it downloads the application and product data for those new numbers. The system finds packaging dimension changes and downloads those new numbers. Let’s say in the same connection O’Reilly learns of some new data available from a small specialty accessories provider. That small company has elected to hire an outside service, say a company like DCI, to prep and maintain their data, so the query for that data is directed to DCI’s server where it is then transferred to O’Reilly. With a single connection, O’Reilly can search and find data from literally all of their vendors, big or small.

The data transaction I described probably is not the most common one that would take place, however. More typically, the connection would come from one of the large third-party eCat providers (like Activant or Wrenchead) who provide the majority of aftermarket practitioners with their look-up data and the convenience of a single go-to point to source up-to-the-minute, standardized data to populate their systems. 

What it is not

Perhaps even more important than what ADT is, is what it is not. It is not an eCat. Nobody can “look up” anything in ADT. There are many viable eCat providers out there now and ADT will not compete with any of them. A consumer won’t be able to log on to a “shop” of all things automotive. In fact, registered users of the service cannot view just any data that resides in the repository. The only people who can view specific data are those who are granted access to it by the owner of the data. Hence, manufacturers will not be able to view their competitor’s data.

ADT is not a data service vendor. There are many companies out there now that help manufacturers gather their data, put it in industry-standardized formats and prepare it for syndication.

ADT should be thought of as a “trade service” provider. Perhaps a good analogy is the Federal Reserve Bank System, which are not “retail” banks where anyone can walk in and open a checking account; rather, it is there as a trade service provider to other banks to make sure the nation’s money supply flows freely and efficiently. That’s what ADT proposes to do: make sure the industry’s data flows freely and efficiently.

The Aftermarket Data Trust will not be tied to any one association. If there is to be an industry solution, it must represent everyone in the industry. Currently, the group that is working to develop the service is in close coordination with SEMA, MEMA and AAIA, all of which have lent their support and have both staff and volunteer members actively participating with the ADT initiative. Other industries also are participating, and AIA Canada is playing an important role as well.

ADT cannot be a for-profit concern. The creation of a centralized distribution point for data is by definition the creation of a monopoly. And granting a monopoly to anyone who stands to gain makes the industry too vulnerable. It is essential that everyone have equal access to data.

And keeping ourselves viable is the key. If you haven’t done it lately, step into an independent shop and talk with the proprietor about the percentage of parts he is purchasing from the OE dealer. What used to be single digit percentages are nearly always double digits. And it is not uncommon for those numbers to be pretty significant: as in the 20 to 30 percent range. The aftermarket is in reasonable shape to withstand an assault by the OEM to bring motorists back to the dealer for service work. While it might hurt some, they don’t have enough bays to win. An assault on “our” bays to use “their” parts is another story. As an industry, we have never attempted to track aftermarket versus OE market share at the service center level. If we did, I think we would see that we are losing share at an alarming rate. And if we keep sending our bays the wrong parts or telling them we don’t have something because of our bad data, “their” parts will become increasingly more common in “our” bays. Helping the Aftermarket Data Trust create a centralized distribution point for aftermarket application and product attribute data must become this industry’s highest priority. It is the critical weapon we need to wage war with the OE to assure that “our” bays continue to use “our” parts.