Industry veteran looks back at past predictions.
THEN:
We asked aftermarket icon Jack Creamer to look back on a column he wrote in 1981 in which he made a number of prescient predictions. Among them:
- Programmed distribution and the three-level distribution pattern will continue to thrive in rural trading areas. Chaos will reign in the metropolitan areas.
- There will be somewhere between eight and 12 major distribution systems in the United States. They all will be doing well in excess of $100 million per year, and they all will have 250 or more jobbers either under direct or indirect control.
- The larger jobbers will be served by major cooperative warehouses.
- Discount structures and gross margins that were common during the '60s and '70s will change.
- There will be more "control" between distributor and customer. Most of this will probably surface as data processing and data communication become less expensive and less complicated. Automatic daily replenishment will be the rule rather than the exception.
NOW: A new revolution begins
The revolution we discussed in 1981 has come and gone. Some of our predictions were on target — others not so much. Rather than rehashing old news, I would like to give some of my views concerning the future of the automotive aftermarket.
It looks as though the large organizations, both retail and wholesale, will continue to rule. For a while, I thought the manufacturers might make a comeback, but recent events seem to have ruled that out.
The "new" players appear to be financial organizations such as Carlyle and Blackstone as opposed to strategic acquirers. They will demand a faster return on their investment and, therefore, will not be as patient as the previous consolidators.
Internet-based businesses (such as WORLDPAC) will develop and thrive. We may see some new, large companies like Home Depot and Lowe's invest in the automotive parts distribution business, as well as the retail side.
Consolidation on both the wholesale and retail sides of the street will continue. The medium- to large-sized WDs ($200 to $400 million in sales) will either double up in size or will themselves be acquired. There are still a few regional retailers who would be good candidates for acquisition.
The manufacturing community will continue moving its production offshore. Many already have invested in both Mexico and China, and this will continue. This will cause those vendors without offshore capabilities to become candidates for acquisition or demise.
Manufacturers' sales forces and their functions will be taken over by major independent rep organizations that can leverage both manpower and products. The parts business won't go away — but it will go through a few more major shifts before it settles into a stable business. The installer could and should rule the business.
The systems will focus on him and his ability to get the right parts at the right price and in a timely manner.
It will be difficult to assess the impact of some of the financial pressure currently being applied to the supplier portion of this business.
Hopefully, and optimistically, I believe that the remaining players in the marketplace will survive and live to fight another day.
Jack Creamer is also a member of Aftermarket Business' Editorial Advisory Board.
