FOR THE THIRD year in a row, ABRN convened a panel of representatives from a variety of backgrounds in the industry to discuss some of the key issues facing the collision repair industry – and offer some predictions on what may lie ahead.
The roundtable discussion brought together six representatives from shops and associations and one insurer. This year's participants include:
- Denise Caspersen, collision division manager for the Automotive Service Association (ASA)
- Dan Risley, project manager for Allstate Insurance at the company's home office in Northbrook, Ill.
- Diane Rodenhouse, owner of Rodenhouse Body Shop in Grand Rapids, Mich., a past national board member of ASA, and the treasurer of the West Michigan Body Shop Association
- Mike Schoonover, president of Schoonover Bodyworks & Glass, a third-generation business with two locations in Minnesota; he serves on the I-CAR board of directors, and is chairman of the Certified Automotive Parts Association (CAPA) Technical Committee
- Aaron Schulenburg, executive director of the Society of Collision Repair Specialists (SCRS)
- Rick Starbard, president of Rick's Auto Collision in Revere, Mass., and president of the Alliance of Automotive Service Providers (AASP) of Massachusetts
- Dusty Womble, operating partner of Roger Beasley Collision Center, a dealership body shop in Austin, Texas; he serves on the national boards of both I-CAR and SCRS.
Highlights from this discussion
ABRN: All of you have probably noticed that consolidation in the industry seems to have kicked back into high gear in the last year or two. From your perspective in the industry, how do you view the future prospects for a single-location shop operation, given the continued growth of multi-location shop operations (MSOs)?
Starbard: We don't have the same experiences here in Massachusetts as the rest of the country as far as the MSOs and consolidators, mainly because we don't have DRPs in a legal fashion. But I don't see it any differently than on the mechanical side. For many years there have been Sears and Firestone and Goodyear and Midas, yet we still have many single, independent auto service centers all over. We find around here the consumers go with those they are comfortable with and those that are part of their community, rather than migrating toward the larger operations and multiple shops operations.
Womble: I think independents are going to have to be more specialized in what they're doing than they are now, telling customers what the shop is certified in and what training they take, things that some of the MSOs don't do to set themselves apart.
ABRN: Dan, Allstate owns Sterling Autobody Centers, one of the largest MSOs in the industry. Do you see single-location shops going away?
Risley: I would say no matter what industry you are in, any business that provides a high quality product or service is gong to be successful. That is the basis on which America was founded, that entrepreneurial spirit. I don't see that going away. We've seen consolidation in other businesses, but smaller operators that operate at a high level continue to survive. The vast majority of shops on our Good Hands Repair Network program today are single-location independents, and that's something our business model will continue to support for the foreseeable future. Some of the best performers on our network are those sole proprietors. The one thing I would say, though, is those single location shops that are going to be the survivors will be the ones that are more specialized than they are today. They may focus on one or more makes of vehicles, or maybe identify a specific niche market.
ABRN: Mike, with two locations, you're the only MSO represented here. What's your take on the future for single-location independent shops?
Schoonover: I think the large MSOs are going to gain more footing and continue to get stronger. Short-term, I see independents doing very well. But maybe 10 or 15 years from now, I think it's going to be a whole different landscape. I just look at what's taking place in the pharmacy business, with small retailers competing against big-box stores. Now granted, we are a service industry, and when your name is on the door, I think you tend to have quite a bit of an advantage in terms of taking care of your customers and gaining loyalty and repeat and referral business. But with safety systems increasing on vehicles, and laws changing to prohibit bad behavior while driving, those things are going to have a huge affect on our business. So I would say independents are going to have to right size themselves to handle the sales they do get, so they don't get too top heavy.
ABRN: A hot topic in the industry this year has been the PartsTrader online parts bidding and ordering program State Farm is now requiring its Select Service shops in a growing number of markets to use. Do you think it poses a threat for a shop and for the industry, and why?
Womble: I am not on the Select Service program, but I think it is a very big threat. I think it will change the landscape of our industry if it's allowed to continue. If you're on a DRP, there are a lot of companies out there that no longer treat you as a partner. They treat you as a vendor. When that change happens, then the expectations of being a partner go out the window and you have to change your perspective to that of a vendor, no longer a partner.
Caspersen: State Farm has presented no factual data that proves this program is in the financial best interest of the collision repairer. State Farm has stated that this could save them $43 million dollars in cycle time costs, but no data has been provided as to how this will financially benefit the shops. The bottom line is that if this application does not benefit the collision repair facility financially, then this program should not move forward.
Starbard: Now, in their plan, are they willing to share half of that savings with their repair 'partners'? I doubt it. What I hope comes of this is that shops use it as a wake-up call to say, 'You know what? Enough is enough.'
Schulenburg: Rick, I agree. If this program were truly beneficial for any other party (other than State Farm), why not make it voluntary? It's instead mandatory for people who don't want to participate in it. You're seeing stories of shops discontinuing their relationship with State Farm. You're seeing stories of dealerships and others concerned about this to the point they're making decisions they haven't made before. If it was beneficial, those benefits would be influence enough to participate. And it isn't just about potential loss of profit or the costs associated with diminished efficiencies and the unnecessary administrative burden. This program really permits carriers to completely step outside the business of insurance and take over our internal business processes while assuming all the financial benefits of those processes. What is next? Is it paint?
Risley: We aren't real familiar with all the details (of PartsTrader). It is obviously very early in the process. We're doing our research on it. But I will offer this, which will probably not be a very popular opinion: I would rate the threat as zero, because shops have a choice. They don't have to participate. If it doesn't fit within your business, don't participate. For those who are not participating or choose not to, it's a zero threat.
Schulenburg: There's a lot of shops and dealers who are electing to say 'I don't want to participate in this,' and they are being really effective in sending their message by doing that. And I think that people who argue that shops have a choice are right to a degree. But what I think everyone needs to remember is when shops got into the agreement with State Farm, the terms and conditions of this electronic parts program weren't in front of them. Now there's new terms and conditions, and if they've become reliant on that business, sometimes it's not as simple as saying no.
ABRN: Diane, your shop is on the program in one of the test markets. How do you view the PartsTrader program?
Rodenhouse: I don't know if I would use the word threat to describe it. I kind of feel it's an opportunity. The reason I say that is it's not business-to-business with State Farm; it's master-to-servant. If you want to be on their program, you've got to figure out the PartsTrader program. That's just the way it is. I think right now it's a little cumbersome. They haven't gotten a lot of the kinks out. But I have no doubt whatsoever that as soon as they work those out, other insurance companies are going to jump on also. So it's not a matter of whether I like the program or not, or whether I am going to use it or not. Really the question is: How can I use it to my benefit? Because it's here. We have to deal with it.
ABRN: On a different topic, very quickly, if your high school-aged son or daughter said they wanted to follow you into a career in this industry, how likely would you be to encourage them to do so?
Caspersen: I would say I would, absolutely. It's challenging and not easy, but it's also exciting and there are opportunities to affect change.
Starbard: If that's where their interests lie, then I would encourage it. It's not for everybody.
Womble: Being second generation, that's an interesting question. About a year ago, my eldest daughter joined our business. So I think they have to choose it. She was 26 when she joined the company, out of college a couple years, and really had a passion for it.
Rodenhouse: I absolutely would, but the one condition: Education. I would make sure they learned as much about everything as they possibly could, from going to college, from taking classes. I always say life is like a toolbox. You can go through it empty, or you can add as many tools as you can. Education is just adding tools.
Schoonover: I would say I would not encourage my kids to get into this industry. It's such a fragmented, disjointed industry. That's just extremely frustrating. You have players within the industry who one minute want to look out for our mutual customers, and then the next week that all changes because a percentage point on their profitability went down. You just have to have thick skin, I guess. I don't think my kids have thick enough skin.
ABRN: Lastly, could you look to the future a little bit, say three years from now, 2015. What do you think will look different at your business or for the industry?
Caspersen: It really depends on how we, as an industry and individually, respond today. There are multiple financial areas for our industry to address: paint and materials compensation, blending within a panel, the feather, prime and block process, data privacy, standards and more. Each of these areas has proposed equitable solutions based on fact, and have at least some industry consensus. Our future is really dependent on us working together, finding facts, collaborating and finding solutions that are in our best interests. If we can't recognize there are possible solutions as an industry that benefit our entire industry, then we could end up three years from now at the status quo.
Starbard: Every time in the past I've played this out in my mind, I say that five years down the road it's going to be a much better industry. Then that five years will go by and it's not a whole lot better. But I always hold out hope. I'm optimistic that things are finally going to break.
Risley: I think insurance companies will have a more focused approach to identifying the best collision repairers in a market: those that do a high quality repair, and are up-to-date on current technology, training, equipment. And the one thing we're already starting to see: I think customer service will be viewed on par with some of the other key operational metrics, such as vehicle repair cost. For some carriers, the customer experience may be even more heavily weighted and more important than some of the traditional key operational metrics.
Schulenburg: I think there's a lot of uncertainty. From a technology standpoint alone, I almost wonder if cars have gotten so safe that they've become dangerous to repairers, with accident avoidance technologies and things like that. It's going to change some of the dynamics. I think you're also going to see refinements from insurers in their use of data analytics. I was just looking at a program for medical insurance that actually provides financial incentives to consumers who use low-cost medical service providers identified through harvested claims data. I think you'll see more and more things like that. I appreciate Dan's optimism that there's going to be a greater focus on the customer experience, but I think the trends indicate it's going to be based more on those (cost-related) types of metrics. I think it's going to remain tough, but there is certainly opportunity for shops to differentiate themselves, to bring themselves closer to the consumer and to be successful.