Parts Sales: Money Doesn’t Grow on Trees

At one point in time or another, we’ve all heard someone in our lives tell inform us that money doesn’t grow on trees. And they would be right. Technically.

 

The facts are, however, that the phrase started because sometimes there is money (revenue) that is simply waiting to be taken by businesses. There are a lot of revenue sources in dealerships and while those sources haven’t changed much in a century, the way in which dealerships can harvest or maximize the profits in each of those has.

 

Technology is being introduced daily that can assist dealers in creating more positive and easier buying experiences in sales. Technologies are showing up making dealerships not only more efficient for customers but allow for a higher volume with existing infrastructures.

 

That’s not what I’m talking about.

 

What I’m talking about is taking advantage of a technology that we’ve had access to for decades. The Internet.

 

e-Commerce, if nothing else, has taken our world by storm. It recently made Jeff Bezos the richest man in the world, nearly doubling the net worth of the second richest man, Bill Gates. Amazon now has more consumers in the United States that pay money to be a member of their Prime program than don’t… and that train probably isn’t stopping soon.

 

e-Commerce isn’t anything new to us as a society. We’re all getting quite used to – and fond of – being able to order anything we want and having it delivered to us within a couple days, the same day or, in some areas, even within an hour. Anything from books to refrigerators can be had by a consumer without them leaving their living rooms. But don’t think that the automotive industry isn’t vulnerable.

 

Amazon recently announced to consumers that they could be tires for their vehicles through Amazon which would be delivered to the consumer and installed for free by Sears. We know that Amazon has been selling auto parts online for quite a long time. This, however, is next-level. And shows that dealer fixed operations revenues are being attacked not only on the parts end – but also the service end. (Someone has to install those tires, right?)

 

As a dealer, parts sales represent an incredible opportunity to increase revenue in an already-existing profit center. One that, in many cases, goes incredibly neglected. There are plenty of dealerships that have taken advantage of this and made a killing. Many others, however, either have not realized the potential or think that the mechanics to accomplish this would be taxing.

 

There’s a reason why Amazon chose to get in the automotive parts industry… and it’s not because there isn’t money to be made. According to a 2017 report from Hedges & Company, not only is the online retail parts industry up to $9 billion per year but it’s also growing at a double-digit year-over-year increase, while retail sales are only growing at less than 3% year-over-year.

 

With new car profits shrinking, future sales volume in doubt due to ride-sharing and autonomous vehicles, analysts predicting newer generations to have less interest in car ownership and electric cars threatening to put a bite in service revenue due to less maintenance required, dealers should be exploring all revenue opportunities that they have the infrastructure and ability to leverage in order to ensure that future financial profitability has a secure foundation.

 

Money may not literally grow on trees, but perhaps we’ve all been looking for the wrong type of tree.

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