SEMA News - July 2009
BUSINESS
Restylers Use Nontraditional Avenues During Bumpy Times
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| Dealers understand that new cars currently hold less appeal than good-quality used cars, and they are increasing their used-car inventories. Both franchisees and used-car dealers are buying vehicles at auctions and keeping better trade-ins to sell on their lots. Courtesy Lund Cadillac |
First, the obvious: The new-car market—traditionally fertile ground for restylers to cultivate—has become mired in the global recession. Extremely cautious consumers are holding off on big-ticket expenditures, and while reputable economists see glimmers of a rebound, business has yet to fully flex the recovery springboard. Still, some restylers have searched along the boundaries of their expertise to explore avenues they may have overlooked in more fruitful times.
Bob Nardine, owner and president of Bob’s Top Shop in Orlando, Florida, went back to his roots. Nardine started his business in “soft trim”—convertible tops, carpet and anything that had to do with fabric either in or on the vehicle. He eventually expanded into a full restyling shop, but never gave up the trim side of the business. As the recession deepened and work fell off from his established new-car dealership contacts, he began to promote retail convertible top repairs—a natural fit for his Florida demographic.
“At one time, we did about 85% of our business in new-car dealer work,” Nardine said. “Now, it’s about 45%. I learned from a predecessor whose uncle taught him. He told me that during the Depression, his uncle always had gas in the car and food on the table. He didn’t get rich, but people repaired before they bought new, and it’s the same thing today.”
Repair work can be a boon for a shop that employs experienced technicians. Restylers should talk with their crews to see how they might turn some of that knowledge into opportunities, discovering skills employees possess that don’t require a tremendous investment to promote, but may lead to new revenue streams. Technicians often come to restyling shops with experience in audio, paint, exhaust and bodywork—the whole range of repair services—and that can lead to niche business for the shop through refurbishing good used cars.
Experienced dealers understand that new cars currently hold less appeal than good-quality used cars, and they are increasing their used-car inventories. Both franchisees and used-car dealers are buying inventory at auctions and keeping better trade-ins to sell on their lots.
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| One way to help a dealer shore up its bottom line is to add accessories so that some profit cushion is built in to each vehicle. The cost of additional accessories creates only a marginally higher payment on a no-interest or low-interest loan. Courtesy Lund Cadillac |
“We’re buying a lot of low-mileage used cars from all across the country and accessorizing them,” said Larry Appleby, accessory manager at Lund Cadillac in Phoenix, Arizona. “We’re selling four used for every new car, where it used to be about equal.”
That shift in the car market should be an obvious signpost for restylers. There is pent-up demand for vehicles, and people must replace older cars and trucks at some point. For those buying now, a good used car is an appealing deal. The same concepts—although, not necessarily the same accessories—apply to used vehicles as they do to new, and some installers have seen their used-car business increase considerably.
“The one thing that installers who may not be familiar with used-car restyling need to keep in mind is that every late-model used car depreciates every day that it sits on a dealer’s lot, unlike a new car that holds its value until someone drives it away,” said Ellen McKoy, SEMA’s senior director of dealer relations. “So dealers have a great incentive—a financial need from an investment standpoint—to turn that inventory as quickly as possible and as profitably as possible. But they need to keep in mind that people who buy used cars do so because they’re less expensive than their new-car twin. Because the vehicles themselves depreciate in value, you don’t want to over accessorize a used vehicle so that you price it out of the range of the potential buyer.”
In some markets, that means toning down some of the things one might do to a new-model vehicle—a power sunroof, full leather interior with custom inserts, high-dollar wheel-and-tire package—that will put a hefty add-on ticket on the vehicle. Instead, consider a factory look-alike leather package to replace a worn velour or cloth interior. That type of addition costs hundreds of dollars less that the full-boat package, but still makes the vehicle distinctive and more attractive.
Appleby’s philosophy at Lund Cadillac is to make every car that rolls off the lot distinctive from what can be found elsewhere. Lund does far more restyling than most retail outsets, and Appleby says that the consumer’s desire for a unique product is the reason.
“Accessorization still differentiates your car from the one down the street,” he said. “That’s what we do differently. We treat used cars like new cars, but on a used car, we’re putting all of the products on the car at cost. So we’re generating work for the technicians and moving product, but all the profit is made on the gross of the vehicle.”
For instance, Appleby explained, rather than showing a $2,895 sticker add-on for a top on a new car and applying about $2,095 in profit to accessory sales, Lund puts the top on a used car at its $800 cost with the intention of selling the vehicle for an additional $2,000 and applying the $1,200 gross profit to the dealership. Another dealer might have a similar car at about the same price, but the customer gets more value by buying the accessorized car at Lund.
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| Just like his own site for Sunroofs Etc., the websites built by Steve Thompson for his dealership partners act as a sales tool, allowing customers to view products at their convenience. Because Thompson’s company is the installer for anything ordered using the sites he built, the company locks in the business from the dealerships it services. The dealership increases its margins; the salespeople are more efficient; the customers order exactly what they want; and Sunroofs Etc. sees additional production. |
Steve Thompson has taken yet another road to keep his business going while others have fallen by the wayside. Thompson, president of Sunroofs Etc. in Golden Valley, Minnesota, is a long-time traditional restyler who has been in business for more than 20 years, but he had also acquired some expertise at developing websites. Through his work on the Internet, Thompson decided to offer a service to area dealerships. He created sites that incorporated both specialty equipment and the original equipment that the dealers carried.
“We built specific accessory websites for certain larger customers because the people at the dealership weren’t really sure what they were selling when it came to aftermarket products, and they didn’t know what to charge,” Thompson said. “Once you template a site and put on whatever the dealership wants to retail, their sales or service people can pull up a picture and information on how much the product is, what the warranty is and how much they are supposed to charge. There’s a part number included, so the employee can handle the order and charge the customer the proper amount.”
The site also acts as a sales tool for the dealership, allowing customers to view products and packages at their convenience. And, because Sunroofs Etc. is the installer for anything ordered using the sites Thompson has built, the company locks in the business from the dealerships it services. The dealership increases its margins; the salespeople are more efficient; the customers order exactly what they want; and Sunroofs Etc. sees additional production.
New-car interest rates present another opportunity that restylers should be aware of. Because of the drastic slowdown in new-vehicle sales, many automakers and their dealerships are offering unheard-of incentives to get buyers to come into the showrooms, including interest rates as low as 0%, depending on certain qualifiers. If the rate is 0%, dealers are not making anything on financing—one of their traditional revenue streams. One way to help a dealer shore up its bottom line is to add accessories so that some profit cushion is built in to each vehicle. The price of a sunroof, leather or wheels creates only a marginally higher payment on the no-interest loan, so accessories become truly low-cost options.
In addition, while the factories and the dealers currently have excessive inventory because of the stagnant market, things could change as the automakers shut down not only for their usual summer break, but also as some extend their production hiatus to negotiate severe economic hurdles. In that case, it is entirely possible that dealer inventory on some models could eventually be depleted—particularly as the factories curtail certain option packages. That opens the door for restylers to supply needed accessories on a just-in-time basis.
“Savvy restylers know what those option packages are, and they will use that as a marketing tool when they talk to their dealers,” said McKoy. “If customers just want a sunroof on a particular model, they may have to also order an upgraded stereo and wheels and tires as a factory package. They can’t order them singly because they come as a unit. The restyler can offer the dealer a better sunroof than from the factory with superior benefits and improved features at a more competitive price. Restylers should sit down with the dealership’s sales manager, general manager or dealer principal and ask about the most popular option packages. See where there are shortages and then try to build unique accessory packages of their own around those.”
Finding a need and filling it is an old precept in business, but timing is also of the essence, McKoy said. When business is good, it’s hard for restylers to get a dealer’s attention because they’re focused on moving inventory. When business is slow, they’re focused on just keeping the dealership going, but they’re also more receptive to hearing about ways to keep the dealership alive.
Even dealerships that may not have been interested in restyling will recognize positive results from a sale here and there that was made because the vehicle was accessorized or that brought in a higher price. As business begins to improve, which it eventually will, the restylers responsible for those additional sales will have already laid a solid foundation.
