E-Commerce for the Aftermarket
Web-based technologies promise to save the aftermarket money by sourcing hard-to-find parts, keeping inventory from landing in the wrong place at the wrong time and streamlining internal operations. However, there are many roadblocks to implementing e-commerce. Suppliers and distributors have a vision of their core customer, which often does not involve the Internet. Plus, businesses frequently cannot spare the time and resources to properly plan and implement new systems.
"The aftermarket is a mature, established industry with some very good, strong players," said Jesse Hermann of Icarz, Inc. "We view the Internet as a tool that can be used to improve processes, just like a telephone. However, the actual business is selling auto parts. It's not about putting parts online, so much as it's about enabling new efficiencies through better communications."
E-commerce is not a new concept to the aftermarket. Electronic inventory management and ordering systems were available and widely used long before the dot-com boom of the '90s. However, the popularity of the Internet created an online marketplace that threatened traditional distribution models.
"Until we can push water pumps through a phone line, the aftermarket won't embrace the business-to-consumer model," said CARQUEST's Pete Kornafel. "There really is not a single dot-com that has killed off the old players, because brand-recognition is key to winning new customers, and the bricks-and-mortar presence is critical for retaining existing business."
However, the other side of the equation is the expanded product offerings the Web makes possible. A good example of this is Don Seyfer of Seyfer Automotive, Inc. in Wheat Ridge, Colo., who uses the Internet to source rare parts for the many classic cars and older vehicles that come through his service bays. "The Internet is truly a godsend when it comes to specialty parts," Seyfer said.
"B2C presents a very specific opportunity for companies to improve their top-line revenue by capturing market share that they don't have access to through their physical presence," explains Ron Pyle, president of CarParts Technologies' distribution network.
Like many aftermarket companies, CarParts Technologies has shifted away from B2C, selling off its Internet retail interests to established direct marketer J.C. Whitney. "B2C was not a good fit for our long-term business-to-business strategy," Pyle said. "We didn't own our fulfillment and distribution infrastructure, and that made it very difficult to control costs. When you have to contract out to that extent, the margins become very thin."
Data Access Equals Efficiency
There are two types of information retrieval - push and pull. With the push method, you distribute information, and the onus is on the recipient to do something with it. In the pull method, information is always available, and users can find it on an as-needed basis. Corporate intranets allow users to pull down office memos, forms and data whenever they are needed - an improvement over the old method where information was distributed to users, who were expected to keep it on hand until needed.
Several aftermarket players are building intranets and extranets for their sub-program distribution groups. The systems are designed to filter the information access based on the user's identity. These systems also aim to increase efficiency by eliminating the overhead of printing catalogs and distributing parts data.
"Today's e-commerce is really a brand-new concept for the aftermarket. Before, we had systems that were very slow and required a lot of downtime waiting for connections," says Hermann.
As the owner/operator of a NAPA Auto Care Center, Seyfer agrees that having access to inventory data via the Web is a huge advantage. "We have a T-1 connection and nine terminals in our shop. Service advisors who are trained in the use of electronic catalogs and sourcing tools handle parts ordering. Only 2-3 percent of our purchases require a counterperson's expertise."
"Deploying a system over the Web is much cheaper than across a network, because it runs off a browser and requires no special hardware or software. It takes a lot of pressure off your internal IT resources," Pyle said.
Seyfer uses the collision repair industry to illustrate this point. "Body shops are constantly battling with the insurance companies over their use of proprietary software. It's a huge inefficiency when each shop has to install a separate claims management tool."
"The new generation of e-commerce gives us the ability to share data across companies, whereas in the past, every-one had software that was very specific and limited in scope," Kornafel said.
Online parts catalogs can be greatly enhanced with features like VIN matching, which simplify ordering and help avoid costly returns. "The industry needs to move away from TransNet and EDI. New Internet-enabled technologies like Java are light and run on any system," says Malcolm Davidow of CompressorWorks, Inc.
"At AAPEX we demonstrated our new channel management tool, which runs on the Web, but can be custom-configured to any environment. The goal is to reduce the cost of routine business processes," Pyle said.
"Parts proliferation is a big problem for the aftermarket. Time spent shelving and cataloging is significant. Wall Street's biggest complaint about our industry is slow inventory turnover," Davidow said.
Some would argue that the aftermarket isn't taking full advantage of the new distribution concepts and opportunities provided by the Internet. "A lot of companies get started on e-commerce implementation, and then quit halfway through," Davidow said.
"I don't think e-commerce will solve returns, because replacing inventory with data is never going to meet the industry's demand for parts in 30 minutes, or less," Kornafel said. "That is the primary reason why B2C ventures couldn't deliver: Somebody has to own the local store.
For Joe Torchiana of Torchiana Automotive in Drexel Hill, Pa., the hardest thing about ordering parts online is the lack of quality assurance. "It's not worth saving a few dollars if the part fails two weeks later, and leaves my customer not satisfied with the repair job."
Torchiana prefers calling his local WD, where he can get personalized assistance from a knowledgeable counterperson. "The online catalogs make more work for technicians, many of whom are not computer-savvy. Plus, many shops don't have high-speed Internet access or enough computers to make this a viable option."
Furthermore, when it comes to facilitating access to technical information, Torchiana believes the industry is stuck in a rut. He cites as an example the OEMs' stalled proposal to offer service data online as a solution to the on-board diagnostics issue.
Open architecture, the ability to integrate with legacy platforms, and plug-and-play adoption are critical factors in the success of aftermarket e-commerce initiatives. For jobbers and installers, time is of the essence. An Internet solution may be more efficient, but if the interface is not intuitive they won't have time to learn how to use it. When sourcing parts, cost is probably the driving factor at the installer level.
"As a software company, we have to bring a solution that works within our client's existing business model. You can't walk in and say the world's going to be different now, because I'm here. All of our senior management has substantial experience in all areas of the aftermarket, as well as in software development. That enables us to maintain our focus. We certainly learn every day, but it is not on-the-job training at our customers' expense," Hermann said.
Companies want to see a return on their investment within three to nine months, because they can't afford to wait longer. Most companies also don't want to deal with third parties who become business partners, as opposed to software providers.
"Nobody wants someone in the middle of their transactions with customers, because it raises issues of security and jeopardizes the integrity of your marketing message," Pyle said.
Start-up capital isn't available like it was two years ago, but there are still successful technology companies out there. They are the ones who had clear strategies, and were held accountable for meeting sales goals and demonstrating return on investment.
"It's too soon to come to any conclusions about the effects of Internet technology on the aftermarket. Just because some companies failed doesn't necessarily mean that all the ideas behind them were wrong," Hermann said.
"It's encouraging when the WDs start making decisions independently of their program groups, because it takes the red tape out of the process. We need to find ways to get technicians and counterpeople off the phones and online, and we'll need the support of manufacturers and WDs to make this happen," Davidow said.
Torchiana, who does a lot of training in his shop, notes that the Web still has not made much of an impact on his colleagues. "I don't think technicians realize the implications of how the Internet is going to affect their jobs in the future." E-learning, online parts ordering and online technical manuals are still a long way off for many people.
The 1990s saw a rush of companies trying to leverage the opportunities presented by the Internet, while older, established players scrambled to reinvent their business plans. Suddenly the connection between suppliers and consumers was streamlined, to the perceived disadvantage of jobbers, WDs, and bricks-and-mortar retailers. Plus, nobody knew what the impact would be on consumer habits.
What has become clear over time is that the Internet did not change things as much as predicted, but neither did it disappear. Today it remains a very powerful tool for improving efficiencies and reaching new customers, and many companies have successfully incorporated Web technologies into their business models.