PMM reports on the Independent Automotive Aftermarket Federations’s (IAAF) Annual Conference.
The IAAF end of year conference provides the perfect opportunity for garage owners, motor factors and aftermarket manufacturers to network, learn, and grow their businesses. With a stellar line up of industry expert speakers on the bill, motor sport legend Johnny Herbert hosting the event, and a veritable feast of industry topics and challenges to be discussed, the 2017 edition was geared up to be a big one.
Wendy Williamson, IAAF Chief Executive, got proceedings off to a festive start, running through the ’IAAF 12 Days of Christmas’, which was succinctly summarised in 12 key issues that had featured heavily in the 2017 aftermarket. Williamson’s run-through introduced a number of themes that would be visited later in the event, and the tone was officially set for the conference to begin in earnest.
First to take the floor was Dr Julia Saini of Frost & Sullivan, who provided an insightful overview of the role the aftermarket plays in the UK economic framework – noting that it contributes a staggering £12.5 billion to the economy – before considering the market forces that look likely to have an impact on future figures.
The Brexit Effect
It wasn’t long before the Brexit-shaped elephant in the room was addressed. Dr Saini explained that if the UK loses tariff-free access to the EU as a result of Brexit, we could see the introduction of a 2.5-4.5% tariff on imported goods, coupled with a decreasing consumer spend on car maintenance. Add to this regulatory uncertainty, supply chain disruption and reduced investment and it doesn’t take an economist to work out the net result for garages.
The growth of online retailing
According to Frost & Sullivan, £0.72 billion worth of parts and components were sold online in 2016 (4.3% of total aftermarket sales), with this figure expected to grow to around £1.65 billion (roughly 10.5% of total sales) by 2022. This particular trend is expected to largely affect parts sales, but there is also a developing market for online service providers (see page 6 of the 2017 December issue of PMM for more on this). Again, garages will bear at least part of the brunt of this trend, as it not only increases the likelihood of consumers ignorantly purchasing poor quality parts, but it could also potentially lead to more requests for technicians to fit customer-supplied parts.
Opportunity knocks for savvy garages
Dr Saini went on to discuss the evolving nature of ‘personal mobility behaviour’ (in layman’s terms: the way we get around). With the growth in leasing, car sharing and e-hailing (think Uber), we could see a reduction in the amount of vehicles on the road over the next couple of years. Whilst on the face of it this might seem like a worrying development, in fact it is expected to lead to an increase in demand for parts, services and maintenance, by virtue of the higher mileage undertaken by these vehicles.
According to Frost & Sullivan’s historical data on the aftermarket, the current strong performance of the fleet-owned and leased segments is a positive indicator for the UK aftermarket as a whole, and there’s a golden opportunity for commercially-astute independent garages to win contracts, as operators are often more inclined to rely on local, independent garages because of the associated convenience and price. Finally, things are looking up!
Dr Saini brought her presentation to a close with a brief look at the ‘monetisation of data’. Since the advent of the connected car, ‘data’ – and more specifically who owns it – has become a crucial issue. Of course, the VMs have their own agenda for protecting what they see as ‘their data’, which they will campaign vehemently for at every accessible level, but the aftermarket cannot afford to be left at a competitive disadvantage. And in order to remain competitive in this data-driven environment, Frost & Sullivan believes that the aftermarket needs to recruit skilled workers, from technicians to parts sellers, through partnerships with schools and government.
Garage schemes in the UK
Next in the hot-seat was GiPA’s Quentin Le- Hetet, who provided his interpretation of the proliferation of so-called ‘garage schemes’. Whilst the concept of a garage scheme is not new, this fragment of the market has been burgeoning over the last few years, with the likes of Autocare, Bosch, Unipart, Euro Repar, Servicesure, Autofirst and UAN Garages (to name but a few), doing their utmost to sign up willing independents. What is noticeable – and perhaps concerning – if you delve deeper into the origins of these schemes is that they are not all owned by parts manufacturers. Indeed, large motor factors, buying groups and even VMs are getting a slice of the action.
But is this a good thing?
The perceived benefit of joining a network is that it will help a garage to become more professional and allow it to capitalise on the credibility associated with the network’s brand, thereby bringing in more customers and improving profitability. That’s no bad thing, and it’s probably the reason that 10% of independent garages in the UK are already members of such networks. In France, this percentage is near 60%, while in Germany it’s 45-50%, so clearly there is enormous scope for growth in the UK. Watch this space.
Are you charging enough?
Mr Le Hetet proceeded to reveal an alarming statistic: labour rates in independent workshops in 2017 were lower than they were in 2012, while the labour rates at competitor businesses (fast-fits and franchised dealers) were up. He also reported that, in 2017, 95% of technicians at franchised dealers received some form of training. The same cannot be said for the independent sector, with the constant barriers of time and cost preventing many businesses from undertaking any meaningful training. On these issues of ‘value creation’ and adequate training, GiPA suggests that independents desperately need help, and called upon key stakeholders in the aftermarket to help sustain garages in the future.
Online work provision
Next, the baton was passed to Alistair Preston, Co-Founder of whocanfixmycar.com, who began by saying that ‘aggregators’ (for example, comparethemarket.com) are very popular in lots of industries and consumers are used to them as a form of searching for and choosing a service provider. With that in mind, Alistair argued that there is a place for such platforms in the aftermarket. This assertion was not without statistical back-up, as Mr Preston presented the following findings:
- When approaching the service/repair process, 50% of drivers will not have already made their mind up as to which garage they are going to choose.
- On average, choosing a garage is an eight- day process for consumers.
- The average consumer will use three to four online sources to help them make their choice.
- 55% of people will use a smartphone as part of their search.
- Consumers these days need assurances – what is the garage’s reputation? Does it have written reviews? (see page 28 of this issue for more information on the power of customer testimonials and case studies).
On the basis of the above information, it is arguable that there is an opportunity for UK garages to capitalise on the public predisposition to use online providers. On page 21 in the December issue of PMM, our garage contributors argued strongly against online work providers, but perhaps they do have their place in the market afterall…
Right2Choose
The IAAF’s very own Mike Smallbone was next up, to present an update on the IAAF’s recent activity. The take-home point was that the Right2Choose campaign is being rejuvenated for the digital age. For the uninitiated, the Right2Choose campaign seeks to raise awareness in the trade – and ultimately with consumers – by clarifying that drivers have the right to choose an independent garage over a main dealer, even before the warranty has expired on their car. A reported 72% of consumers currently think that they will invalidate their warranty if they do not take their car to the franchised dealer, and even more alarmingly, there is still some uncertainty in the trade as well (if you’re among the 16% of garages that haven’t heard of Block Exemption, may I suggest that you do some research).
The next industry body to have its say was the IMI, as Steve Nash, Chief Executive, discussed future technology and the potential impact on the aftermarket. Mr Nash noted the political rhetoric of recent months – much of which has poured scorn on the internal combustion engine and championed an autonomous future – but urged delegates to ‘take the politics out of the statements’ and instead look at the reality. Mr Nash argued that it’s very hard to imagine a future without the combustion engine in one form or another, while also suggesting that the words ‘fully autonomous’ should be taken with a pinch of salt and will perhaps only ever apply to public service vehicles that do set journeys in mostly urban areas. Passenger cars, in contrast, will still have steering wheels (see page 36 of this issue) and driver capability.
The electric future
The IMI is reportedly seeking regulation for those technicians and garages that operate on automated, hybrid and electric vehicles. This so-called ‘technical licensing’ can surely only be a good thing for the industry, improving standards of professionalism and safety, while exposing those that are not up to the task. On this point, Mr Nash remarked “the theory that anyone could stick their hand under the bonnet of a high voltage vehicle is scary”. As it stands, this is a massive problem for the independent sector, as less than 1% of technicians in the UK – and most of them are from main dealers – are adequately trained to work safely on electric vehicles. Something’s got to give.
The IMI believes that there needs to be a ‘badge of competence’ to demonstrate that independents can do the same work, to the same standard, as franchised dealers. With the Automated and Electric Vehicles Bill currently making its way through Parliament, garages will soon find that they will need at least one technician with Level 4 competency, or they’ll have to start turning away work.
