Jim Lang: Market Share Shifting from Independents to Dealers
Feb. 10, 2017—Longtime industry analyst Jim Lang, president of Lang Marketing, sends out several “Lang Aftermarket iReports” each month. Through data culled from consumer, installer, distribution and industry research, these reports take a detailed look at trends that are shaping the automotive aftermarket.
Recently, in a report entitled “Independent DIFM Share Peak,” Lang Marketing identified that the independent Do-It-For-Me (DIFM) aftermarket (aka independent automotive repair shops) is “beginning to decline in car and light truck repair market share, as dealer bays stage a steady recovery."
The report—which expands on data Lang provided Ratchet+Wrench in a past feature—stated that independent repair outlets peaked at 78.9 percent in light vehicle product volume during 2013 and 2014, but that it declined in 2015—the first drop in product share since 2007. Over the next four years, the report says more than $1.1 billion in product sales will shift from independents to dealer bays, reversing the flow that kept up from 2008 through 2014.
Jim Lang dove deeper into the report with Ratchet+Wrench to explain why this shift is happening.
How did dealers lose their market share back in 2008?
For a number of years, dealers were expanding their shares of the DIFM market. But then with the recession of 2008 and the closing or shutter or disappearance of 3,000 dealers, independent outlets began surging in DIFM shares because they were filling a void in the marketplace.
Over a period of two or three years, the service share of dealers went down almost 8 or 9 percent. It was tremendous. It happened so quickly because they lost so many outlets, particularly in smaller communities.
What is the main reason dealerships have started to take back some of the market share from independents?
Now what has played out is dealers are starting to expand the number of bays they have. There has only been a slight increase in the number of dealer outlets, but there’s been a sharper increase in the number of dealer bays.
Honda, for example, is merging its dealers to add quick lane service and oil bays. So now the focus is to provide more frequent, less complex service to consumers so that they have contact with consumers on a repair basis several times a year. This strategy has also worked pretty successfully for Ford, and now a number of other nameplates are adapting that strategy by encouraging dealers to increase their service bay capacity.
How else have the dealerships shifted their perspective on service?
With the dip in new vehicle sales from 2008 to 2012, the dealers who survived took a much broader view of the aftermarket in terms of providing service for all years of vehicles, not just newer vehicles. So another impetus for service bay growth has been the increase in off-lease vehicles, and the increase in number of used vehicle sales by dealers.
These vehicles are then refurbished by the dealers before they’re resold, so that’s created a whole other service stream of income for dealers, because then dealers try to encourage these used vehicle dealers to come back to them for their service. In years past, dealers were only really interested in vehicles maybe five years and newer for service. And now, because of the reduction in warranties, vehicles are more reliable. So there’s less warranty work. And so with this new strategy, they’ve been able to rebound a share in the aftermarket.
Which independent shops will be most/least affected by this shift?
It isn’t that the independents are going to be left in the dust. Independents are still going to see growth in the aftermarket volume, and certain segments, like repair specialists, are going to see very strong growth, so there are segments within the independent repair industry which are going to do well.
Another huge factor in the surge has been increased foreign vehicle sales and foreign vehicles’ share of the aftermarket. People who have foreign nameplate vehicles are more inclined to return to the dealer for service. In many cases these are luxury vehicles as opposed to non-luxury vehicles. That’s mostly because of the technology of the repair required, the special tools required—this has been incrementally driving up the share of dealers business.
It’s just a question of looking at the overall marketplace, I think the share momentum has gone back to the dealers for the reasons mentioned. What caused the rise of independents after 2008, that market has been played out. Those dealers that did survive have a much different view of the repair industry than prior to 2008.