Welcome to 2020.
It may look different than you pictured. There are no flying cars—yet. But, that could all change in the next five years—in 2025.
So much has changed since 2015, it’s hard to say what the automotive industry will look like in the next five years. That being said, the time to prepare for the future is now.
Rideshare, autonomous and electric vehicles have been a major topic at industry events and within the pages of this magazine. Their presence threatens the landscape of what our readers do. Today’s consumer is more informed than ever, and comes with higher expectations, meaning businesses need to adapt. With a shift in vehicle ownership and the type of vehicles consumers are buying, paired with growing customer demands, shop owners need to pay attention—or go extinct.
These next few pages highlight five trends that shop owners need to pay attention to and adapt their business for—consolidation, telematics, EVs, virtual reality and e-commerce.
Are you ready for these? If not, start reading. 2025 is just around the corner.
The Trend: Consolidation
Why it Matters:
According to Jim Lang, president of Lang Marketing, the number of non-dealer light vehicle repair outlets fell by 2 percent between 2013–2018 (information gathered from the 2020 Lang Aftermarket Annual). Within this number, the number of chain outlets remained roughly the same, while independent outlets fell nearly 4 percent over this time period, resulting in a decline of roughly 5,000 service stations and garages. This shows an increase in chain outlets and decrease in the presence of independents.
How to Prepare:
Dan Bauer, managing partner of Murphy Business Sales, has been working on business transactions for 22 years and during this time, the biggest mistake he sees business owners make is not preparing for the day that they sell.
“They leave a lot of money on the table,” Bauer says.
Most business owners don’t prepare because they have the mentality that they’ll be there forever—that’s not the case. Bauer encourages shop owners to prepare for the future today no matter what they decide to do with their shop after they retire. Be it passing it to a family member, leaving it to a shop manager, going through a private buyer or consolidating, shop owners will have the most success if they get their ducks in a row ahead of time:
Talk to an accountant.
According to Bauer, this is the most important step. Sit down and explain your plan. Let the accountant know your timeline and set up and prepare for taxes.
Keep an eye on everything.
Bauer says shop owners should prepare for the day they sell on the daily, keeping an eye on key numbers by watching the books. Staying on top of equipment and staffing is also key because that will help earn more money in the actual sale.
Get team together.
Bauer advises getting an investor, broker, accountant and anyone else necessary to get your selling plan in order.
“You should have everyone looking at what your best interests are,” Bauer says.
Consider your options.
Consolidation is not the only route to take. If a shop owner decides to sell to an outside buyer instead of leaving the shop to someone internally, the choices are a private buyer or a consolidator. The benefits of going with a larger company, Bauer says, are that the transition is minimal as they’ll usually bring in their own management.
Future Outlook: Bauer does not think consolidation will be the death of the independent. He believes there’s still major opportunity for indys, they just need to prepare for the future of their businesses today so they’re not stuck doing something they didn’t want to do or leaving money on the table.
More Information: To learn more about the state of the automotive repair landscape, including trends in consolidation, request your copy of the Lang Aftermarket Annual 2020 at bit.ly/langaftermarketannual2020.
The Trend: Telematics
Why it Matters:
In 2018, the Right to Repair Coalition relaunched due to telematics and the advantage that it gave to dealerships. At the time the Right to Repair law was passed in 2013, access to information through telematics was not an issue. In 2020, it is. Independent shop owners need to be aware that the dealerships have access to information that could steer customers away from the independent shop.
How to Prepare:
In order to create an ongoing relationship with customers, independent shop owners need to look at online and mobile applications created by the aftermarket that will allow them to compete with the OEMs, Bill Hanvey, president and CEO of the Auto Care Association, says. For those shop owners that are doing this, Hanvey provides a few ways to use it as a differentiator.
Improve customer service.
Utilizing telematics can provide a seamless, smooth, customer experience that alerts customers immediately when their car needs to be repaired, Hanvey says.
“Shops can use the opportunity to automatically schedule the repair, order the parts, keep it convenient for the customers and increase trust and rapport through this process—a big differentiator,” Hanvey says.
Branch out.
Fleet work can benefit in a large way from telematics. If shops have the capacity to do so, Hanvey suggests reaching out to fleets with this offering. It will help increase revenue opportunities.
Future Outlook:
Information is power, and if independent repair shops do not have their customer’s information, that power will go to the dealerships, warns Hanvey.
If the playing field is level, this access to information can improve the overall experience for customers as well as the automotive industry as a whole.
More Information:
To learn more about how to make telematics work for your shop, check out this 2017 Ratchet+Wrench story at ratchetandwrench.com/telematicstrendline.
The Trend: Electric Vehicles
Why it Matters:
In September of 2019, Daimler announced that it would stop developing new internal combustion engines to focus on electric cars. Prior to that, in March 2018, Nissan announced its plans to sell 1 million EVs annually by 2022. These are just two examples of moves made by OEMs that signal an overall trend in the industry moving toward EVs.
How to Prepare:
“If shop owners aren’t doing hybrid cars, they are missing the boat,” Craig Van Batenburg, CEO, Automotive Career Development Center, says.
Even though it may not seem like EVs are taking over, hybrids already make up a significant portion of vehicles that are on the road today, so Batenburg says an understanding of those is essential, and once you have that, you’re well on your way to understanding EVs.
“If you know those, you know EVs, just throw the engine out,” Batenburg says.
EVs do not need maintenance as frequently as gas-powered vehicles, meaning there will be less work to do, which means the shops that will survive in the future need to find a way to be attractive to EV customers. Here are a few action items to take right now to help you stand out in the future, according to Batenburg.
Buy an EV website.
Batenburg says to buy a domain for your area with hybrid or EVs in it right away so people will find you. For example, if you live in Ely, Minn., purchase ElyHybridRepairs.com, Batenburg says. Get that real estate before someone else in your area does.
Gauge staff interest.
The next step is to get your staff trained in actual hybrid/EV repairs. Gather your staff and ask for one or two volunteers that are interested in this and send them off to the necessary training. They can then come back and teach the rest of the staff.
Advertise like crazy.
Once you’re ready, get the word out, Batenburg says. Once people start to bring their vehicles in, your staff will become more confident in working on this type of vehicle and gain more knowledge, which will in turn bring in more customers.
Future Outlook:
“We can’t continue to keep doing what we’re doing. Shops will be fine—but there will be a lot fewer,” Batenburg says.
If the price to purchase an EV begins to level out with the price to purchase a gas vehicle, there will be a shift in the type of vehicle that is on the road. And, if internal combustion engines cease, shops that haven’t prepared to fix EVs will find themselves in a difficult situation, Batenburg explains.
More Information:
For answers to common EV questions, check out ratchetandwrench.com/ecommercetrend.
The Trend: Virtual Reality
Why it Matters:
Less than 2 percent of those entering the automotive industry are between the ages of 18–23, according to Shawn Dupuie, solutions design manager at Bosch, based on a survey of 4,543 participants in the industry. The majority of the workforce is aging, and the technician shortage is at an all-time high. Not only that, but vehicles are becoming more advanced than ever before, making today’s technician’s look more like engineers. Virtual reality (VR) can be used as both a recruiting and cost-effective training tool, Dupuie says.
How to Prepare:
“Most of our customers are coming to us and saying they’re having a hard time recruiting new techs that want to work in the industry,” Dupuie says. “How can you [Bosch] help us? VR.”
Virtual reality is appealing to younger generations, as many have grown up with it and have come to rely on it. It can be used as a recruitment tool, Dupuie says. Not only that, but it has cost-saving benefits for shops. It’s an effective training tool that allows staff to get safe training from a remote location that they may not otherwise have been able to attend.
For example, Dupuie gives the example of an OE doing training on engines. Rather than purchasing 100 engines to work on, VR headsets allow technicians to work on the engines without actually having one physically in front of them. Not only that, but VR doesn’t require the space that certain training requires.
Right now, the majority of VR training is available for OEs and dealerships, but independents are still able to reach out and request it. Bosch is also currently working on a training subscription model, which will allow independent shops to do VR training with a monthly fee if they have the VR headset. Dupuie anticipates this will be available sometime in 2020.
Here are a few of the benefits of taking advantage of VR training:
Information Retention
Dupuie says that what they’ve found technicians retain knowledge better with VR.
“We’ve found that most people retain 10 percent of what they read, 50 percent of what they see and hear and 90 percent of what they do—we’ve had a high success rate of retention [with VR training],” Dupuie says.
Cost Savings
Although the investment may seem steep up front, VR means you don’t need the physical materials to work on, so down the line, it’s actually more cost-effective, explains Dupuie.
On top of that, staff can actually stay in the shop rather than racking up travel expenses to go to a training session.
“It’s expensive to send them away to training, so when they can do one-hour blocks in the shop, it’s cost-effective,” Dupuie says.
Effective Marketing
“Being able to offer it is huge,” Dupuie says of the benefits for attracting both customers and employees.
VR is attractive to younger generations, which makes it an appealing recruitment tool for shops to offer as part of a benefits package. Marketing this to customers also helps show that your shop is on the cutting-edge of technology, Dupuie says.
Safety
With more advanced and complex vehicles, repairs are getting more dangerous, especially if a technician is unfamiliar with it. VR training offers a safe environment to practice the repair and become comfortable with it because they’re actually performing it, says Dupuie.
Future Outlook:
“In the next couple of years, it will become more readily available to independents,” Dupuie says of VR training.
Dupuie believes that VR will change the way training is done over time and that independent shop owners need to start doing research on it and taking advantage of it today to prepare for it becoming more mainstream.
One way to do this is to become acquainted with the equipment, he says. Go out and buy a VR headset and become familiar with it. Another tip is to contact a company that offers VR, such as Bosch, and share the pain points that you have with training so they can help find a solution.
More Information: For a look at how a few OEMs are using VR training, check out this article by Jasoren, a software development company that works on applications for VR, at bit.ly/VRtraininguses.
The Trend: E-Commerce
Why it Matters:
According to a study by Sana Commerce, buyers purchase an average of 75 percent of their products online. 25 percent of those polled want easier and faster checkout, repeat ordering and quicker delivery. On top of that, over one third of buyers would choose a vendor if they offered them the ability to place, pay, track and return orders online. For shops that sell—or are thinking of selling—parts, an E-commerce presence is key.
How to Prepare:
According to Giuseppe Ianni, VP of sales, North America, from Sana Commerce, even though customers are increasingly online, the auto industry is still heavily lagging. And, the majority of those that are only, only have a commerce 1.0 solution, he explains. What he means by that is that the platform is not personalized to the customer and is often not streamlined, causing more problems than solutions.
The reason many are not online is because the task seems daunting, explains Ianni. However, there are tools that can help with the process and Ianni believes its a necessary step to connect with today’s consumers.
“They [business owners] have an option and a way to better meet consumers’ demands through E-Commerce,” Ianni says.
Here are a few tips for getting started in e-commerce.
Embrace technology.
The first step, according to Ianni, is to take note of where you’re at today and make a commitment to getting started. Begin by getting all of your data compiled. Begin collecting SKUs and coming up with a system to move inventory online. If shop owners are able to invest and put the product into one database, Ianni suggests doing that, as it’s a much simpler way to get the inventory online.
Find a system that works for you.
Ianni suggests finding a single stack solution—which means all of the data that is needed, such as SKUs, make, model, year, etc., is all managed in the program.
To find the best one for your business, Ianni suggests reaching out to a company to get a trial of the product. The trick is to test the product out and think of how it will work 3–5 years down the road rather than just seeing how the functions work for you today.
“Look at the usability and the transparency [of the system] in terms of data,” Ianni says.
The growth plan of your business is another factor in determining what system you will use. For example, if you plan on adding or acquiring new locations, you may want to ask how the system will synch up inventories.
Find someone to manage the data.
The first step is getting online, the second step is keeping that site running smoothly. Ianni suggests having a dedicated person that owns the data and makes sure to manage it all in one place.
“Don’t manage data twice—find a system that will allow you to manage it once and find a primary owner that manages one set of data,” Ianni says.
Too many systems in place and too many people in charge is what causes hiccups, Ianni says. Avoid having too many cooks in the kitchen when it comes to your E-commerce site.
Future Outlook:
Ianni believes that in the future, there will be a shift toward automation and e-commerce is a way to increase revenue and be more efficient. He suggests taking a holistic look to your business and taking stock of what you already have in place and what you will need to have in place to survive in the next few years.
More Information:
This 2018 article (ratchetandwrench.com/ecommercetrend) from Ratchet+Wrench will provide more information on ecommerce trends in parts ordering.