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The benefits to dealerships of parts e-commerce vary based on the category of target customers. From this perspective of distinct sets of dealer benefits, there are three categories of buyers. The first category of buyers consists of professional independent repairers; other dealers of the same franchise make up the second category and the combination of consumers and semi-professional repairers is the third.
Professional independent repairers (body shops, IRFs and Fleets) are primarily motivated by speedy deliveries and trust – they build ongoing trading relationships with franchised dealerships to purchase new OE parts at a substantial discount from MSRP. For more: “Parts Buyer – Sourcing Motivation.”
For dealers in the wholesale parts business, adoption of parts e-commerce is (in part) a matter of sustaining (or improving) customer satisfaction. To retain their current professional independent repairer customers (as some and then more shift from placing orders by phone and fax to online ordering), dealers with substantial wholesale parts businesses will need to implement parts e-commerce ordering (potentially participating in multiple programs favored by their best customers). Buyers that prefer to conduct at least some parts ordering online may switch to dealers that participate in parts e-commerce programs. As dealers will be able to retain their best customers once they agitate to use a particular parts e-commerce program, the level of customer conquest and switching may be low. There is also little evidence that (assuming sufficient dealers respond to their customers’ requirements) parts e-commerce will in the end significantly change the balance in market share between AM, OE and salvage parts purchased by professional independents.
Parts e-commerce for AM parts matters. As professional independent repairers buy AM parts (in most cases, much more than OE parts) and the AM parts sector leads in online ordering, trends and successful approaches to AM parts e-commerce will be a driver in the pace of adoption and nature of OE parts e-commerce. Buyers may develop strong preferences for functionality and look-and-feel based on extended use of AM parts ordering solutions.
As the potential of web-based technologies are increasingly recognized, buyer programs instituted by automakers, insurers and leasing companies will be embedded in online parts buying systems. Buyers will be obligated to use specific systems to be in compliance with program requirements for parts orders. Examples of programs that could result (and in several cases already have resulted) in online ordering compliance requirements include:
From a dealer operations efficiency perspective, the substantial use of faxes reveals the benefits of online parts ordering compared to orders placed via phone calls. Parts orders faxed to dealers are typically quicker to process for two reasons. First, the buyer has already identified the part numbers (and often expected MSRP) enabling the dealer parts counterman to validate the part numbers via dealership EPCs quickly. Second, conversation not related to parts ordeing is avoided. In addition, orders by phone are disruptive (interrupting whatever the parts counterman is doing from processing other orders to assisting a Service Technician with parts needs) and phone orders are more sensitive to being interrupted.
The efficiencies described above that apply to orders by fax apply to online parts orders – and more. Online orders are more efficient than fax orders in that the order information is available in digital form – so VINs can be copied and pasted into an EPC or DMS without rekeying. And, part numbers and quantities can – generally be transferred to a DMS parts quote with a few key strokes.
Finally, the saved telecommunications costs will usually be minimal, but for some operations with high volumes of incoming toll-free (“800”) calls is worth considering.
Parts e-commerce for most OE parts wholesale trade will follow expressed or latent buyer needs and benefits. Each dealership must judge: How many of its professional independent repairer customers are: (i) demanding online ordering; (ii) asking for/about online ordering; (iii) interested in adopting or expanding online ordering; (iv) disinterested or opposed to online ordering. Industry observers expect OE part e-commerce for most wholesale transactions will be 80% pull and 20% push.
Trade between same-franchise-dealers occurs in three scenarios. In the most common scenario a dealer urgently needs a part (for a repair underway in their own workshop or as part of a rush wholesale order from an important customer) and that part is not in the dealer’s own stock. In this case, the dealer will often use a parts locator to identify dealers with the urgently-needed part(s) in stock. If another dealer can supply the part(s) more quickly than the automaker can (typically, same-day delivery), an order is placed. The second scenario of parts trade between dealers occurs when one dealer has idle parts stock that cannot be returned to the automaker (at all or not cost-effectively). Dealers will often market non-returnable idle parts stock (generally at a substantial discount from ‘Dealer Cost’) to other dealers either in bulk (often via online services) or as individual parts flagged within a parts locator. The third scenario is one in which the automaker buys parts back – generally to fill back-orders.
Before 1990, dealers seeking to buy parts (to fill an urgent, immediate need) from another dealer generally started calling a (short) list of dealers that might carry the part until a dealer with the part in stock was reached (or a seller with the part available could not be found). With the advent of parts locators, buying dealers usually only called dealers flagged by a locator as having the part in stock. Participation in the predominant locator for a franchise is best viewed as a required cost of business essential to satisfying dealers buying non-idle parts. Many dealers have a parts locator that is e-commerce enabled, allowing the buyer to submit an e-commerce order; some of parts locators without online ordering enable the buyer to e-mail the parts order to the seller.
While the benefits to dealers of dealer-to-dealer parts trade in immediately needed parts includes boosted parts sales and shorter key-to-key cycle times in vehicle repairs and maintenance, the benefits to sellers of adding e-commerce (online ordering) to the mix are: (i) orders are processed quickly and with less labor; (ii) order processing, tracking and reporting can be further automated with DMS integration. Historically, however, most dealers urgently seeking individual parts from other dealers have not preferred online orders over phone orders.
Dealers that need parts from another dealer immediately will call the seller in addition to (or instead of) placing an e-commerce order to confirm availability and pick-up or delivery timing. Non-idle parts transactions between dealers nearly always consists of a single part SKU – reducing the time savings of placing the order via e-commerce.
Same-franchise dealers are the primary market for distressed OE parts (mostly idle stock) that are substantially discounted. Services and tools to facilitate trade in distress parts inventory are increasingly accessible via the web and increasingly enable buyers to submit orders online. Dealers benefit from the increased liquidity in parts inventories by being able to sell more of their idle inventory and to sell it more quickly as well as being able to buy a wider range of discounted inventory more conveniently. The incremental benefits of e-commerce to the seller are: (i) labor savings in entering the order into the DMS and (ii) greater flexibility, control and convenience.
Automakers have deployed e-commerce enabled applications to reduce their queue of backorders . In brief, automakers send digital offers to buy back parts (nearly always at a premium) from participating dealerships known to have the part in stock. Offers that are accepted become e-commerce orders. Participation and compliance with these programs, requires dealers to install and staff to these online parts ordering solutions. Buy-back programs for back order fulfillment would not be cost-effective or practical without e-commerce functionality.
DIY (consumers) and semi-professional repairers are often motivated by low-cost and by technical sales support – for more: “Parts Buyer – Sourcing Motivation.” From the perspective of dealership selling parts to consumers and semi-pro repairers, a distinct set of tools (largely not those used in selling to professional repairers or other dealerships) is required. If executed well, the dealership will generate incremental sales often from new customers (many of whom are outside the dealer’s normal geographic range), a channel to clear idle or other distressed inventory and cost efficiencies.
Dealers can reach nearly all of these DIY and semi-pro potential buyers via the web. The tools gaining the most traction in recent years are dealership parts websites (optimized to be found by Google and Bing searches) and digital marketplaces (for example, eBay Motors and Craigslist). These tools have been particularly effective with accessories, merchandise and hard parts used in maintenance, light repair and restoration. Some dealers have been effective attracting international buyers. Most dealers will find e-commerce parts sales to consumers and semi-pro repairers do not cannibalize existing retail trade.
Many consumers and semi-pro repairers prefer to research potential parts purchases online and often want the option of placing an order 24 x 7 online. To reach these customers a dealer needs a web parts e-commerce solution with an easy-to-use process to specify part numbers. Fewer retail buyers are satisfied with solely calling or visiting a dealer to assemble and submit a parts, accessory or merchandise order.
The higher price sensitivity of consumer and semi-pro repairers enables dealers to channel substantially-discounted idle parts (and other distressed or overstocked inventory) to this market segment, reducing the selling dealer’s “frozen” inventory. From the dealer perspective, e-commerce is a large, growing channel to sell idle parts (as well as accessories and other items).
For dealers, e-commerce parts orders from consumers and semi-pro repairers are less labor intensive and disruptive than phone orders. The risk of costly high return rates exists in any mode of selling to consumers and semi-pro repairers (who largely pay by credit card and thus retain leverage). Some dealers have responded with restocking fees of up to 25%.
Last Updated: January 24, 2012.