- October 2, 2017 at 1:52 pm#65249
Last week I was invited to attend a Service council strategy conference for my primary parts supplier. Twenty or so shop owners in the room, picked by field staff to represent the several hundred or so service centers they currently have. Impressive group. Progressive thinkers.
The CEO and top execs from the various sales, operations, IT and marketing departments were in attendance . One of the subjects that they had obviously put a lot of time and thought into prior to the meeting was a strategy on how to compete with Amazon(specifically) and thir belief that we would all be affected as Amazon was entering the auto repair arena.
They proposed a general concept on how they could get ahead of the trend by offering parts directly to the consumer with a service component tied into it. The customer purchases the parts from this supplier, either by bringing them with them or having them sent directly to the service provider for install.
The whole concept went over like a lead balloon. Their were only a couple individuals in the room that thought this was any future or impending threat to our business’s. Most had little intention of entertaining the idea seriously(currently?).
Their proposal is pretty much a copy of what Amazon is doing with it’s “Amazon Home Services” component, which includes auto parts installation(either mobile or “instore”).
Comments from those that watch Amazon closely revolve around the fact that consumers spend 2/3’s more on “services” in their lifetime than they do on “stuff”. Amazon wants their piece or maybe everyone’s piece of the service pie.
The elephant is at the door and i am not convinced he will bother knocking and ask to come in.
See attached for some of the current Amazon automotive service offerings and links to how it works.
Some other info not as easily found info:
Additional guidelines for service providers
The following guidelines apply to service providers:
The service provider must perform the service as outlined in the scope of work on the service detail page on the date the service was purchased. The service provider may not solicit additional product, parts or service orders before, during or after the service call.
If the buyer requests services, parts, or products outside of the defined scope of work, then the service provider may fulfill that request and charge the buyer directly.
Pros can get new jobs in two different ways:
Offer-Based Jobs: These jobs are purchased by Customers on Amazon by selecting a specific Pro and submitting three (3) appointment preferences. For these jobs, Pros set the price estimate upfront. Pros receive these jobs via email and work with the Customer to confirm a final appointment day and time.
Claim-based Jobs: These jobs are purchased by Customers on Amazon but Customers do no not select a specific Pro. Instead, Amazon surfaces a single price using localized price estimates based on the range of competitive prices that providers offer for each service and collects a single appointment preference from the Customer. These jobs are then sent to all the Pros offering that service within the Customers ZIP code. Pros receive these jobs via notifications through the Selling Services on Amazon app or the Seller Central home page.
Note: Claim-based jobs are only available for Appliance Technician, Assembler, Carpet Cleaner, Computer Technician, Electrician, Floor Cleaner, Garage Door Specialist, Handyman, Home Cleaner, Home Inspector, Home Organizer, Home Theater Specialist, Home Security Specialist, Holiday Lights Specialist, HVAC Specialist, Irrigation Specialist, Junk Removal Specialist, Locksmith, Mobile Device Technician, Mover, Painter, Pest Control Specialist, Plumber, Pressure Washer, Roofer and Window Cleaner.October 3, 2017 at 8:19 am#74848Joe MazurParticipant
While i can see this type of “service” offered by amazon appealing to some people, most of us have not built our businesses on a “auto repair is a commodity” type of model. Most customers come to us because they trust us and see the true value provided for something that 80% of our customers have no clue about. While i can see this affecting the price shoppers, i dont think this type of approach will affect the good shops out there.October 9, 2017 at 4:54 pm#74851dpetersonMember
I believe it is a mistake to take Amazon lightly. Considering their purchasing power, marketing and distribution assets, Amazon is in a unique competitive position. While I don’t disagree that some customers have a relationship with their shop, there is also evidence showing that over 1/2 of the average shop’s customer base is made up of 1-time customers. There is further evidence that these customers tend to select their service provider based on cost and convenience, an arena where Amazon excels.October 9, 2017 at 7:00 pm#74853stthomasautoguys2012Member
Amazon is treating auto service like a commodity which it is not! Who is making recommendations for vehicle service and maintenance a trusted auto professional or a vehicle owner? The fact that there are so many restrictions on services bought on Amazon is clearly a RED FLAG. Amazon is catering to the younger generations. If we are to compete we need to sell ourselves and the advantages of dealing with people who know vehicles. If we try to compete on price with Amazon we will lose. Lets approach this from a different point. Amazon has no service outlets. We do and they are very well established. As a service provider, who would agree to the terms Amazon wants to establish? Vehicle owners are not educated enough to know what services they need and when to get them. This is our strength. This is where we should compete.October 10, 2017 at 2:20 pm#74858
I believe my approach to this is that I’d rather be sleeping with the enemy and have some idea of what to expect. So we got our first call today. Was asking about having a $90 pair(both for $90) of front wheel bearings installed on his 2010 T&C. Wondered how the whole thing worked. I am in a town of 3000 with two stoplights and the system has been turned on for less than a week. Don’t know where we are going with this, but were learning. Consumer to installer agreement attached. I suspect Amazon will nix us when they see it.October 10, 2017 at 2:32 pm#74859Joe MazurParticipant
Thats a great agreement. Amazon may not like it, but in this case its probably better to ask forgiveness than permission!October 11, 2017 at 9:46 am#74862carhospitalMember
I must have been at the same meeting as rlucyk. While I understand both sides of this, I feel it comes down to the way young people shop and their lack of education on not only vehicles, but on anything that needs maintenance or repairs. I grew up when many things got fixed. There were TV repair men and repair men for just about anything. Now we throw just about everything away and buy new. Young people grew up in a world of everything being a commodity and have no reason to think auto repair is any different. I think shop owners need to educate these young people, and to do so, will likely require them having a bad experience with allowing them to bring the Amazon part and having an issue with any number of things, be it quality, fit, more parts needed, etc. The staff at Amazon that has set this up is also just as clueless. The agreement states that no other parts or services may be solicited at the time the customer comes in for the Amazon service. This is not even a little bit realistic. It is our job to advise people of other needed repairs we see, especially safety issues. Beyond that, it is highly likely the customer didn’t get everything needed for the job, and that’s assuming they even diagnosed it right. Much of the backlash at the meeting I attended was the parts vendor putting on the meeting wanted to go after online business. I see no reason why they shouldn’t. NAPA, AZ, Advance, and all the others have consumer sites they sell on. They also all sell to walk in customers. The vendor at this meeting was wanting to add installation services to be directed to their Certified Service Centers. I understand that the attendees of this meeting seen it as their own supplier was going into competition with them, along with all the other issues of wrong parts, misdiagnosed problems or any number of other things. Fact is that young people shop by price. We are not the only industry with this issue. Plumbers and electricians also have this issue with customers seeing endless options on display at all the home centers with low prices. This industry is just too focused on the parts margin. We all need a certain margin to remain in business. There is no law that says we have to make a certain amount on parts and a certain amount on labor. The easy solution is sell parts at cost and increase the labor rates. Then you no longer have to explain why the Monroe strut you’re selling for $200 is better quality than the exact same part number Monroe strut that the customer can buy for $100, from just about anywhere. It just proves to the customer that we are all liars about low price meaning low quality.October 11, 2017 at 11:58 am#74863larrybloodworthMember
This lends credence to my new business model of a transmission shop forgoing the RDI process of selling. Upfront pricing online with free pickup and free delivery.
On another note, here’s a shop I consulted for a short period of time. The owner believed it’s best to “buy” E-mail addresses. Check this out:October 14, 2017 at 12:13 pm#74870Joseph Van syocParticipant
I looked into marketing my services via Amazon some time ago, and immediately dropped the idea when I learned they wanted 20% of each sale! I have bought an occasional part from them, but if they are doing like the online tire retailers and dropshipping their parts direct to you, there is no margin. So will they now also want 20%? Sounds like we need a special Amazon door rate of around 400 hr if this becomes the norm. I already use a higher door rate for extended warranty contracts, so one just for Amazon doesnt seem too far fetched!October 17, 2017 at 6:50 am#74871CURTSPARTSMember
I see the Amazon contract as a liability nightmare. If you cannot upsell or add additional parts who holds the liability for unsafe conditions that the car will be sent away with? My guess is our shops. That being said, I dont know that they can have that clause in the contract with us as it makes it a non binding contract? Who holds responsibility for warranty? I would imagine Amazon will warranty the part. But who pays for the labor in re-installing that part? I think this is a horrible idea and any shop that enters into a contract like this is a shop that is taking their last breaths as an auto repair shop.October 17, 2017 at 7:37 am#74872Tom HamParticipant
Regarding Joseph Automotive’s comment about an Amazon door rate of $400 per hour…
While that may be a bit high, the reality is that a solidly profitable shop in the Midwest U.S requires $110 to $130 per sold hour in gross profit dollars from both labor and parts together.
So, if all parts profit is eliminated, that leaves only labor profit. A shop would need to add the cost of a tech during that sold hour to get the needed GP. Plus the 20% cut that Amazon gets.
Do the math and see what the labor will need to be.
Tom - Shop Owner since 1978October 18, 2017 at 8:38 am#74873carhospitalMember
I had the conversation with Amazon just this week that whoever the team was that started this program, they have no idea about vehicle service. This is what I sent them.
“Seems this selling of service wasn’t thought out very well, or didn’t have any automotive professionals involved in the set up. One vehicle may take an hour to do a certain job, but another type of vehicle may take 3 hours to do the same job. It’s nearly impossible to quote a generic price to replace a listed part that applies to all vehicles. A process where a customer could request an install quote based on vehicle facts, would be much better.
Next is the rules say it is not allowed to solicit additional parts or services to the customer while we install the part the customer brought in. That is just not realistic for multiple reasons. One is that if we see something that is either unsafe or could cause a breakdown, it would be irresponsible and unprofessional not to present that to the customer and could be cause for a lawsuit in the event of an accident. Next issue is it is highly likely that a customer will misdiagnose their vehicle and provide a wrong part, unneeded part or not all required parts to do the install. At that point, any shop would proceed with selling a proper diagnosis, parts and/or labor.
Again, this selling of services was not thought out and will no doubt create bad experiences and unhappy people. Vehicle service is not a commodity where everything on every car is the same. ”
They replied that they would take my concerns into consideration and review their policies. As far as a Amazon door rate, I think we all need new door rates. Our pricing system is ridiculous. I think to provide tools for the technicians and pay a real fair wage for the skill and training, along with still being profitable, and then adding in that the internet is providing customers with more access than ever to information and quality, name brand parts for less than our cost from local vendors, I think everything with our pricing model has to change. I think we have to price off labor. Take other professions like accounting or lawyers, who pretty much have no products to sell, only service. Basically, we create our own problems because our pricing is top secret and not at all transparent. It’s a shell game of excuses on why our parts prices are so high and every excuse is really a load of crap. Forget about making so much money on the parts, double the labor rates, look and be professional. Much more could be changed. Cars and technology has changed drastically just over the last few years, but our business models have remained the same since the wheel was invented.October 21, 2017 at 8:45 am#74877mtnmodsMember
I agree our pricing/profit model is a mess. To profit (as required) using a combination of labor and parts will likely need to change. So far, customer’s that come in insisting that they can get the part down the street at AZ or online through Amazon get the normal “steak in a restaurant” explanation. If they don’t come over, we send them away and there’s plenty of fish in the sea. However, with eBay motors and Amazon doing what obviously is only growing, we are going to see nothing but any increase in scope and intensity. It behoves us to to seriously consider revamped profit models. The problem we have, at least here in Washington State, is that if I install a part, whether it be provided by me, my customer, or a third party (i.e. extended warranty company), I own that part. The “You touched it last” rule applies every time according to my attorney. For this reason I refuse to install customer’s and 3rd party parts and purchase from affiliate venders that provide Nationwide parts and labor reimbursement regardless of their sometimes few percent higher initial cost.
I realize this won’t last forever, and I will have to eventually accept parts from outside sources if I’m to stay viable. What will need to change is the law. I have no issue charging $225/hour and zero margin on parts. I believe a small handling fee is appropriate and reasonable, but without tort reform we are all slitting our throats. It will be just a matter of time before the lawsuits are so huge that independent shops are dropping like flies.
I’m sure the dealerships/manufacturers would love this. Have we followed the money to see if/how they are involved? Not acting paranoid, but I’ve experienced a mass increase in volatility toward me from all the local dealerships over the last couple years.October 21, 2017 at 11:04 am#74878jruffingruffMember
Every time that we react to negative responses from the least targeted customer, we shape our offerings in a way that isn’t to our advantage, or to the advantage of our best customers.
You can change over your pricing to labor only/labor focused fees overnight. The formulae involved are fairly simple. The complications exist.
I don’t see a real advantage to being a pioneer on changing over to “labor only” pricing structure.
Pioneers die with arrows in their back, Settlers Take the Land.
Consider the outcome:
Say that you end up quoting $250 to install a battery.
You’ll label the battery at “$0.00” or you’ll call it “included” in the fee.
Many states call for itemized separations between labor and parts components. Will there be a backlash that considers our “new and improved pricing” process to be working around that?
Really, honestly, that’s all that we’re doing. We’re sick of the complaints about our parts pricing. We’ve always been sick of complaints.
Will the guy that complained about paying $180 for a battery, or $70 to install it, suddenly be happy to pay $250 for a “Battery problem solution” that includes a battery and installation?
I doubt it.
If you’re charging $200 per hour, including all parts…will the battery work out? If you get .7 for battery installation….you won’t even cover the parts…..
How will you reconcile the low labor/high part cost operations vs the high labor/low parts cost operations?
Just using an average computation for parts cost? Even if you get it to be very accurate that way, people will make decisions to get the best deal….and you will not be able to make it work in every case because of the invisible hand of the free market…
I’m in no hurry to get on this bandwagon.
The Amazon thing…. Convenience. Only the convenience could hurt us.
Work on our convenience of scheduling, convenience of interaction, convenience of paying, and convenience of pickup.
Forget the pricing structure.
There’s a reason that we still price things based on our cost of labor and cost of parts.
The reason isn’t that we are cavemen.
The reason is that it reflects actual CODB.October 21, 2017 at 4:39 pm#74879Joseph Van syocParticipant
Labor only pricing sounds great, but I feel it is unworkable for several reasons. To start, most of us have to do business in a competitive market place. It is bad enough having to compete with shops that undercut you both on labor rate and margins, but at least you, and the customer can make an apples to apples comparison. If you think its hard to explain your margins now, try explaining why the guy 3 blocks from you is $58 hr while you are $175. Of course he is marking up the parts, but do you know his margins? The other issue, is there is in theory anyway an upper limit to the number of labor hours you can produce in a day. Not so with parts. If you are looking for profits, those extra parts that make for a better quality repair without adding much to labor charges are the way to do it. Replacing a water pump? How does the belt look? Brakes? Are you including a hardware kit? These things add up. In a town as small as the one I do business in, labor hours are pretty limited, I have to make a good parts margin to stay above water. I also install such things as wiper blades , many air filters, and most batteries at no labor charge. How do you do that at “0” margin?October 21, 2017 at 9:10 pm#74880Tom HamParticipant
Maybe a reality check would help.
Is Amazon going to offer packages where you buy your steak and take it to the local Amazon partner restaurant to grille it? Nope – because Amazon would tell you that’s ridiculous.
Everything Amazon does is not brilliant by default. They can do really dumb stuff just like anyone else.
I thought Marcus Lemonis to be a business genius. Then he announced recently that Trump supporters are not welcome in Camping World stores where he is the CEO. That’s about half the population and I suspect that its the half who camps more than the other. In 40 years of running a business, I cannot think of anyone of over a hundred people we have employed who would have been dumb enough to do that.
It won’t be too long before Amazon pulls the plug on this fiasco after a cascade of b——- customers. We’ve all had the frustrated caller who wants to know why all the shops that he has called won’t install his part. Sure, a few will. But these are the sinking ships desperate to get any kind of sale.
The original Amazon program was different. We signed up to see how it worked. It attracted the worst of the worst customers from hell. We soon cancelled.
Bottom line – when Amazon calls, just say “no”.
Tom - Shop Owner since 1978October 23, 2017 at 4:56 am#74881
I wanted to say thank you to all who took the time to respond to my post. A lot of great thoughts and valid points. I believe we all know that our business’s will continue to evolve and the new buzz word “disruptions”, will continue to occur.
Convenience and trust will continue to trump all else with a majority of customers for the time being. I do not expect this to change for the masses, during my business lifetime.
I do believe in understanding trends in the marketplace.
Amazon’s current automotive service platform will have stumbles. That said, they are not as ignorant to our business as I wish they were. Two years ago i worked on a pilot with Amazon where they were testing an automotive estimating platform that did adjust for labor hours. It ran into a technology glitch and did not go further to my knowledge. Not sure i would know if it did. Lot’s of activity in the digital world with new devices and platforms seeking to improve transparency while getting between us and the customer. In many cases it will just result in higher prices to the consumer. Increasing transparency in retail is a given. The closer we match our model to our market, the stronger we will become. That hasn’t changed.
This post started because of conversations with one of my vendors. I continued that conversation with one of the higher level execs over the last couple weeks. He wants to believe he understands our margin requirements, which I offered to make those requirements vividly clear. He understands the ramifications of no warranty and how ugly that could get. He wanted to believe if we could just come up with a “warranty package”, he could send his DIY customers to us, and his problems with Amazon could be lessened. He was quite persistent in keeping the conversation going, which I enjoyed.
In the end I told him, I would “test” the following concept with customers he sends us.
Customer supplies the part purchased from his organization, we will install it under the guidelines of the Consumer/Installer agreement(newly minted agreement attached), with a 30% up charge on whatever our normal labor would be for the service requested.
For another 20% up charge on the already up charged labor, we would warranty the labor for the part, only once, as if we supplied it.
I have not heard back. I suspect he realizes that his DIY customer would likely seek out a “less expensive” service provider, of which we have many, to perform the service, rather than pay our price or requirements. I suspect it will be the same with Amazon. Our initial inquiry from a consumer in our Amazon test wanted to know if we would install two front wheel bearings for the price we had set for one. We can find shops in our market willing to do just that.
One of the things i greatly appreciate from this thread and this subject matter, it has finally caused me to put on paper what I have always wanted consumers to know when they ask about parts prices or to install their own parts.
If a consumer wants us to install their part, then fine. As long as they pledge all of their personal assets and pledge indebtedness for the rest of their lives, while pledging to be first in line if anything goes wrong, that’s a start. . After all, that’s what we do every time we open the doors for another business day. Would the agreement ever stand up in court, doubtful. Yet maybe their would be some valuable lessons testing it’s legality.
Consumers have every right to do what they can to save money, but it needs to be very clear that saving money on their part, should not cost us money as a result.
As this subject goes, automotive life in Kalkaska will continue pretty much the same for the near future. We will continue to look for better ways to service our customers, while maintaining profitability.
Thanks again allOctober 25, 2017 at 9:56 am#74884Rick WhiteParticipant
I recently did a webinar that covers installing customer supplied parts and the different issues associated with this topic including how to present your decision to your customer that doesn’t involve a steak and a restaurant, and if you’re going to install customer supplied parts, what to do to be successful. I’m happy to share with you if you’d like to watch it. Just shoot me an email and I’ll get you access to it. You can email me at [email protected] and I’ll make the magic happen.
RickOctober 30, 2017 at 6:16 pm#74890rinfantinoMember
rlucyk – Great topic. Interesting set of responses and positions.
How to compete with the approaching “elephant” [Amazon] for automotive services is a great question. And one that certainly need discussion. But I would argue the question all automotive service centers should be asking themselves is how can I win over the same consumer Amazon is targeting for automotive services? Once you achieve this, you win. The focus then becomes on growing your business and not necessarily on the elephant.
Amazon is getting into automotive “services” as several of you indicated. It’s a natural extension of their auto parts business. According to an exclusive article in the New York Post penned by Josh Kosman and James Covert, “Amazon’s next Frontier to conquer? Auto Parts”, touches on how Amazon has its sights on the $50 billion dollar DIY aftermarket auto parts business http://nypost.com/2017/01/22/amazons-next-frontier-to-conquer-auto-parts.
Amazon’s target customer for Automotive Services
These days, Amazon appears to be targeting anyone with access to the web. Do they have a customer segmentation strategy established for automotive services? My guess they will start with any Amazon customer that purchased automotive parts from their site – a natural starting point. And then segment these customers by the Vehicle-Make and Vehicle-Age they purchased parts for. The older the vehicle the better because it requires more service. And some Vehicle-Makes require more maintenance than other more reliable vehicles. Amazon most likely has “Profiles” built for every Y-M-M predicting when a component needs replaced before the OE does. Powerful.
Given the above, what is the common characteristic amongst Amazon’s target customer for Automotive Services? All are mentioned above, but in the simplest way of identifying this group is they are online consumers, that own a vehicle and place a high value on convenience.
Who makes up the majority of this target customer? They are a fast-growing segment of the overall market. They are the Millennials and Gen-X. The Millennials make up a powerful buying group of 91-million in the U.S. with ages between 17 – 37, the largest in U.S. history. They are certainly early adopters of technology and online services. They grew up in the digital age and with mobile. There is Generation-X too, with a powerful group of 61 million in the U.S. that caught the technology wave and became users of online marketplaces and services. Both groups educate themselves on a product or service before they buy, they rely on customer ratings and reviews, ask friends for referrals, and seek convenience and quality.
To compete and win the same consumer Amazon is targeting for automotive services is offer a great online user experience and deliver quality service throughout the entire service process. From engaging the customer online, to booking their appointment, during the service itself and then follow up. Are you delivering this level of interaction with the customer? If not, the way you go about your business of acquiring and maintaining new customers must change (if it hasn’t already) to align itself with the buying behavior and expectations of the online consumer. This is the way you win.
Alignment with the modern consumer
Your business must have an online presence – Website, blog, business profile page hosted by a third party. Good-to-great reviews. Social footprint. Your online presence must have features to engage the online consumer – one to one – and in ways they want to communicate; text, notification via mobile app (if you have one), email, video, etc. The online consumer wants to be treated like they are your only customer. Responding to their questions should be quick and meet all their expectations for the information they are seeking.
What types of information can you expect to deliver to the consumer?
Consumers want to know if you support their make-model vehicle. They want to know if you can perform the service they are seeking. When can they bring their vehicle in for service. Price range for the service. The time it will take to service their vehicle. They are a busy group and they need to plan their day. Can they wait on site or should they drop the vehicle off in the morning or the evening prior to the day of service. When service begins, they want to know how is the service going. Were any other issues found and should they be addressed now or on the next service. When service is complete, customers want to be notified right away that their vehicle is ready for pickup. These are the expectations of the modern day consumer.
When you shop for products and services on Amazon (outside of automotive services), most of the information is readily available on line or Amazon proactively keeps you informed on the status of your product or service. They have worked hard a delivering a great user experience. You can too.
How to compete with Amazon
My advice – focus on what you do best, deliver quality service to your customers and start leveraging new and innovative online tools and services to align your business with the modern consumer and deliver a great online user experience.
There are many online tools and services available to you that will align your business with the modern consumer. One of these online services is Openbay (http://www.openbay.com). Openbay is an online marketplace that connects online consumers in need of automotive repair and service with automotive care businesses nationwide. Openbay is also a provider of several subscription services (online customer facing tools) to help align your business with the online consumer delivering on their expectations and convenient.
Openbay has earned the trust of the top automotive insurance providers in the country
Full disclosure: I am the founder and CEO of Openbay.
RobNovember 1, 2017 at 4:42 am#74892
I believe what has been missing from this conversation is the concept that what we really have in this industry is a “shop charge”. As least in the case of brick and mortar stores. We have a charge for a roof, equipment and a skilled operator to perform the necessary task. The charge is typically the sum of the labor we charge, the gross profit dollars on the parts we sell and shop supplies. Maybe we need to re-evaluate how we present our service…
If you need dirt moved for a construction project, you pay a “rate” per hour for a dozer or excavator, and that rate includes an operator. Typically, 2/3’s of that rate is for the equipment and 1/3 for the operator. We use a “labor rate” and yet our technicians are not laborers, they are skilled “operators” and our facilities are expensive pieces of equipment.
Maybe our challenge is internal. Maybe we need to rethink how we present our service. I can generate the same amount of gp$ per hour regardless of where the parts come from, as long as i understand that my shop charge needs to be the same. It is the charge for putting a technician in a bay(or two), supplying him with adequate equipment to perform his job efficiently and the skills he is required to have.
I can charge less, but something has to give. If i have no responsibility and limit my liability for the parts, warranty, ect, their can be a small savings for the consumer. Not the huge savings they believe is there, just some percentage points, as the risk gets shifted to them.
Not unlike much of what we deal with on a daily basis, part of our job is that of educators.
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