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Selling Parts Profitably in a More Price-Conscious World
Selling Parts Profitably in a More Price-Conscious World
Lately I’ve noticed there are a lot more price-sensitive customers. It is so easy to compare prices online, but many comparisons aren’t fair at all! A lot goes into pricing, so these pricing comparisons are often like comparing cherries and watermelons.
Many shops in our industry have a difficult time making money selling parts, so they try to make up for it when they’re buying them. Rather than sell the parts for more, they try to buy them for less. But, this isn’t a ‘buying’ problem. It’s a ‘selling’ problem. We need to educate our customers on what is a fair price for the value we offer.
In one case, a customer called a shop after seeing a flyer from a chain of parts and service stores advertising “Buy one strut, get one free.” The price appeared to be $139. Sounds like a pretty good price for two shocks, right? I overheard the service manager tell the customer,“We can’t match that price so buy them and bring them in, and we’ll install them for you.”
I went online and found the flyer. Sure enough, it was “buy one, get one free,” but below the price was an asterisk. I’ve learned what the large print giveth, the asterisk taketh away! I called around and discovered that the struts were actually $278. So when you factor in the buy-one-get-one, it works out to $139 each. I also found out that the warranty on the shocks is 12 months or 12,000 miles, which is a lot less than what we offer – 24 months or 24,000 miles.
In another instance, a customer returned to a service center after picking up his car to tell them his son had logged on to eBay and found the part he purchased from us for a better price, and he also said a local dealership would have charged less for the job we did. He wasn’t very happy; however, when the service manager asked a few questions, we learned that the part was in another state and would take a few days to get here – and the shipping was expensive. When I looked at what he was prepared to buy, it turns out the part he found online wasn’t even the right part! As for the dealership price he’d been quoted, well, that was for one side – not two, like we did. And if you factor in our diagnostic time, our charge was far lower than the dealer’s would have been.
It’s easy to think you could have found a better price for a part, but there are a lot of things to take into account – even something as obvious as the quality of the part in question. There are top-of-theline parts that you know will fit, work, and last. And there are cheap knock-offs that don’t look right, don’t fit right, don’t work right and don’t last! Are they cheaper? Sure they are, but they’re still a waste of money.
We should educate our customers that some parts are such poor quality that we refuse to install them. We only install quality parts for the safety and reliability of their vehicle. As professionals, we select parts that we can stand behind. If something goes wrong, we’ll make it right. But if a customer brings in their own part, why should we be on the hook if it fails?
From a customer’s perspective, it seems logical to compare prices. They’re trying to save money, and we can all relate to that. Yet often we get frustrated when a customer questions our pricing (especially after they have agreed to it and the job is now done). I know some service managers who are downright rude when a customer asks if they can bring in their own parts. They say, “You wouldn’t take your own steak into a restaurant to cook it for you, now would you?” But that doesn’t tell the whole story, and it does nothing to educate the customer. We have to explain why it is best for us to supply the part.
Since we know we’re installing the best parts, we can provide the best warranty policy. We set ourselves apart from our competitors by offering 24 months or 24,000 miles on our work. I don’t want my shop to have “a competitive warranty” – which means it’s essentially the same as what others offer. I want to be the best. That helps people understand what they’re paying for when they buy from me. Of course to do that, I have to make sure our parts gross profit is high enough to self-insure against the occasional failure. We also explain that the warranty we provide is linked to the part we supply. We could not provide that warranty if they supplied the part.
Knowing what you’re paying for is key when you’re talking about the installed price, too. Many times the customers will call a dealership or another facility that has a parts department and a service department. Getting a price from the parts department is simply a take-out price – the installed price is higher. Customers need to know that. We have a reason for charging what we charge – and part of our job is to explain the fairness of our pricing to customers.
I follow the same principle when I’m the customer. For example, I’m having my garage doors repaired. I’m hiring experts, because I have zero knowledge in this field. I’m not going to call a bunch of hardware stores to find the cheapest doors around and then hire the cheapest workers to install them. I’m going to let reliable professionals tell me what is best for my home, and then I’m going to expect them to do a good job and stand behind their work. I might pay a little more but I’ll have garage doors that work, and I’ll have some recourse if they don’t.
Kelly Bennett Kelly@kellythecoach.com • http://www.kellythecoach.com
Kelly Bennett (AAM – Accredited Automotive Manager)For more on parts profit topics:
#autoshoppartsmargin
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2 Replies
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Well stated!
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There is another problem with buying low. Counterfeit parts. I educate my customers about the dangers of counterfeit parts. Its estimated to be a 12 billion dollar industry. The Chinese copy the box and part so it can be very difficult to distinguish. That’s why it is so important for the shop to have a reliable seller. Do you know where that Moog ball joint from Amazon is actually coming from? I have read reports of brake pads being made in Mexico using sawdust and compressed under high pressure. Ebay, Amazon and other sites do not really care if the parts are authentic as long as they can’t be held liable. But its not their responsibility to inspect and verify all the parts on their site are authentic. Its easy for a seller to set up an account and then buy product from overseas that they may not even realize is counterfeit.
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