Thinking Accessories

Have Your Share of Dessert

Imagine if you will a pie, your favorite, in front of you on a table. Because you are generous, you allow those around the table to take what they want of the pie before you take your piece. What you are left with is about 10% and you enjoy your piece along with  the satisfaction that everyone else got their fair share. Now slap yourself, because business doesn’t work that way!

In the last blog entry, we mentioned that the pundits and predictors have pegged vehicle sales in the U.S. to fall below the 16 million for 2008. Let’s just start with that pessimistic view and carry on.

We also know that in 2007 the accessories market in the U.S. was still growing and was expected to get close to $40 Billion according to SEMA.  However, based on the economic forecast for 2008, we can’t expect that the accessories industry will continue to grow, but contract this year. Sounds like bad news…

Let’s return to our pie analogy and think about the pie as the accessories market. It’s the dessert after selling the vehicle and dealers get the first crack at serving themselves! Meaning there is no sharing in business and dealers have the opportunity to take a bigger piece of the pie. We aren’t just talking about new car sales either. Pre-owned and serviced vehicles have just as much if not more opportunity for accessory sales. So let’s pretend that instead of the normal 10%, you take 20% of the pie, because you can. You get first dibs and let’s put that into monetary terms.

A $40 Billion industry isn’t going to just disappear, but let’s be realistic and say that it will shrink a bit. Worst case scenario the industry contracts a whopping 25% in 2008. Yikes, that’s puts us at about $30 Billion for the year. But wait, instead of you normal 10% slice of the accessories pie, dealers take 20% this year. Hey, where else are you going to get profits? For all the right reasons you double your accessories efforts and sell 100% more than you did last year. As a whole, the dealer portion for 2008 would grow from roughly $4 Billion to $6 Billion.

Now wait a second? Isn’t this going to be a down year? For car sales, sure, but it doesn’t have to be for accessory sales. Dealers get the first crack at dessert. It’s there and it’s not going away. The upside is dealers getting more than the 10% they usually take. Take more. It’s your car sale; it’s your service customer. Profits in dealership are languishing yet here is a profit pool that is pretty close to a guarantee.
We say have some more pie…

"Damn the Torpedoes!!"

As we plunge into 2008, it has the makings of being one very interesting year. Consider the factors:

· The vehicle accessories business was just shy of $40 Billion in 2007.

· Consumer choice and personalization show no signs of slowing.

·  OEMs (Original Equipment Manufacturers) and dealerships are realizing the profitability of getting into the accessories business.

· The collapse of the mortgage/credit and housing markets has squeezed interest rates and made credit more expensive and harder to come by, which means it will be harder and more expensive to buy a new car and people will have less discretionary funds to do so. Most conclude we are heading into an economic slowdown or the dreaded “R” word.

· The new vehicle market is expected to contract for the fifth straight year and could fall below 16M vehicles in 2008

· Gas continues to average above $3 per gallon nationwide

· Truck and SUV sales continue to fall

With such a mixed bag, it would be easy for dealerships to take a “wait-and-see”, or worse, “cut costs” attitude regarding accessories until things rebound. Heaven forbid manufacturers take the same attitude and start retracting their accessories programs. Running counter to these reactionary and short-sighted actions is exactly what dealers and the OE’s SHOULD do in the face of these trends…expand their accessories efforts.

Here’s why. Looking ahead for the next 5 to 10 years, accessories or “personalization” offers the greatest opportunity for dealership profits and increases in revenue. Consider the following:

· Customer choice is here to stay. We’ve opened Pandora’s Box. People want what they want, when they want it. Fueled by “lean manufacturing” and “just-in-time” supply, we are customizing everything from your “WHOPPER” to your cell phone. Vehicles are no different -- we CAN have just the vehicle we want regardless if it is a Focus or a Mini. AND, just as manufacturers have adjusted to the post $3/g gas with hybrids and more fuel efficient vehicles, so too will the adjustments be made in accessorizing cars over trucks.

· The expected contraction in vehicle sales in 2008 is expected to hit domestics a lot harder than imports. So, if you are a domestic dealer and you KNOW you are going to sell fewer vehicles this year then you should be doing everything you can to maximize profits on the vehicles you do sell. Domestic dealers that realize this and adopt will weather the credit crunch nicely. Also, fewer vehicles sold mean fewer buyers. So 20-some thousand dealers are fighting over -16 million buyers. Those buyers are going to buy from the dealership that gives the MOST personalization (see the first point).

· Make the jump to cars. The “early bird” gets the worm here. Yes, yes, trucks will always be highly accessorized, but those 16 million buyers are going to purchase more cars than trucks this year. Show them how much they can accessorize in cars and if they step up to a truck they will know the same personalization exists.

When we entered 2007, we felt that dealers didn’t need convincing that accessories were vital to their dealerships’ profitability and growth. There seemed to be a general sense of “getting it”. In the last few weeks, it seems we have to go back and remind them why they are in the accessories business and why it’s important.

If anything, 2008 will be a critical year for dealership accessories to “make it” or at least be part of the dealer culture when we emerge from this market slow down. In a perfect world, we would have had one more year where accessories could flourish unabated by market forces. But perhaps what we need as an industry is a good test to prove that selling accessories is as important as selling the vehicle.

Seven Tips for Accessories Sales Success

The path to a successful accessories program is to have a clear process in place that is used by every department throughout your dealership. Here are seven key tips to help you develop and sustain an accessories sales process in your dealership.

1. Know you can do better. No matter how much you’re making in accessories sales, you can always make more. It’s no accident many of the large dealer groups are shifting business models to increase sales of—and often expect the lion’s share of profits to come from— fixed ops and accessory sales.

2. Be a champion or find one. Like any successful program, accessories sales must be championed throughout your dealership. You (or your appointed person or even an entire department) must become the program’s lead cheerleader and policy driver.
Too often dealership processes come and go. Your dealership accessories champion must ensure that your accessories process sticks. Champions don’t have to be managers. You need someone with discipline, enthusiasm and likeability. In many ways, your champion is selling the program as well as accessories. Make sure your champion is someone you’d buy from.

3. Think product, product, product. Your dealership must have what your customers want. Whether it’s rear-seat entertainment, wheels, cargo management or exhaust systems, be sure you have a stocking strategy and supplier to help drive your business with the right products and availability.

4. Maintain consistent pricing. Centralized, standardized-throughout-all departments pricing is key to a successful accessories program. This necessitates creating a matrix for consistent retail pricing with a delivery system so all departments—and personnel—are pricing from the same page. It must be reflected on your dealership’s web site, flowing backward and forward through sales, service, parts and management.
Nothing will sack your accessories effort faster than sales’ quoting one price while parts quotes another. Whether you prefer an integrated e-catalog with custom pricing features or printed pricing notebooks, make sure the tools your staff uses are up to date and accurate. Even if it means daily manual updates.

5. Be armed with ammunition. Your sales force, service writers and parts staff need tools that help them sell accessories to new and existing customers. Full color product sheets and brochures, e-catalogs, “hero” cards and/or pocket reference guides should be available to all, in ample supply for both staff and customers.

6. Dress your mannequins. A dealer once told me that putting vehicles in the showroom without accessories is like walking into a department store full of naked mannequins. Sales people, service writers and parts personnel don’t just need ammunition, they need props— something real to help customers visualize what their fully accessorized vehicle will look and “feel” like.

7. Display and merchandise. Featuring the accessories themselves in your showroom and service waiting areas does two important things: It announces loud and clear that you’re in the accessories business and it reminds employees you’re floor-space serious.
That it also suggests to customers that the accessories they love on your mannequin vehicle will look just as good on what they’re driving—it’s icing on the cake. Especially since accessories displays in waiting areas announce that you’re the one to go to for installation, too.

Bonus Tip #8 
Whether that person works in sales, parts or service—or body shop, fleet sales, detailing, whatever—the one tried-and true way to motivate accessories sales is sharing the wealth.

First, accessories sales must be credited by the originating department. Equally important, each dealership employee who sells accessories must be rewarded, regardless of title or department. Nothing motivates or says success like money. With lowered margins on fewer sales, sales people can make more from accessories than from the sale of the vehicle itself.
When you get serious about increasing accessory sales and go at it with:

1. A solid plan.
2. An integrated and accurate whole-dealership system.
3. Motivated personnel.

… then your entire dealership can find accessory sales trumping vehicles profits.