NEWS
BUSINESS AS USUAL… OR IS IT? ACA Research states it felt privileged to have the opportunity to present the results of its latest wave of industry research at the 2019 Australian Auto Aftermarket Expo ACA Research states it is now at the end of the second year of this program and has built on the first year where it introduced the ‘Leaders’, ‘Business as Usual’, and ‘At Risk’ market segmentation. In this second year, its focus has been on giving workshops ideas about how they can improve their business and what everyone can learn from those who are ‘Leaders.’ The segmentation is built from the following two questions: 1. Would you say that the average number of vehicles you service per month has increased, decreased or stayed the same, compared to the previous 12 months? 2. Looking ahead 12 months, would you say that the average number of vehicles you service per month will increase, decrease or stay the same? Workshop owners can use these questions to selfcategorise their business into one of the following three groups: ‘Leaders’, ‘Business As Usual’, or ‘At Risk’ as shown in Figure One. Looking at this year’s data, more businesses are sitting in the Business As Usual segment and fewer are classified as Leaders (see Figure two). This shift in the market is also reflected in the growth expectations, with fewer businesses expecting to see growth in the number of vehicles they service. If that trend is projected out to the next five years, ACA Research says it would have concerns about the long term health of the industry. To reverse these projections, ACA Research says workshop owners would benefit from understanding why ‘Leaders’ are bucking the trend and outperforming the market. The first area of performance to examine is productivity. Figure Four clearly demonstrates that
Figure One: Market segmentation
Figure Two: Proportion of businesses in each segment
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‘Leaders’ are operating at close to fully capacity whereas a third of the ‘At Risk’ group are operating below 60 percent capacity. When ACA Research examines what is holding businesses back from increasing capacity, it says the ‘At Risk’ group is more likely to be impacted by the behaviour of the OEM dealerships, including consumers perceiving they must return their vehicle to the dealer for servicing, capped price service programs, and extended warranties. These factors also impact ‘Leaders’ and ‘Business as Usual’ groups but to a lesser extent, whereas the shortage of trained mechanics is a much greater challenge that is holding these businesses back. So, what actions are businesses taking to increase their revenue and manage their cost base? As Figure Six shows, the ‘Leaders’ are far more active compared to their peers, nearly a half of whom are taking no actions to improve profitability. Conversely, ‘Leaders’ have been busy running advertising campaigns, talking to their suppliers to negotiate the price of parts and changing their pricing structures. In addition to increasing revenue and reducing costs, businesses are also investing in new service offerings to optimise the customer experience, which in turn should lead to higher satisfaction, more repeat business and more word of mouth referrals. Most of these service initiatives are intended to make the experience easier and more convenient for customers including loan vehicles, online booking sytems and extended operating hours. ‘Leaders’ are more likely to be investing in online booking sytems, SMS confirmation and loan vehicles. So are the various initiatives to grow the business, manage costs and improve customer experience paying off? When ACA Research examines the impact of these various initiatives on the performance of the business, it says the data clearly shows that Leaders are seeing an increase the profitability of their business. What marks a leader out from their peers is that they have made a shift from working in the business to working on the business. They are likely to be spending less of their time servicing vehicles and more of their time on servicing customers, managing suppliers and building their brand. They are action oriented and understand that activity creates opportunity. In the words of Richard Branson, one of the most successful business owners who has figured out how to take on and beat the established order, “to be successful you have to be out there, you have to hit the ground running.”
Figure Three: Expected growth in vehicles serviced
Figure Four: Proportion of maximum capacity that workshops are operating at
Figure Five: Barriers to getting more customers (among those looking to increase capacity)
Figure Six: Actions taken to improve profitability
Figure Seven: Current and planned service offerings
Figure Eight: Change in profitability over the last year
This column was prepared for AAA Magazine by Steve Nuttall and Ben Selwyn of ACA Research, our partners in the AAAA Aftermarket Dashboard, which is delivered to your inbox each quarter. For more information, visit www.acaresearch.com.au or contact Ben Selwyn on bselwyn@acaresearch.com.au