Price Shopping Auto Parts
“Most shop owners think the way to build a more profitable business is by price shopping each part. Unfortunately, more often than not, they’re not just off a little. They’re dead wrong.”
Since Henry Ford rolled his first Model T off the assembly line shop owners have been exposed to an incredible amount of both technical and management information. Fortunately, most of it has been good for the industry. Yet at the same time, there’s also been a disease, a virus if you’d like, that’s been passed from generation to generation of shop owners. It’s driven much of the profit out of the industry, it has ruined business relationships and it’s driven thousands upon thousands of shop owners into bankruptcy court. I’m talking about the ill-founded belief that the way a shop owner makes a profit is by buying the cheapest parts.
There is no question; if you plan on being successful in the auto repair business, you have to buy high quality parts. Substandard parts will drive up your repair time, they’ll drive up your warranty claims and they’ll erode your customer base. You also need to buy those parts from the right suppliers. Not the cheapest suppliers, but the right suppliers. These are the companies that deliver the right part in the right amount of time, they stand behind their parts and they understand your needs. These suppliers are out there, and they are priceless.
So, rather than have my service advisors waste their time searching the web for the lowest price, I took a different approach that I learned from Ray Kroc, the founder of McDonalds, and I used it to grow some of the most successful shops in America. Today we share the below technique with our coaching clients around the world.
If you are a shop owner, what you need to do first is identify the right supplier. You know who the candidates are. They’re the companies that have a good inventory, great service, and great people. Then meet with the decision makers and make them an offer: What you will do is give them the first call on all your parts, and as long as they can have that part to you in XX minutes, they’ll get the order. The conditions are that you expect your delivery will always go to the top of their priority list, you want a no-hassle policy in place for returns and warranty claims, and you want competitive pricing. They don’t have to offer the lowest price on each part you buy, but let them know at the end of each quarter you plan on doing a review, and you have an expectation that their pricing will be competitive.
Shop owners should never forget that their suppliers not only need to be able to make a reasonable profit, but equally as important, this is the only way you can build a great relationship with your vendors. If you are a shop owner, and if you take my advice, a number of things will occur. First of all, your supplier will have a golden opportunity to have you as a long-term, profitable customer. Good for them. The way you will win is by having a partner that will go to the ends of the earth to provide outstanding service, you’ll get competitive pricing, and your service advisors will no longer be wasting their time trying to save a few bucks on every job they sell. Instead, they’ll now have more time to do what they should be doing in the first place; which is bringing in more customers, selling more jobs, and helping you build a more profitable, successful business.
There is no doubt in my mind: the belief that has been passed down over the years from one shop owner to the next that the way you make money is by shopping prices on each job, is far more than just a falsehood. It’s actually an insidious disease. Once it penetrates your business it will eat away your profits, it will eat away at the relationships you have with your vendors and it will destroy your customer base as well. Given time, this disease will take far more than your customers and income. It will actually take the life of your business. If you question my prognosis, you have to look no further than the history of our industry, and the records you’ll find in the bankruptcy courts.