When it comes to making profits at automotive dealerships, the potential to bring in impressive revenues really lies in the
parts and accessories arena. Although dealerships have frequently overlooked these fixed operations in the past, that could
be changing as they turn their attention to their overall businesses.
Dealers could both save and generate billions of new dollars by transforming their parts businesses and reaching out to new
customers. Other industries have pitched in with new tools and technologies to aid dealers who now stand on the edge of a
brave new business world of profit possibilities. Will they make the leap? And what will it mean to your business if they
do? Read on.
Keeping score
By all accounts, 2005 wasn't the best year to be running a new car dealership. It also was far from the worst. Several 2005
statistics produced by the National Automobile Dealers Association (NADA) show a strong industry beset by small — but notable
— falloffs in revenue. 
Dealerships by the numbers
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Service and parts sales reached almost $85.2 billion, down from $85.5 billion in 2004, which is good news for the aftermarket.
However, service and parts accounted for a larger part of dealer revenue: 58.5 percent, a 1.5-percent increase over 2004.
Additional research suggests that sales dollars remain strong and are concentrated mainly in larger dealerships. These large
dealerships are financial powerhouses with considerable resources. As competition stiffens (and sales of domestic models such
as Ford and General Motors slip), dealers increasingly are compelled to look elsewhere for dollars, most notably with fixed
operations such as parts and services.
With large showrooms, impressive inventories, trained personnel, extended operation hours and plenty of investment dollars,
they're well suited to go head-to-head with retail outlets and other parts vendors. Some already have, but overall dealer
movement — for now — appears small. Rich revenue territory remains largely unexplored.
Having what it takes
One of the best known and reliable sales axioms states: Business is where you find it. Selling is an opportunistic pursuit.
Dealers apparently are passing up a significant opportunity to do more business selling parts to independent shops. Retailers
and other parts distributors may want to pay heed.
Like many of the independent shop owners we talked to, Tim White, owner of California CARS in Redding, Calif., would like
to buy more parts from dealers. White has the same goals of any repairer. Mainly, he wants to reduce comebacks to an absolute
minimum. White believes the best way to do that is to use more OEM parts. Unfortunately, White says he simply can't afford
to.
"The markup margins are just too small," he says. "When you buy through a dealership you're looking at a 15-to 20-percent
markup. That's it. That hasn't changed in years, and I don't expect it to anytime soon."
White believes part of the problem may lie in the fact that dealers view independents as competitors for the same service
business. "I can understand that to a point, but there's a lot of business out there. There's also a lot of potential out
there for them to sell more parts to independents. If they would reach out to us, I think there's a lot of money to be made,"
he says.
Distributors take note: White says dealers are particularly well positioned to sell to shops because they can offer parts
he believes the aftermarket can't offer in terms of quality. "It's particularly important to get OEM parts when you're dealing
with a part that needs calibrated. We've seen real problems with aftermarket coolant temperature senders, idle speed control
motors and oxygen sensors," he notes.
