July/August 2019

BIG ISSUE JULY 2017 AFTERMARKET 4 SUBSCRIPTION VERSUS SUBMISSION? S PREPARING FOR THE ON-DEMAND FUTURE 8 AFTERMARKET JULY/AUGUST 2019 “ Nothing is ever going to change, and everything is going to be alright forever” is usually the last thing said by a business owner, just before their enterprise becomes completely irrelevant. Customers sometimes take a little while to realise that something has happened that is affecting their behaviour, but once they notice they are doing something differently, it is probably too late. Then again, why should they go back? While the customers of our oblivious service provider have happily moved on, he or she is watching their life’s work quietly slip away. This has happened to many businesses across a wide range of industries. If there is a new offering that is a serious disruptor to the status quo, only those who are adaptable and open to change will survive. Keep doing what you have always done and you will go under. Think it won’t happen to you? Then maybe it already has. Subscription Alright, let’s take a step back from the brink for a second and think about what could be coming around the corner to change our world. Actually, maybe it is already here. I am sure most of you are aware of subscription-based services, and probably use one or two in your private time i.e. Netflix or Spotify. The principle applies to the automotive sector too. There are quite a few car-sharing services and car clubs. These tend to be on-off options that users will activate when they need a vehicle. Vehicle leasing is probably a better example. This is not a new concept, but it has become much more common and accepted by motorists, particularly in a world where people are becoming increasingly comfortable with using a vehicle without the need to actually own the vehicle. The big issue with motorists not owning the vehicle from our perspective is this: If they don’t own it, who does, and where does that owner expect to get the vehicle serviced? Because, if it is not at an independent garage, or if legislation does not keep up and shuts out independents until amendments are made, you are not going to see any of that business. Let’s get back to subscriptions. We read something interesting recently from Syncron, the provider of cloud- based after-sales service solutions. The company recently released research that highlighted increasing consumer interest in subscription-based services, and the company believes this is forcing vehicle manufacturers to redefine their dealer service operations. If manufacturers look to change the rules of the game, it is always a good idea to make sure independents are still allowed play. As Syncron pointed out, vehicle subscription services are a way for people to access what are euphemistically called ‘mobility services’ as an alternative to traditional car ownership. Through mobility services, a provider’s customer pays a flat monthly fee to a manufacturer or third-party provider in return for on-demand access to several vehicle models. The fee covers insurance, maintenance and roadside assistance. As with music or on-demand TV, this can be turned off or on at will. OEMs already employing these models worldwide include BMW, Volvo, Jaguar Land Rover, Lexus, Mercedes-Benz and Audi. Submission As you might already be imagining, in this model where the customer picks up and drops off a car when they feel like they need it, or not, there is not much need for the customer to source servicing or repairs. Where’s the convenience in that? It would be like having Netflix, and having watched the film, deciding to go outside, up the road to Blockbuster to take the tape back. What tape? Also, how can you take the tape back to Blockbuster since it is not there anymore. Aha, but there is always the independent video store…no I can’t get to the end of that sentence either. Can you see where the logical end of all this might go? Motorists that do not own their vehicles do not need to have a vehicle serviced. Neither will they be looking for servicing or repairs on a price point, as again it is not their responsibility. Where does this leave independent repairers? Should you just chuck in the towel? Actually, things might not be as bad as you think. Upside As far as Syncron is concerned, there could be an upside for service providers like the automotive aftermarket. The change in attitudes brought on by the subscription economy, as far as they are concerned puts the most pressure on vehicle manufacturers in their traditional core business area, i.e. vehicle production. With less impetus to buy vehicles, there will be less vehicles sold. That means they need to derive income from the other end of the chain – namely servicing and repairs. This means manufacturers would need to look to their dealer networks to generate income for them. As some you may have already realised, in many ways servicing and repairs is not where the primary strength of many franchised dealers lies. This is despite the fact that most of them generate more profit from this end of the business than from new car sales. Part of the issue may be that for dealer workshops, most of the work they do will be on cars below three years old, mainly focused on servicing and warranty work. While they do try to keep as much metal from escaping as possible once the standard three years is up, for the most part their workshops do not need to perform the more challenging diagnostic work that many independents will see day-in-day-out. Given the right circumstances, and if vehicles were Can independent garages survive in a vehicle-via-subscription world? www.aftermarketonline.net If manufacturers look to change the rules of the game. It is always a good idea to make sure independents are still allowed play... ”