APIA 17 Sept 05
AGM Comment
Each year I ask myself – “Why do I do this job?”
I effectively retired from the Recycled Parts Industry 3 years ago yet find myself spending many hours each week communicating with those still involved or presenting their interests to bureaucrats.
The fact is I love the industry. I believe recycling vehicles is a responsible and rewarding occupation and one that can make you a very respectable living.
Given this, it is causes me grief to observe the salvage and recycling industry generally experiencing a reduction in market share and profitability.
I’m going to risk your resentment by telling you why I think this is happening.
Most of you spend your marketing efforts competing against each other.
That’s crazy. You’ll on the same side. You’re all complimentary to each other in supplying a resource that is increasingly being ignored by insurers and repairers in favour of product which does nothing more than increase the cost of motoring.
Your enemy is the one who is gaining market share… the new OE parts supplier.
I’ve never ever seen any promotional material or heard a representative point out why a repair should be using recycled parts. All of the marketing effort is based on why repairers should be using YOUR parts rather than another recycler’s part.
In the meantime the OEM supplier is busy telling your customers why they should be using NEW parts.
The majority of the time you are offering an IDENTICLE part to the OE supplier – and certainly it is the IDENTICLE part to the one damaged and being replaced. It’s a used OE part. Unless it’s an item that can has suffered wear or rust or damage it’s the same part with added advantages.
It’s always cheaper. It usually offers a better profit margin to the purchaser. It often carries ancillary parts for free – things like badges, mouldings, hardware and brackets. These are the strengths that the recycling industry should be selling.
It’s not difficult. It’s certainly no harder than trying to compete against a fellow recycler who has the same advantages.
Forgive me for pointing out that I do speak from experience. When I and a couple of others like Harry Dodson started in this industry in the early ‘80’s we only competed against OE. There were almost no other similar suppliers in existence. The traditional wreckers were a completely different market and were unable to supply the high demand parts that we imported from Japan because on their stock all these parts were already damaged. We set about, without even realizing the enormity of the task, to steal market share from the OE. And we succeeded – spectacularly.
I remember my 1st year’s business plan. It hoped for an annual turnover of $80,000 from which I would have a net profit of about $20,000. My 2nd MONTHS trading was $30,000. My 7th MONTHS trading was equal to my budgeted whole year - $80,000. I know Dodson’s were experiencing the same because we talked to each other and helped each other to attack the market. The OE suppliers didn’t know what was hitting them. In time we had a multimillion dollar turnover but the OE still didn’t catch on to what was occurring under their nose. What did happen is that other independent traders saw the business that was evolving and within a few years we had dozens of competitors – all who entered the market by trying to undercut our price. They saw us as the competition rather than our real competitor – the OE supplier. That’s where the rot set in. It has become progressively worse. The recycling industry has lost the ability to market. The market did grow as a result of more economical repairs and an increasing on-road fleet. However, the aftermarket and recyclers all rely on an existing pool of recycled parts business and try to carve it up among themselves. This is obviously dopy!
The OE manufacturers didn’t remain stupid forever. They set about trying to get back the business they had lost and have done a good job over recent years of increasing their market share. In almost all instances they have gained that share by focusing on our market. They have taken business away by matching prices, by improving service, by increasing trade margins but most of all by telling the repairers, the insurers and the vehicle owners that they are better off with a new part.
In my view they are clearly wrong. As an industry and as a nation we need to recycle. The insurers need to understand that they have a responsibility to deal with the written off vehicles better. Asking auction houses to deal with written off vehicles has removed the insurers from being face to face with customers like you who could suggest they buy the parts back. Find another way to get in their face. I’m not a greenie but I do think we should be enlisting their help to educate the insurers, the repairers and the motoring public towards the benefits of recycling. We should be circulating promotional material that makes our repairer customers feel good about environmental responsibility – recycle.
A bit of focused thinking will result in lots of strategy to fight back at the OE suppliers using our strengths. One of those strengths is industry unity.
Work together to supply parts – not against each other which only reduces prices.
We now have the APIA web site which offers virtually free communication to source and sell stock and to share strategy or experiences. I recommend that you start forming alliances with other suppliers rather than treating them as competitors. In fact if you don’t, the market will continue to shrink in the face of good OE marketing. Our industry will suffer. Your incomes will fall.
There is no need for this.
The great thing to remember is that the OE has created a HUGE parts business for you to steal. If collectively, APIA members can take 10% market share off the OE that will probably almost double every members business.
The golden goose is there waiting for you to pluck it.
Maurice O’Reilly