Óscar Balcázar
Director
GiPA Mexico and Central America
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View from the Top

Greater Mapping of Garages Will Improve Aftermarket Sales

Tue, 09/01/2015 - 13:09

Q: When did GiPA enter Mexico and how did the company develop the proper expertise in the automotive sector?

A: During its first 15 years, GiPA focused mainly on the European market, particularly France, Spain, Italy, Germany, and the UK. Then, in 1998 we established operations in Argentina, and subsequently in 2002 we entered the Brazilian market, and later Mexico in 2004. We now cover most Latin American countries. In order to measure the aftermarket segment in relation to light vehicles, GiPA began to conduct a syndicated survey, called ATO. This research was then offered freely within the automotive, oil, tire, and parts manufacturing industry. These companies could all benefit greatly from the research without making a huge investment, since 70% of the aftermarket information was equally relevant for all of them. After that, we became a company specialized in understanding and analyzing the aftermarket. To this day, ATO has presence in more than 30 countries, gaining more accuracy each year. The ATO survey has become the most prestigious source of information for strategists in the aftermarket.

Q: Why has Mexico failed to compile adequate aftermarket information?

A: The main challenge is that we are not an informaticsoriented country. In Mexico, 35% of the independant shops and retailers have just one or two employees, meaning that it can be difficult to retrieve the information with a computer. The independent stores are scattered all over the country, with no definite way of finding each one of them. We performed a test census of the available shops in Iztapalapa to compare it with the available information from INEGI, discovering that about 40% of the shops were not registered in INEGI, and approximately the same amount no longer existed. There is no map or accurate information that provides shop locations in the country, and they operate rather informally. This leads to another important trend, which is that all small businesses are going to disappear in the long term. Every year, we see that these informal shops with few employees are performing worse than larger businesses. There is a need to form more informatics-oriented companies, with proper training for employees.

Q: In relation to the heavy-duty aftermarket segment, what were the main trends you found in the 2013 survey?

A: In terms of heavy-duty, our information is not as comprehensive in comparison to the light vehicle segment. There is little information about the aftermarket in the light vehicle segment, but with heavy vehicles it is practically inexistent. Therefore, we are among the first companies to analyze this sector, we have performed syndicated surveys with the same structure for three years, and we are applying the same methodology we use for light vehicles. We are interviewing large and small fleets with less than five vehicles, as long as their vehicles are heavier than 3.5 tonnes.

In the case of light vehicles, we have advised aftermarket companies not to promote their products to the driver of the vehicle. In the heavy-duty sector, however, we have found that it works in the opposite way, since drivers are more involved in their vehicle maintenance and there is a persistent do-it-yourself culture. Average car owners have neither the time nor the interest in carrying out these activities, since there is much cheaper labor available, and vehicles are more technically advanced than before. Additionally, heavy-duty drivers are typically less attached to their vehicles, so the purchase of parts is more pragmatic and the driver is more involved in the decision with different insights. Another important trend that will appear is an increase in the average age of vehicles, both in heavy-duty and light-duty segments. Mexico is recovering from an economic crisis, but the growth we see today does not balance out the age of the current vehicle park. Furthermore, each used vehicle that enters our country increases the age of the vehicular park.

The heavy-duty segment is mostly based on pragmatic decisions, with the most important concerns in this area being time, security, and profitability. Previously, owners did not necessarily care about the vehicle, and there was more of an emphasis on functionality and fast sourcing of components. Nowadays, there is more openness toward a quality-oriented market. Price is still an important factor, but customers are willing to listen and to understand the advantages of certain products, even when they cost more. There is a trend to acquire components that last longer, and the current challenge for companies is to make their clients understand the technical advantages of their products. If a company wants to promote a product through its quality, it needs to use the adequate marketing techniques to properly reach the market and show the cost benefits of their products.

Q: What were the main challenges involved with conducting this syndicated survey?

A: In the aftermarket, strategists are accustomed to working with no information whatsoever. Marketing specialists in this area commonly work with empirical knowledge due to the misconception that there is a lack of reliable sources of information. They struggle to find companies that understand the market and its products, and they do not normally find updated information. It is difficult for certain companies to believe that there is a company that is able to measure the aftermarket in a language they understand. In other industries, there are companies that can provide models of the market’s behavior, because they are able to quickly obtain data regarding purchases and prices of every product. We do not have that benefit since almost 50% of the independent auto parts shops and garages work without a computer, with much of the business being performed informally. Even auto dealers that have access to information find it difficult to analyze and compare to the independent market, which is their main competitor in the aftermarket segment.

Q: What are the main reasons behind this continuous decline in small businesses?

A: The challenge that many shop owners face is that they have built their company through empirical knowledge. They have adopted certain practices that have functioned for them, but are not willing to learn and adapt to the changes in the market. Each year, we observe a reduction in the number of employees that attend training courses. Therefore, there is an increase in the number of components that these workers are unable to repair, due to a reluctance to change the methods and products they have always used. However, a new generation of mechanics has already appeared, aiming to innovate and train this older generation in new vehicular technology and informatics abilities. This year, we may see a change in the current trend, as all the invoices have to be created digitally.

In the case of dealers, there is a different kind of opportunity. These establishments need to understand that they are losing a high percentage of revenue by not encouraging clients to return for maintenance. The clients must be aware of the advantages of using the original manufacturer of the vehicle, rather than an average mechanical garage that is located geographically closer than the dealership. Drivers tend to think that the prices in a mechanical garage are 54% lower than a car dealer garage. As a result, the customer needs to see the value in using a workshop that is further away and more expensive, but has the benefit of employing original parts and the best-trained mechanics.

Q: How is GiPA helping to establish a stronger aftermarket service in Mexico, and how can companies encourage clients to take advantage of it?

A: Many clients show a willingness to take their vehicle to the original manufacturer’s workshop, but most of them do not do this due to previous negative experiences. We approach the dealerships and we show them all the potential business they are losing against independent mechanical shops. We present to them their retention rate and, depending on the OEM, we ask different customers about what they are looking for from their dealers, and what areas of opportunity they detect. Most dealers struggle to understand that maintenance activities are not enjoyable for the customers. In most routine activities, customers do not detect any change after the car has been serviced, which means that they do not assign any value to the service. This mentality is unlikely to change, so companies must seize the opportunity to offer better experiences to the customers. Dealers have to be more proactive in this area, focusing all their attention on the client, and they need to explain the advantages of maintaining the vehicle in optimal conditions, with adequate components.

Companies are now trying to implement this philosophy, but previously, when there was a lack of competition with only five major brands operating in-country, receiving maintenance services was not commonly an enjoyable experience. There was a lack of trust and customers felt that the shops were stealing parts from the car. Nowadays, all the new manufacturers have created a new experience, and these five original companies are working hard to change the way they approach this service. There are now open-plan garages, where people can see what the mechanic is doing to their cars. This might be a simple thing, but it provides a feeling of openness that makes the experience much easier for the client. There are many new initiatives and now dealers are offering commodities such as Wi-Fi, television, coffee, and they even have arrangements with other businesses to offer a lot of other activities to the customers. These initiatives will all lead to a happier client base and a healthier aftermarket sector.