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Analysis

Price No Longer Controls the Market

Fri, 09/01/2017 - 14:56

Price has been for years the sole deciding factor for a company’s success in the Mexican aftermarket. Due to the lack of proper regulations regarding quality for imported components and the open nature of the national market, low-quality parts and knockoffs could compete against original and, therefore, more expensive components from leading international brands. The result is obvious: “There is an oversupply in the market and it has become increasingly difficult to offer a quality product at a competitive price,” says José Pescador, Director General of Fast Autopartes. Imported components enter the market at lower prices than the industry’s standard, creating unfair competition for companies that cannot lower their prices further lest they compromise their quality.

This condition is finally changing. Companies are noticing a gradual change in mindset in the Mexican consumer who is now favoring quality over price. “The market has debugged itself and brands that couple quality products with good post-sale services prevail,” says Benjamín Centurión, Managing Director of Dacomsa. Aftermarket players are finding it easier to approach customers with a better value proposition without fear of being rejected due to a higher price. Technology integration has also been a contributing factor in the growing acceptance of quality and original equipment components. The implementation of stricter emissions tests in the country have also forced clients to seek the best option to avoid No-Drive Day restrictions. “Knockoffs can fool the client at first sight but they cannot bypass digital scanners,” says Alejandro Calderón, President of the National Association for Representatives, Importers and Distributors of Spare Parts and Accessories (ARIDRA)

However, price is not the only factor that has become a priority for the customer. Mexico’s 17-year-old vehicle park and the more than 40 brands competing locally have created a vehicle diversity so rich that companies cannot hope to cope with demand for every single brand and model available, much less when factoring in the differences between older and newer models. “Now, availability is the main driver for a company’s success,” says Isabel Díaz, Managing Director of HELLAMEX. “Especially among retailers, availability is key to retaining customer loyalty.” Although companies cannot guarantee service to the 40-million national vehicle park, Díaz says companies can choose the market segment where they want to participate and become experts in that specific niche. “Specialization has also become a trend among wholesalers and we found suitable partners to commercialize our products with success,” she says.

Digital trends are also catching up to the aftermarket. Companies are gradually changing their strategies and from small national providers to large multinationals, players are looking to build a presence in the online world. “The biggest change we will face in Mexico is going to be e-commerce,” says Gerardo Varela, General Manager of ZF Services. “In our strategic plan, we will skip retailers and start participating directly on an e-commerce platform, including our distribution network. We started in July 2016 and we are already seeing sales increase through this channel.” According to UPS’ Pulso del Comprador en Línea (Pulse of the Online Buyer) research, 44 percent of tablet users and 39 percent of smartphone users have made online purchases.

Díaz agrees on the importance of digital strategies saying: “It is now time to create a strong digital strategy if we want to be competitive in the years to come. We must update on a regular basis the information on our webpage so users, spare-part dealers and distributors can take advantage of our catalogue and offer a better service to their own clients.” UPS’ study says only 70 percent of all online buyers are satisfied with the quantity of information related to the product that helps them decide whether to buy or not.

Online strategies are gradually replacing traditional marketing and product-management strategies and companies that fail to keep up with this transformation will put their participation in the market at risk. “The brand that creates the best digital platform will be the one that controls the market,” says Pescador.