I believe in inclusive reporting. When I’m writing an article, I try to address every topic that comes up in conversation. When I’m at an event, I attend as many educational sessions, meetings and press conferences as possible. As a Truck Parts & Service reader, I believe you have a right to expect to learn as much aftermarket news as possible from us. And as editor, I believe it is the job of our editorial staff to go to great lengths to provide you that information.
With that in mind, I bring you news from the other side of the fence — the dealer market.
Not long after completing our January state of the industry report for this magazine, I started writing a similar report for our sister publication Successful Dealer. Released on the Successful Dealer website last month, the state of the dealer market touched on many of the same topics covered here in January.
For the most part, dealers were pleased with 2017 and are optimistic about the year ahead. Like you, many dealers continue to struggle finding technicians and quality employees. Every dealer I’ve talked to this year mentioned its struggle finding technicians; though, thanks to increased OEM involvement, I do think they have a leg up in solving this issue.
There are other similarities, too. They believe the current administration has helped trucking. They believe e-commerce, remote diagnostics and alternative power sources could fundamentally change their businesses, and they’re concerned.
They know they need to improve their online sales and marketing, and they wish they could find the time and money to improve their store fronts, showrooms and websites.
Dealers also have their own unique problems, as I’m sure you could guess.
The used market has been a thorn in their side for two years. Oversupply drove down used vehicle prices for nearly a year and, when demand finally picked up last fall, it was only enough to stem the tide, not reverse it.
More than 63 percent of dealers responding to a November 2017 Successful Dealer reader survey claim their average used truck turn is 60 days or more and, among that group, almost half say they are averaging more than 90 days. With monthly depreciation rates at or around 2 percent, it doesn’t take many calculations to see the margins disappearing from the used market. And dealer data bears that out, as nearly half (48.6 percent) of Successful Dealer survey responders say less than 10 percent of their company’s revenue comes from used truck sales.
I know what you’re thinking here, “So? If you want to be a dealer, that’s part of the game.”
You’re not wrong. But you need to think about how dealers respond to tough times. When vehicle sales are low, where do they turn?
More than 40 percent of Successful Dealer survey responders claim at least 50 percent of their revenue comes from the parts and service market. Almost two-thirds (65.6 percent) expected their parts revenue to surpass $10 million in 2017, while 38.7 percent expected the same for service. When dealers’ backs are against the wall, they turn to your aftermarket to right the ship.
American Truck Dealers (ATD) data tells the same story. According to ATD’s 2016 financial profile of new truck dealerships, 82.6 percent of total dealer business gross came from parts and service. That was 5.6 percent higher than 2015 (when new truck sales were booming).
Today’s new truck market is booming — January was the best month in 12 years. Let’s hope for your sake that continues. Because when that market stumbles, the dealers come for you.