State of the Aftermarket: Navigating growth in 2014

This is the fifth and final installment of a multi-part series that looks at the state of the heavy-duty aftermarket that published throughout the month of January. The first article, which looks at moving the aftermarket forward in 2014, can be found here. The second, a look at how political turmoil had an impact on business in 2013, can be found here. The third, a detail on changing aftermarket business channels, can be found here. The fourth piece, which looks at the mid-2013 financial turnaround, can be found here

John Blodgett, vice president, sales and marketing at MacKay & Company, says MacKay & Company’s 2014 projections place aftermarket growth around 3.5 percent. Nearly 75 percent of responders to TP&S’s reader survey have increased sales goals for 2014, but most view their growth as just “slightly higher” than last year.

The aftermarket isn’t showing signs of major expansion. To rapidly grow, businesses will be forced to rise to the top of a competitive marketplace.

“It’s going to be a challenging year for the whole industry,” says Fabio Jurchaks, director of sales and engineering at TMD Friction. “The market is what it is right now. The economy isn’t growing that fast.”

One area where independent distributors have an opportunity to grow is the service industry. An aging fleet population translates to less warranty service and more independent repair.

Distributors selling parts to those businesses or offering service themselves could have a leg up in the marketplace, Don Reimondo, president and CEO at HDA Truck Pride, says.

“The single biggest business opportunity in the industry is parts installation,” he says. “It’s the advantage the OE has on the warranty side and it’s a significant opportunity for the independent side.”

He adds, “In this industry, I truly believe the guy who throws the box away wins the game.”

Bill Nolan, president at Power Brake & Spring, says his company made a “renewed commitment” to service last year and is already seeing the benefits.

Walt Sherbourne, senior director, field sales and training, North America for Meritor’s aftermarket division, says the service opportunity is something even suppliers have focused on, which is why one of Meritor’s aftermarket goals for 2014 is focused on eliminating parts delivery delays.

“Time is money in this business,” he says.

Online sales also present a chance to grow, says Debbie Zehrer, vice president and marketing manager at 16 Ton Industries. Zehrer and her husband Jeff, a truck driver, use the Internet to promote and sell their aftermarket tractor toolbox products. Zehrer says the online world allows customers anywhere access to product information and the ability to make a quick purchase.

As a supplier and end-user customer, Zehrer believes the Internet is the ultimate sales promotion tool.

“If we see an ad somewhere and it has a [web] address, we’re going there [to get more information],” she says. “That’s a significant advantage in reaching customers.”

Servicing medium-duty customers appears to be another growth opportunity.

“There is a growing set of [medium-duty] makes and models that a lot of distributors don’t even think to sell into,” says Barry Harris, global manager, commercial vehicle aftermarket at Timken. “That marketplace is growing at a greater rate than GDP, and that’s a big focus for us and our distributors in 2014.”

Steve Crowley, president and CEO at VIPAR Heavy Duty, also recognizes the medium-duty market as a growth opportunity, and says the organization has been active in promoting it to its stockholder base. With retail sales and delivery methods changing, medium-duty trucks are becoming the premier distribution vehicle in urban areas.

“It’s becoming a great market,” Crowley says.

Growing product portfolios in existing markets also could become a growth opportunity, says Bill Gryzenia, vice president and general manager of Dana’s aftermarket group. “Expanding product portfolios for better diversification, to include things like telematics that are growing in popularity, will help in smoothing out some of the traditional peaks and valleys.”

Adds Mark Chung, global marketing director at Cummins Filtration, “There is a tremendous opportunity for [the aftermarket] to grow into segments that were underserved before.”

But steady economic projections and growth opportunities don’t mean the aftermarket enters 2014 without challenges.

The Affordable Care Act continues to be headache for small businesses, and the long-term impacts the program will have on the aftermarket have yet to be determined.

Kevin Cyphers, vice president at Cyphers Truck Parts, and Nolan both see the program as an obstacle in 2014.

“I can manage the risks of competition and the marketplace,” says Nolan. “I can deal with things that I know. What worries me is what we don’t know.”

“If [the Affordable Care Act] makes it cost more to employ people it’s going to hurt what we’re able to do for our employees,” adds Cyphers.

Finding employees also is a major problem.

The aftermarket is aging, and people are exiting the industry to retirement at a much faster rate than young people are entering.

“We as an industry need to a put a full-fledged recruiting program out there,” says Reimondo. “We need to be working to attract young people to the truck parts business.”

The aftermarket isn’t the most glamorous industry available to young business professionals, but it still presents great career opportunities.

“There are a tremendous amount of good jobs available here, and if you think about the opportunities going forward there are great opportunities for 20 and 30 year olds to enter the industry and really thrive,” Reimondo says.

Aftermarket suppliers also face competition from offshore manufacturers introducing low-quality parts in the marketplace. HDMA President and COO Tim Kraus says independent distributors willing to stock and support premium-quality brands provide the best available products for end users and support the North American brands that have led the aftermarket for decades.

“I think the big thing the truck fleet customer is looking for is value,” he says. “People want to get their money’s worth.”

“Our premium [North American] suppliers provide the same products customers could buy if they went to the OEM and that’s important. That value is something that doesn’t ever seem to go away.”

Brian VanCamp, segment manager – aftermarket at Hendrickson, says the company’s distributors “recognize the value of using genuine parts over low-cost entries, and do very well reinforcing that message through the channel.”

Ultimately, businesses that are prepared to navigate the changing marketplace and take advantage of opportunities available should succeed. The market is no doubt competitive, but with the economy stabilized the aftermarket is moving in the right direction.

“I really do believe the carryover [from 2013] is going to continue,” says Reimondo. “That should be very good for our membership going forward.”

Adds Crowley, “If business goes on the way it has, it should be a fairly good, if not a great, year.”

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