Did you know that disco record sales were up 400 percent for the year ending 1976? If these trends continue …” – Disco Stu, on an episode of “The Simpsons”
Like disco’s boogie fever heyday in the late 1970s, similar astounding growth trends in the 1990s are evident regarding the Internet. Over the last seven years, the number of people in the United States regularly online has grown from 90,000 to 100 million. Today, 81 percent of computer users go online, a 54 percent jump from three years ago. In 1998, the number of Americans buying products online was 21.1 million. By 2003, that number is projected to be 72.1 million. Business-to-business revenue in 1999 was $43 billion. By 2003, that number is predicted to jump to $1.3 trillion. If these trends continue …
When it comes to selling items online, many companies are counting on these continuing growth trends. Let’s face it. It looks like easy money. If companies can sell books, compact discs, cars, videos and Russian mail-order brides online, is there anything you can’t buy on the Internet?
Makers of car parts have asked this same question, applying it to – what else – car parts. The answer has been the creation of a number of Web sites devoted to purchasing or locating car parts – crash parts included. And, going one step further, many of these sites are available exclusively to repair shop owners. You say you need a headlamp for a 1992 Toyota Celica? No problem. Flip on the computer, get online and before the coffee’s done brewing, you’ve sent an order. Such simplicity cuts down on your paperwork, the time spent getting ahold of a sales rep and all the other little odds and ends that add minutes and hours to ordering. But not only do you cut down on the time it takes to order, you also hasten turnaround time on a repair. Your whole world is now one big yellow smiley face.
But will these online companies come through on their promises? Is ordering parts online safe and reliable? Will it be the way business is mainly done? Will it erode customer loyalty and personal service? If these trends continue …
That’s the Way (Uh huh, Uh huh) I Like It
You may think this whole Internet craze and the trend toward buying parts online won’t affect you because you’re close to retirement. You can just keep the status quo in your shop and let the next generation worry about the new wave of doing things.
The numbers surrounding the Internet’s growth are staggering. This isn’t like the 1960 World’s Fair where technological marvels like flying cars and videophones were many decades in the future. When it comes to the Internet becoming a standard part of everyone’s lives, we’re only talking about a few years here.
It took the Internet seven years to reach 30 percent penetration. Compare that to television, which took 17 years to reach that same mark, or the telephone, which took 38 years. In fact, I hesitate to give too many statistics in this article because a lot of Internet statistics may be obsolete by the time this article is printed.
When people think of buying items online, they likely think of online stores like Amazon.com or CDNow. Many brand-name stores make it possible to buy their items online, as well. (Because it’s so inconvenient to leave the house.) Such online transactions are called business-to-consumer (B2C – there’s a whole new lingo to learn, too). By 2003, B2C transactions will total $108 billion.
But this is chump change compared to business-to-business (B2B) transactions, which is the category online parts buying falls under. (Remember the $1.3 trillion mentioned earlier?) Some estimates say annual automotive parts sales equal $600 billion. If buying these parts online proves to be a speedier, more efficient and easier process, then get out your umbrellas because a rainmaker is coming.
With such a potential high-dollar windfall, it’s no wonder online parts dealers and locators are popping up faster than long-lost cousins at a lottery winner’s mobile home. These dealers want to be your source for parts. And if this is the standard way business will be done, expect a lot of change, resistance to that change and possibly even a whole new philosophy of doing business.
But does the promise to speed up the parts buying process mean it will actually happen? Will it become the normal way shops buy parts? And more importantly, will it be accepted?
“It will become the norm when it’s accepted,” says Erick Bickett, founder of the Collision Industry Electronic Commerce Association (CIECA). “It will be accepted when it adds value. If it adds value, then it will be good for the industry.”
Buying parts online can be done a couple of ways. You may be able to find a parts dealer on the Web and get parts directly from him. Or you can go to a parts locator, who’ll take your request and find a dealer with your part, likely for the cheapest price.
Unlike other industry changes that come about gradually, if buying parts online goes widespread, it will do so quickly to keep up with the rampant growth of the Internet. However, two big things appear to be a roadblock to this brand new parts-buying method: industry individuals’ resistance to change and the fact that lines of communication among shops, distributors and insurers will have to open up considerably. But before getting to that, we need to examine why buying parts online is being considered as an alternative to the traditional method and why so many parts dealers and locators seemed to have appeared out of nowhere to answer this demand.
What’s Your Name; What’s Your Number
It’s the chicken or the egg situation. Which came first? The need to make parts buying faster and more efficient or the ability to purchase items online? Until the technology was invented to buy parts online, few gave much thought to finding ways to speed up the buying process. Now that improved technology exists, suddenly we think we have a problem. No one had static interference problems with their cell phone 15 years ago because there weren’t any cell phones. Do you remember complaining about the e-mail server being down five or 10 years ago?
No matter how you look at it, the potential for buying parts online pulled the curtain on the traditional parts buying process. Now that a possibly faster way to buy parts had emerged, the old way looked slow and antiquated. This school of thought and need for speed seem to be human nature. If you wanted to travel across America in 1850, it took months. Now if it takes more than six hours, we ask for the FAA’s head on a platter. This same need for speed toward parts buying is taking place as well. What was satisfying before is considered subpar today.
But the need for speed hasn’t come solely because technology now enables it. Since it seems to be harder than ever to make a buck – thanks to reduced profit margins and labor rates that are as unchanged as Dick Clark’s physical appearance – improving turnaround time and cutting costs has become vital. So how will ordering parts online help accomplish this?
For one thing, there’s less need for voice communication. The parts information and the ordering process are on your computer screen, so you don’t have to worry about leaving messages with live, human parts brokers. On your computer, you’ll be able to – in lieu of voice communication – order and confirm those orders, see updates on the order status, make inquiries about inventories, get an estimated time of delivery and see the current status of invoices. Your phone will be collecting dust as your computer heats up. Meanwhile, cycle time will be reduced, information access will be easier and more accurate, and you’ll be able to see where the process broke down in the event of a mistake.
At the Collision Industry Conference (CIC) meeting in April, Frank Terlep of CarStation.com said that when it comes to parts ordering, all the shop owner would have to do is create a computerized estimate. “Once you upload that estimate to an e-business hub, [CarStation.com] can communicate it automatically to the vendors you’ve chosen,” he said.
This way, the shop owner doesn’t need to print the estimate and then fax it to a bunch of vendors. The time this saves may seem extraneous and negligible at first (and if you paid for a fax machine, you want to get some use out of it), but with each order, that time certainly adds up. Suddenly, what was deemed time well-spent when you printed and faxed orders in the past is now considered a waste of time with the onset of online parts buying.
So it seems obvious that buying parts online will save the industry. We can all go to sleep happy. Life is good. Online parts buying is our salvation. So why hasn’t this article wrapped up yet?
Give It Up
If you want to join the online parts buying bandwagon, remember that hitching a ride can well mean that your shop information, which used to be privileged, will end up in the hands of anyone who can spell “privileged.” Internet brokers won’t need long to determine your buying habits. And these days, that information is a marketable commodity, which brokers can sell to any company that pays the price.
This happens no matter what you buy. You purchase some sporting goods at a Target store, pay with your Visa card, and two weeks later, the good people at Sports Illustrated are calling to see if you want a subscription. How’d they get your number? And how’d they know you like sports? Someone told (meaning sold) that information to them.
But your information may not be the only thing online parts buying takes away – you may also lose communicating with a human being.
“Less personal communication will result in a more mechanized relationship,” says Bickett. “This, of course, causes more complexities in getting over the bumps because the relationships won’t be as strong to carry the parties through. Less loyalty may also be a result.”
Many in the industry have voiced their concerns on these points. In an editorial published in Hammer and Dolly in April, Bobby Johnson, a contributing editor to BodyShop Business, expressed his hesitation with ordering parts online. How would customers know the order had been received? What if something goes wrong with the order? How will that information be communicated? On the topic of loyalty, Johnson was equally concerned, stating that if the level of service declines, shops won’t stay with one vendor and may hop around. Using numerous vendors means more estimating discrepancies and more shop owners being instructed where they should get their parts, rather than enabling them to choose on their own.
Since online parts ordering is still new, it would seem that vendors and parts hubs and locators would deal with those problems as they came up and as the purchasing system evolved. And even if they could assure customers that ordering online will go smoother than melted chocolate down a hot tin sheet, there would be many who’d resist.
It’s a big change, and in an industry where making small changes is difficult, making one this big on a transcontinental scale would seem to be insurmountable. Meanwhile, the fact that the change is related to computer technology, which is hard to grasp at times, may increase reluctance to implement online parts buying.
“If the process proves to be better, then the [shop owner] will be encouraged to use it,” says Bickett. “If he doesn’t use it, then it will be interpreted as a fear of the technology rather than an unwillingness to change. If the process is better, why wouldn’t someone use it?”
It seems that the process may be faster, but will it be better? There’s still a human factor in the process, and as much as we hate to admit it, if humans are involved, mistakes will be made.
But people are necessary to keep track of inventories in parts warehouses. Someone orders a part and they check it off the list. Suppose this checker is going through the warehouse counting parts and 10 people order the same fender? He won’t know it was purchased until he gets back to the office. If this happens a lot, he may lose track of what’s going and what’s staying.
Plus, buying parts online doesn’t mean they won’t be damaged while in transit. Parts don’t magically transport themselves through computer fiberoptics to your shop. A delivery company takes care of that. Who works for delivery companies? Humans!
“Parts buying online will not solve this problem [of incorrect or damaged parts being shipped to shops],” says Bickett. “But it may expose the problem so it can be solved at its root.”
We Are Family
Even if you have an electrical outlet in your cave – enabling you to order parts online without ever having to see another person – the process will work best when people work together. But this may sound easier than it really is. Why? Well, this isn’t like asking the Superfriends to join forces. This is more like asking Batman and the Joker to work together.
When it comes to online parts buying, shop owners will need to eventually work with insurers, information providers and even competitors … and not grudgingly, but with a smile.
According to Forrester Research, a leading independent Internet research firm, a shift is taking place in the way companies do business as the number of companies engaging in e-business grows. From this growth will sprout “e-business networks,” where companies form relationships quickly and share their information across a wide spectrum – and even with the competition. In e-business, partnering is more important than ever, and that means many companies will expose their key assets in order to attract partners. What they’re looking for is someone to fill in the gaps where they’re not so proficient.
This information from Forrester is directed toward businesses in general. But does it directly relate to the collision repair industry? Take a look at ADP, CCC and Reynolds and Reynolds. These three competitors have joined to form a new electronic parts network.
Sensing the potential windfall in online parts buying and knowing that each company alone couldn’t form a network strong enough for the industry, the three information providers joined to form one independent network. Each company brings to the table its own strengths in order to produce a complete package. However, this doesn’t mean the three information providers will spend their days tiptoeing through the tulips with one another. They’ll still remain fierce competitors as information providers.
But not just competitors are joining forces. It seems that when it comes to doing business over the Internet, everyone wants a teammate. Heck, everyone needs a teammate. CarParts.com has aligned with Speedvision, a 24-hour cable outlet devoted to the automotive industry, to be their exclusive advertiser. ABRA Auto & Glass has formed an alliance with CarStation.com. Toyota and i2 Technologies have joined forces to create an electronic marketplace. Partnerships like these enable companies to overcome their own weaknesses in the realm of online parts buying, while also opening the door for more people to participate. For example, in the ABRA/CarStation.com alliance, insurers and consumers will be able to track a job’s progress.
What can all this mean to the average shop owner? Why think of partnerships when you’re just a small operation? Chances are you’ll feel the effects of the above partnerships. If, for example, the trend catches on where insurers can efficiently monitor a job’s progress, you’ll be the one letting them know what the progress is. If buying parts online becomes the norm, then it will become normal for competitors to work together – while remaining adversaries – in the Internet business world.
“The business relationships among distributors, manufacturers and purchasers must go through an overhaul for real significant improvement to be realized,” says Bickett.
Do What You Wanna Do
According to Forrester Research, while more partnerships will be important for success, no one is in a great position to take advantage of this knowledge. “The winners in e-business networks will be companies that relentlessly focus on what they do best and become virtuosos of cooperation,” said David Truog, research director at Forrester. “Nobody is even close to measuring up to this standard today.”
For body shop owners, the decision to purchase parts online may depend on their impressions of the likelihood that buying parts in this way will become the norm. And the shop owners who see it as the wave of the future are in a position to benefit the most, since an advantage will only exist until the trend becomes the norm.
“Potentially, there’s a first-mover advantage,” says Bickett. “If buying parts online provides better service, then those who use the Internet will have a competitive advantage over those who don’t. They’ll get a better price, quicker turnaround, less energy expended, just-in-time inventories, better accuracy and fewer comebacks.”
This advantage may last a few years or a few months, depending on how fast it takes online parts buying to become the norm. Why? If everyone starts buying parts online, it will be done faster than in the past, but no faster than anyone else since everyone will be ordering that way. But turnaround time may be reduced to a new standard that everyone uses, all thanks to buying parts online. (If, however, online parts ordering doesn’t become the norm, no first-mover advantage will exist.)
One aspect of online parts ordering that makes it unique is that it’s open to anyone. “The good news,” says Bickett, “is that the barriers to use this technology will be very low, allowing all to play.”
So, if buying parts online does become the norm, the only ones who may lose in this game are the ones who refuse to play. But remember, just because you play doesn’t mean you’ll win. Why? Because if everyone plays, the game may end up in a tie. But then again, a tie is better than a loss, isn’t it?
Writer Mike Lawrence is associate editor of BodyShop Business.
|More Change Coming?
I believe the following is a list of changes we’ll see and the likely order in which they’ll be accepted. This doesn’t mean companies will try to do this out of order, but the products won’t be accepted and implemented past a pilot program unless the companies follow an order similar to this:
– Erick Bickett
Internet Growth Spurts