Apr 29, 2009

Retail Repairs

Economic tides are reshaping the auto industry’s retail shoreline. New-car dealerships are being washed away, as brands like Pontiac disappear or like Saturn and Hummer are, hopefully, sold. What’s left are repair businesses, nursing more mileage from existing cars (or dishwashers or dress shoes) , as consumers shift their mindset from  a manic buy/use/dispose to  keep/repair/keep longer.

What we are seeing more and more is commoditization of basic product attributes, as the center of differentiation gravity moves into post-production: distribution activities that meet new sets of consumer needs. Smart players will find ways to generate plenty of growth and margin there. It’s going to be continued retail channel  revolution.

At this stage, it’s hard to envision the reconfigured landscape of auto sales and service channels five years out. We do know that there is a lot of raw material out there for tomorrow’s owners and entrepreneurs to work with: service centers, parking lots, parts inventories, skilled automotive technicians, and maybe most important, a mature infrastructure to funnel whatever is needed from suppliers to installers.

The strongest G.M. and Chrysler dealers may flourish, sopping up added business in a more thinly populated franchise environment and buying books-of-business on past sales to take over service contracts. And it’s easy to imagine marginal G.M. and Chrysler dealers converting to service centers without showrooms. Replacement parts and periodic overhauls have long been for most dealerships where the real money is.

A big question is how the automakers will adapt. Obviously they’re going to have less market power. Remaining dealers, probably multi-brand or service-only, will have more. The way that Detroit comes at this new equation will have much to do with its survival.


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