WHITE PAPER Accelerating Accessory Sales Growth: How can OEMs capitalise on the opportunity? As vehicles and parts become ever more reliable, demand for replacement parts is diminishing and Original Equipment Manufacturers (OEMs) are facing a long term decline in aftersales revenues. This has prompted a renewed focus on accessories which remains a largely under exploited opportunity for most OEMs. But what is the accessories opportunity and how can it be exploited? Improve your accessory sales revenue by 30% Impetus Automotive 2014
1As vehicles and parts become ever more reliable, demand for replacement parts is diminishing and Original Equipment Manufacturers (OEMs) are facing a long term decline in aftersales revenues. This has prompted a renewed focus on accessories which remains a largely under exploited opportunity for most OEMs. But what is the accessories opportunity and how can it be exploited? OEMs are increasingly coming to Impetus Automotive seeking consultancy support services that will enhance their accessories offer. Typical questions that aftersales managers are seeking to answer include: 1. What is the accessories market s potential contribution? 2. What is currently stopping the growth of accessories? 3. How can OEMs recognise and exploit the accessories market? Developing the accessories market is not simply a response to diminishing aftersales revenues. It is a strategic opportunity for OEMs to improve margins and importantly drive customer brand loyalty across a vehicle s entire lifecycle. ACCELERATING ACCESSORY SALES GROWTH: How can OEMs capitalise on the opportunity?
The Opportunity 2 To establish the macro level opportunity for the accessories market, it is first necessary to define what an accessory is. A simple definition is something that is fitted to a vehicle by any of the following: Customer (who might fit something simple, such as mats or a roof-rack) Dealer (franchised / independent) or other retail outlet Port of entry facility The current opportunity mix available across accessory categories is shown in Figure 1. Carrying/Storage 10.4% Exterior 27.8% Interior 24.7% Misc/Functional 3.9% Techno 21.5% Towing 7.2% Wheels 4.5% Figure 1 Total Accessory market by Product Group Based on this definition we calculate the market opportunity for passenger cars to be worth 7.6 bn per annum across the big five European markets. See figure 2. Figure 2 Total Accessory market ( Billions) ImpetusAutomotive.com
3 Barriers to Success To truly exploit the accessories opportunity requires a different approach. The historical culture that has built up around this niche sales area is creating barriers to its development. One of the biggest barriers is the relationship between an OEM and the National Sales Companies (NSCs). Typically OEMs promote a one size fits all range of accessories across the European markets that ignore market nuances. NSCs are often placed in a situation where the range of accessories provided to them is both too narrow and expensive. Subsequently the local market becomes closed-off to the concept of accessories sales. Frequently there is a clear case for local sourcing but the opportunity is missed because of a lack of understanding between the OEM and the NSC. The golden rule is that the NSC, being closer to the local market and its vagaries, should be able to identify niche opportunities where the introduction of locally sourced product would support sales of OEM product. Another barrier is traditional sales targets which are often based on historical sales within each market. Instead they should be based on the actual opportunity, taking into account the model mix and split between fleet and retail sales, as shown in figure 3. Figure 3 Influences on Market Opportunity ACCELERATING ACCESSORY SALES GROWTH: How can OEMs capitalise on the opportunity?
Broadening the Market 4 The market opportunity for accessories sales is not all about retail sales. Most OEMs are missing out on the potential for growth from the sale of accessories to two other important types of customer: Fleet Used The sale of decals to larger fleets is an obvious example of penetration into the fleet opportunity but there remains considerable untapped potential. Data collected by Impetus automotive suggests sales penetration into the used car market is even more limited*. Most OEMs run used vehicle re-marketing programmes that provide an excellent opportunity to use accessories to differentiate vanilla flavoured vehicles, that might be de-fleeted from a rental company, for example! *a study in the UK into accessory sales by a UK NSC to used car customers revealed an average spend of 90 per vehicle. Not much more than a set of mats! ImpetusAutomotive.com
5 Achievement Managing a successful Strategy of accessories sales growth requires commitment from senior management within the OEM to overcome the sales versus aftersales conundrum. Most often sales responsibility resides with the latter but it is the vehicle sales process that is key to the sales opportunity. Without buy in across the business any new initiative is doomed to failure. Our experience working with a UK based volume manufacturer is that a top down focus on growing accessories that is manifested in the creation of a specialist function, can achieve impressive results (Fig.4). Vehicle age Year one Year two Year three Figure 4 Growth in Accessory sales at a UK volume manufacturer. Creating a specialist unit to drive accessory sales success is a key enabler to an OEM achieving growth. There are a number of constituent elements that must be managed to support an effective accessories strategy and assigning a dedicated resource is essential to ensure these components are delivered (Fig.5). Accessory Business Unit Mass Customisation Pricing Autonomy Integrated Third Party Supplier Management Product Development Product Marketing PoE/VRC Programme Development Ownership Cross functional KPI Monitoring & Development Website Development Accountable Cross Model/Vehicle Line Showroom Vehicle Accessory Management Used Vehicle Personalisation Programme Network Development & Training Competitor/ Market Analysis &Benchmarking Figure 5 The elements of a successful accessories strategy. ACCELERATING ACCESSORY SALES GROWTH: How can OEMs capitalise on the opportunity?
6 Enhancing the Offer The Dealer Experience! For any OEM the foundation for developing a successful programme must be based on insight into the customer and Dealer experience. Impetus Automotive have run focus groups that have shown that customers would be receptive to a well-executed and appropriate accessory offer from OEMs. For all accessories that require fitment, the dealer will remain the conduit for these offers, hence the focus on the Dealer experience. In-Dealer new car sales staff are tasked with selling a multitude of ancillary products alongside the car itself and the accessory sale opportunity is often overlooked due to other priorities and the effort required to make the sale. Providing the right motivational support and simplifying the sales process are two obvious ways for the OEM to overcome these sales blockers. For accessories that do not require fitment, an online retail solution is an obvious way for OEMs to engage directly with their customers. This strategy fits with the growing trend towards manufacturers leading the digital customer experience. On line Applications such as the Impetus Automotive Accessory Sales Driver solution can help the OEM exploit this opportunity. ImpetusAutomotive.com
7 Conclusion The accessories sales market is a sizable opportunity and achievement of significant growth is within the grasp of most OEMs, provided there is a clear commitment from the top that breaks down the traditional silos of vehicle sales and aftersales. A dedicated resource is required to drive this cultural and operational change, managing a sales strategy that can exploit the opportunities available within local markets across new, fleet and used vehicles. The successful strategy will establish: The market opportunity establishing appropriate sales targets and programme Return on Investment (ROI) Benchmarking of current performance Practical recommendations on what needs to be done to optimise the accessory programme (including the introduction of relevant processes and IT systems) Stakeholder concerns and solutions A resourced and supported programme implementation plan Working in partnership, Impetus Automotive can support this plan by providing consultancy, IT and business process outsourcing support to an OEM and NSC. Our programme would sit alongside existing processes to form a holistic growth strategy. Our proven approach begins with a full consultancy review of current performance and analysis of the market opportunity. Thereafter we are able to recruit a dedicated accessories business unit tasked with programme implementation, via our business process outsourcing division. Our IT function will assist with development of appropriate sales support tools. As a business we are committed to demonstrating ROI on all our projects and ensuring that your customer s experience is at the heart of what we deliver. Impetus Automotive Tournament Court Edgehill Drive Warwick CV34 6LG United Kingdom Call: +44 (0)1926 430 202 Fax: +44 (0) 3333 211 642 Email: Enquiries@ImpetusAutomotive.com Visit: ImpetusAutomotive.com ACCELERATING ACCESSORY SALES GROWTH: How can OEMs capitalise on the opportunity? Impetus Automotive 2013 AccessoryWhitePaper 12/13