Sunday, 31 August 2003 17:00

Profiting from Wal-mart-ization of the CR industry

Written by Dick Strom

If you can imagine Big Bird settling into a cozy yet busily productive henhouse - the aloof behemoth arrogantly fluffing its plumage as it wiggles its super-sized rear into a comfortable nesting spot, destroying everything the residents spent years producing, you can understand why thousands of productive small businesses become alarmed, outraged, even militant when Wal-Mart barges into their market area. 

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The reason? Wal-Mart has the reputation for putting smaller operations out of business. No amount of protestation from surrounding businesses will impede, let alone halt construction of new Wal-Marts. And what hope do individuals and small businesses have against the company that's been instrumental in forcing retail giants like K-Mart, Woolworth, Mont-gomery Wards, Ames, and Bradlees into bankruptcy.
 

Wal-Mart's "slash-prices-and-make-it-up-in-volume" business approach has become one of the greatest challenges to small business. But remember, this is the same technique Henry Ford used to flood the automotive market with 15 million Model Ts, crushing hundreds of small auto manufacturers in the process.

Some of the following quotes and observations concerning Wal-Mart were gleaned from a recently aired National Public Radio four-part article on the retail giant, which spelled out things Wal-Mart does better, or at least, different, than its increasingly 'former' business competition. These tactics are being implemented by large service-provider businesses, including insurers and collision repair consolidators.

So, what can small to mid-sized repairers do to carve out a living in a business environment increasingly dominated by big business? Consider the following.

Remember that nobody owes you a living

"Wal-Mart doesn't care about [your] company's illustrious past, or how big [you] might be: If your success is dependent on fat profit margins, Wal-Mart is coming after you." Sound familiar? For years we independent auto repairers were pretty much able to conduct business as we pleased; the only competition came from higher-priced dealer service operations. Then business chains (Jiffy Lube, Midas, AAMCO, etc) honed in on certain aspects of vehicle repair, stifling shops from charging what consumers were willing to pay, and so, we assumed, what we were worth.

Loss leaders are nothing new, and insurers are quick to spot a nickel. They know that any chain store that charges $29.95 for a wheel alignment will have to upsell its customers to cover their advertised get-em-in-the-door price. But insurers jumped on these cheap "chain store" door rates, challenging collision shops with "Why should we insurers pay collision shops more than these chains advertise?" And you and I got stuck in the middle.

"Impossible!" you say. By daring to think outside the stereotypical "body work" box, it may indeed be possible. Start out by doing your homework. Find a particular niche market in which your shop can outshine the competition by doing better, more thorough work. If your market area is saturated with alignment shops doing a satisfactory job, branching out into alignment work won't be the most effective move. However, if the others consistently do lousy alignment work, move into their niche.

One of the best things my "collision" shop did was invest in the tools and personnel to go after general mechanical repairs. The profit on mechanical labor and parts is much higher than insurers pay for collision. I can't remember having one mechanical customer, aside from insurers of course, complain about paying our $67/hour mechanical charge, and with mechanical repairs there are no insurers breathing down your back criticizing your work and cycle time. An additional benefit: You can be more particular concerning which collision repairs to take on when collision repairs don't compose all the eggs in your basket.

Know what your customers really want

"The most emphasized element of Wal-Mart's culture is studying the customer. They've turned listening to the customer into a technological art form . . . stocking their stores accordingly." An example: When Wal-Mart discovered that ant and roach killer, which flew off the shelves in Florida, wouldn't sell in Minnesota, they turned to their customers for answers.

Though both geographical areas have roach problems, Wal-Mart learned from asking their customers that whereas it was no big deal for a southern home to have a can of roach killer in the pantry, in Minnesota it was considered a sign of sloppy housekeeping. Wal-Mart had discovered something that even the manufacturer of the roach killer hadn't researched, and when the picture of the roach was removed from containers marketed in northern states, it sold like wildfire. "Wal-Mart store managers in Minnesota knew to ask their customers because for 40 years that's what Sam Walton did."

Yeah, I know you don't sell roach killer and your market area is localized. But have you ever once polled consumers in your area, especially your past customers, to determine exactly what they expect from you as a service provider of automotive repairs, and what would consistently bring them to your door rather than to your competitor's? Or have you just assumed that you know better than your customers what they should want, need and expect?

My shop presently sends follow-up letters with business cards after every repair, soliciting customer input on the effectiveness of our services, encouraging them to recommend us to others, and informing them of other services we perform, of which they might not have been aware. Whatever input we receive from this feedback is taken to heart, and we make sure that any legitimate complaint is immediately corrected. We thank clients for their comments and, if the occasion warrants, we do our best to win them back, sometimes with a gift certificate to a nice local restaurant for their efforts in helping us learn how to better serve them in the future.

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We keep close tabs on our customers and potential customers. Each estimate written is followed up with a letter thanking the prospective customer for considering us and explaining why one should entrust repairs to us. Then, after work is completed and the vehicle is released, we send out a follow-up letter thanking the customer for choosing our shop, encouraging further contact should there be any questions or concerns with the repair… and encouraging satisfied customers to recommend us to others.

We've learned a lot of what consumers do and don't like in service providers in this way, and have built our business largely around what they tell us . . . which isn't always what we thought it would be.

Though there are CSI companies catering to collision shops, you can gain the same information yourself just for the asking. But be prepared to listen and change the way you have always done business in the past, by making more effort to adapt the business to meet your customers' wishes.

Put The Customer First

Put the customer first. Yes, even ahead of the insurer involved. Some consumers change their auto insurers as often as they change socks. But fully satisfied customers are there for you for life, or at least as long as they live within driving distance. There's no substitute for total satisfaction where customers are concerned. Customers totally satisfied with your past work will have no qualms about recommending you to their friends and acquaintances, will be able to stand up to insurer representatives who attempt to steer them to "darling shops," and will believe what you say because your honesty and professionalism has never given them reason to believe otherwise.

It was reassuring, when we decided to delve in deep with general mechanical repairs, to have so many of our collision repair customers give us all their mechanical repairs also. The reason: Knowing we were trustworthy in collision repairs, they knew we would be just as trustworthy in mechanical repairs . . . and electronic wheel alignment… and complete A/C . . . and exhaust work . . . and rental vehicles. . . and glass repair and replacement . . . and wheel and tire work . . . and . . . on and on.

Get 'em in the door

Our shop philosophy is that the more times we get consumers through our door, the more of a household name we become, and the better chance we have to sell them other products and services we provide. Since we now do many general mechanical repairs, we often uncover additional legitimate mechanical repairs needing attention recharging A/C, repairing or retrofitting, suspension or wheel alignment needs, exhaust system work, and the like). It's not uncommon to sell from $50 to $1500 of much needed mechanical-related repairs we've discovered while doing a collision repair.

On the other hand, when mechanical customers come in for an oil change, we often up-sell them on repairing dings and dents, repairing or replacing the windshield, or colorsanding and buffing, or detailing and waxing their vehicle for $250 - $400.

The Wal-Mart way

If you're a Wal-Mart shopper, you know that while Wal-Mart may be the low price leader, Wal-Mart's prices are not the lowest on every item.

Likewise, if you've established a widespread reputation for quality workmanship, once consumers are in your door it's pretty easy to sell other services and products they need. Even if your prices are slightly higher than the shop or chain store down the street, the convenience of a "one stop auto repair shop" is worth a little extra to most consumers.

We recently started including coupons for mechanical specials in ValPak envelopes. In our case, the results have been better than anticipated; from a multitude of vehicles brought in for our $9.95 LOF special we picked up quite a number of additional repairs in the $100 - $300+ range (radiator replacements, etc). The largest ticket item to date is over $1700 of much needed mechanical repairs on one car. We've even sold some exhaust and collision repairs on cars that came in for our LOF special. Not a bad return on investment, and from a Valpak coupon campaign, no less! With so much new business, we've begun the process of looking for another mechanic.

Advertise

It's been said that "the average sale is made after the sixth call, but the average salesman gives up after the third." One thing Wal-Mart excels in is consistent advertising.

Another form of advertising we tried recently was including a one-page flyer in the Chamber of Commerce monthly packet describing the various services we provide. It's an attractive, multi-color advertisement we printed on a good-quality vellum paper - to attract consumers to our message. Total cost, including color copier cartridges, paper, and inclusion in the C of C monthly, was in the range of 70 cents for each of the 800 recipients in our area - not bad when you consider that each of these is a business person who knows, comes in contact with, and has influence over a lot of other people.

Some parting thoughts

Who can say that Wal-Mart won't branch out into mechanical, collision, and glass repairs and replacement in the future? And who can say they haven't already looked into the feasibility and profitability of doing this? If they did so in your market area, would you be able to survive?

Dick Strom, Modern Collision Rebuild, 9270 Miller Road, NE, Bainbridge Island, WA 98110; (206) 842-8056; email: moderncol@aol.com.

 

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