“The performance of those who provide parts has an impact on repairers, and repairers have an impact on our shared customer,” Avery told Priest and other parts vendors at the meeting. “So you’re in the game. If you’re not on PartsTrader, it’s your decision. But you need to decide if those repairers that are working with me are repairers you want to deal with. Because I’m asking them to use PartsTrader.”
Priest noted that dealers could just as easily lose business through PartsTrader as gain new business, and that any number of different insurers could require different electronic parts procurement systems.
“How many fees am I going to pay? How many hoops am I going to jump through,” Priest asked. “We have the slimmest margin of anyone in the room, yet we have to pay for the program. State Farm should pay for the program. It’s going to benefit them.”
New Information on Fees
About 130 people, including two Arizona state legislators, attended the meeting, which also offered some new information about PartsTrader. Sailer said 1,400 shops and 2,300 suppliers are now using PartsTrader following its roll-out in early August in major markets in Arizona, Colorado, New Mexico and Texas. He said major markets in California, Nevada and Utah will follow on September 9, with markets in Michigan and Ohio following in October.
Sailer said 56 percent of shops using the program are using it for at least some non-State Farm work; this is up from the 30 percent Sailer reported at a meeting in May.
Use of the system for jobs other than State Farm work is something PartsTrader is counting on given its planned fee structure. PartsTrader is currently free to shops and Sailer said the company doesn’t “expect to ever charge a shop to use the system.” Sometime next year, however, suppliers will be given 60-days’ notice ahead of the start of a monthly fee for their participation; Sailer would say only that the fee would be “modest” and “less than you’re used to paying today for comparable products.”
The supplier also will pay a yet-to-be-determined fee per transaction, Sailer said, but there will be no transaction fee charged on State Farm jobs.
“Our success is dependent on shops finding value in using PartsTrader beyond State Farm,” Sailer said. “That is an absolute must for us.”
State Farm Defends Mandate
Avery was asked several times about the elimination of the “fax-only” option in PartsTrader, which had allowed a shop to use the system to buy from a vendor even if that vendor didn’t participate in PartsTrader. If State Farm went back on its assurance that shops could buy from any vendors they want, Avery was asked, might the insurer also step back from its assurance that shops aren’t required to buy the cheapest part the system locates?
Avery responded that the “fax-only” option was available only during the pilot testing of the program in five markets, and insisted that shops still can use the vendors of their choice provided they are on the system—something that can only happen if a shop “nominates” those vendors to participate. In terms of other changes to the system or requirements down the road, Avery encouraged shops to remember that State Farm doesn’t require the use of non-OEM parts, doesn’t require discounts unless they are given to another insurer, doesn’t have paint caps, and “has a pretty good book of business.”
“You’re going to have to decide for yourself as to what sort of partner State Farm is,” Avery said. “There’s nothing else I can say. I will tell you: There is no value in pushing you to take the cheapest part. It doesn’t make sense. If (your Select Service score) is balanced between quality, efficiency and competitive price, and I put pressure on you for the price, it’s going to hurt what? Your efficiency. It’s going to slow you down if you get bad parts. So that decision about what parts to choose is in your hands.”
Other Concerns Raised
Bob Schubert of Impact Auto Body in Mesa, AZ, was among the Select Service shop owners who spoke at the meeting. He challenged Sailer’s introductory comments in which Sailer compared PartsTrader to travel websites like Expedia or Orbitz, which allow users to see all the available options and make a choice based on the factors they see as most important.
“Plane tickets and collision parts are nothing alike,” Schubert said. “I’m sorry, but it’s a terrible analogy. Anybody, a 10-year-old, can get online and figure out how to buy a plane ticket. Not so with collision parts. Not so with the people who fill the orders.”
He said he found it “kind of insulting” that State Farm felt the industry “wasn’t smart enough to order parts efficiently, get them there on time and have single-digit return ratios.” He noted that no one has addressed how Select Service shops with automaker certifications will reconcile the conflicting requirement some of those programs have for using a particular parts sourcing system. And he criticized PartsTrader for not providing parts suppliers with more than vague explanations of what fees they will eventually have to pay.
“Once these dealers are signed on, they’re signed on, they’re hooked,” Schubert said. “They’re not going to get off of it. They won’t be able to. They have a right to know what their costs are going to be, or at least a range, before they sign on to it.”
Schubert conceded that, as was pointed out earlier in the meeting, no one is forcing a shop or vendor to use the system. But he said just as parts manager Priest said State Farm jobs account for at least 20 percent of his collision parts sales, Select Service is a significant part of his repair shop’s business.
“This is just one in a long line of control we have lost in our shops,” Schubert said. “We’re a Select Service shop in defense as much as anything else. You can act like we’re stupid for doing it, and by gosh, I might agree with you. But sometimes the alternative is even uglier.”
John Yoswick, a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988, is also the editor of the weekly CRASH Network (for a free 4-week trial subscription, visit www.CrashNetwork. com). He can be contacted by email at: