O.K. I know that the real name of this childhood game was “Button, Button, who’s got the Button?” But think about it. We are in a scrap for the margin on parts and accessories, and in the end, it is a split between the dealer, the supplier, and the customer. Just how that split goes is a function of market dynamics, advertising, supply, demand, and the desperation in your salesman’s voice as his last closing attempt starts out with “Well, if you take it today, I will throw in the (fill in the blanks here)… “
So just who ends up with the margin?
In March of 2000, I studied 1999 P&A sales of just under $100 million dollars, and evaluated the margin allowed by OEM’s and aftermarket people alike. It was an interesting exercise that revealed margins all the way from 53.9% on the high side (Southern Motorcycle), to 30.7% on the low end (Parts Unlimited). The average was around 40%.
Things have changed. A little.
The chart on this page summarizes $161 million in sales from January to October 2003, and again, the margin percentage realized ranked by vendor. The average remains right at 40%, but three new-comers appear at the top: Dixie International, Holoubek, and TISCO (tractor stuff). Parts Unlimited rises a few points to 34.1%, and Polaris sinks to the bottom of the pile by allowing only 30.6% to dealers.
Two other interesting facts emerge. While individual companies have shifted somewhat, the average margin allowed by the major aftermarket suppliers as a group has dropped only 0.1%. Margin on OEM supplied parts and accessories has dropped from 42.0% to 41.1%, a loss of just under 1% to the dealer.
As always, it is not how you sell, but rather how you buy. Parts managers must always be reminded that their job is to shop, compare, and evaluate margins just as our customers do with us and our selling price.
While the industry average has remained stable over the past few years, this chart shows that shopping among sources can and will produce a greater gross margin for your parts and accessory departments.
Cherry Picking is allowed.