It’s difficult to compete and be profitable in the wholesale parts game, especially in the collision segment. Shrinking margins on non-captive, highly-competitive parts require careful price matching through various platforms. Are you converting all the opportunities on that repair estimate? Of all the aftermarket and recycled parts written on the repair estimate, we should be converting 70- 80% of that opportunity to genuine OEM parts.
At the end of the day, 15-20% overall gross profit margin is what we are left with before expenses with wholesale parts. It requires meticulous management. Back-end dollars from the OEM can only be achieved by submitting for these price matching occurrences.
Since Wholesale Parts is the number one sales channel that Parts Managers have total and direct control over, it’s important to lead a discussion in terms of sales vs. cost of sales.
There are several key expenses that can be linked directly to your wholesale operations:
1. Wholesale personnel salaries and benefits
2. Delivery Costs, including vehicle maintenance expense, fuel and outsourced delivery expenses
3. Marketing & Advertising including outside sales representatives
4. Wholesale bad debt
5. Miscellaneous (Incentives or “Spiffs” paid to the staff to drive sales)
Leveraging eCommerce Technology
Many Parts Managers are leveraging online eCommerce technology in the mechanical segment more than ever, and for several reasons. Mechanical part numbers dominate the number of available part SKUs for the collision segment; the ratio is roughly 80/20. They also happen to be more profitable, especially if it happens to be a captive part, meaning you can’t purchase it anywhere else but a dealer. It also allows them to connect with parts buyers who normally never return to the dealership for repairs.
In addition, this brings both new customers as well as many repeat customers. Most parts inventories consist of a ratio of 85% mechanical inventory and 15% of the collision segment sitting on the shelf, waiting to be sold. Selling deeper in the mechanical segment can offset some of the cost of doing business that the collision segment brings. Be sure to perform a monthly financial analysis to track the profitability of your wholesale business and report it to vested stakeholders.