OE vs Non OE product
When wondering how to write an article on parts business in general I had many thoughts on how to approach it. I’d like to talk about a rather big and contentious topic on OE vs Non OE product.
I found myself somewhat reminiscing about the various debates and conversations I’d been involved in, in the past. People’s opinions matter and I felt obliged to put down my own thoughts and experiences whilst trying to remain open minded.
Now, many people have the preconceived perception that OE is expensive but long gone are the days when margins are doubled on captive parts. The market is far too competitive.
In some ways the OE suppliers are inherently the ones to blame. In days gone by factors weren’t able to supply like for like or very good alternatives so the consumers were somewhat hesitant to go outside the OE route. Especially when the vehicles were under warranty or the 24-36 months after. However the consumer has changed, money is tight, and their margins are squeezed in a competitive environment and a big cost for the long term sustainability of their business is a reliance on them sourcing low maintenance costs.
Who can afford OE parts these days? Is that what the customer now wants?
I can hear myself becoming an operator when I delve into the thought process of why? Why should I pay over the odds when this one does the job just as good they say and it’s got 12 months parts warranty? The market has changed, factors are using a less engaging format of parts supply. They have a supermarket or warehouse type approach where they supply a product and not a customer focused service.This type of business inevitably means factors start infiltrating different automotive sectors, commercial, passenger transport, rail, all sorts of markets just for another outlet for supply which in turn strengthens a factors grip on the market. The worrying thing for the dealers is that this also increases the factors purchasing power. Their outlet and scope for the products is far wider than that of an independent dealer.
Business types and Opportunities.
Alternative is widely accepted as OK to be applied to a vehicle despite its compatibility with the original for non-safety related components. Fleet business is attractive for manufacturers and dealers. Large manufactures now see alternate supply as a business opportunity. The approach they take is to supply a limited second line of their products and become an alternative for other manufacturers, for example in the truck world TRP supply a second line for some DAF product but their main objective is to capture Volvo, Scania and MAN business. This type of business can be very risky for factors as it would generally be high volume, low margin business.
If you are lucky enough to have this type of business it can provide a significant benefit to the smaller operations that benefit from the purchasing power of the dealer/factor or a potential for the dealer/factor to make a healthy margin. It seems perverse that the smaller operators somewhat fund the ability for the dealers/factors to do the fleet business successfully and with an overall profitable return. Again this type of supply will inevitably mean some alternatives will have to be sourced. So does this mean alternatives are deemed to be a must for a successful business to survive in the current climate?
With what you have read so far it begs a few questions, is alternative an issue? Do I have to have an alternative because the manufacturers don’t allow the prices?
Let’s just imagine if….just if, the dealer could offer you that personal service at competitive prices against alternative products, with the parts readily available.
What would your choice be?
I firmly believe that the OE supply route is one that has changed its mentality. It’s recognised the significant threat from factors and decided that enough is enough. It’s time to get the business back by instilling trust in the supply chain and supporting the dealers to push the products at competitively priced parts.
A dealer should adopt the same philosophy. Service, availability and price. Provide a great service with the product availability at competitive prices means the consumers have no reason to go elsewhere. Be transparent with the customer and you will see the loyalty returned tenfold. Dealers should be in partnership with the customer because without them there is no business.
So OE or non OE?…..OE every time with the right dealer as your partner.