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Parts Matrix for Dealer-source parts?


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Guys, we are having a tough time figuring out mark-up on dealer sourced parts. Currently we are selling parts at DEALER LIST and getting parts at DEALER COST, which is roughly 5-20% below list.

This currently isn't cutting it for us.

 

We have considered using the Dealer Parts Matrix, which I have copied below. The problem is that using this matrix will put most of the jobs we do WAAAAAY above the cost of the dealership, which is not an option. Customers get a brand new loaner car at the dealer. They get free food there. They get factory-trained technicians there. etc. We have a great facility and a great warranty. However, we cannot compete if we are way above dealer costs...

 

So, with that said, what strategies are you using on dealer-sourced parts?

 

 

DEALER PARTS MATRIX

$Part cost Gross Margin Divide By

0.01-1.00 70.0% 0.30

1.01-5.00 65.0% 0.35

5.01-25.00 60.0% 0.40

25.01-75.00 55.0% 0.45

75.01-500.00 42.0% 0.58

500.01-750.00 32.0% 0.68

750.01 and up 28.0% 0.72

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Don't forget that when you purchase parts from the dealer and resell them to your customers, you are adding your warranty to that part, plus your time to source the parts, and your tech's time to inspect said parts once they arrive. All that has to be integrated into your pricing to be profitable.

 

That being said, I believe that matrix will yield close to 45% GPM average on your dealer sourced parts, which I agree is probably too high to compete.

Look at tweaking the matrix, especially in the $25-75 and $75-500 ranges, or even create your own cost ranges. (I personally think $75-500 is too wide of a range)

Don't forget that it's just a guideline, not anything set in stone.

Also don't forget that you should be constantly looking at and tweaking your matrices to make sure you're hitting your GPM targets, it's not a "set it and forget it" solution!

 

You say you get 5-20% GPM on your parts, say 15% average. Find out what would it take to be profitable and still competitive. 25%? 30%? Just make small changes until you're hitting your desired GPM.

Also, if you buy a lot of parts from the dealer, consider asking to get your account on a better pricing level. Even a couple percent difference can be a big help.

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There are a few ideas that I think could help a lot.

 

1. Pick a few parts dealership you may typically use. Price the parts from the parts department, then try to get an estimate from the same dealership for a repair using those parts. You will probably see the service department has higher parts prices, because they also can not do repairs without proper margins.

 

2. Bstewart is right, The $75 to $500 spread is too wide, craft it into a few categories.

 

3. Consider using OEM alternatives. There are suppliers that specialize in Motorcraft and Delco for example. This will allow you to use something closer to dealer list, and get a much better cost factor.

 

4. Decide what you must make, and explain that you provide a service, which includes parts, labor, sourcing, estimating, customer service and not to mention providing a warranty. Take the focus off parts pricing. You don't go to a Restaurant and focus on the fact that your steak would be $ 4.25 at the supermarket, and it is $ 28.50 on the menu, for obvious reasons. We are in the service business, and you must steer the conversation to this fact.

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I was told through shop management education that I should be charging using the same matrix with all my other parts. I have never been able to do so HOWEVER I do charge over list in a very unscientific/mathematical method. Since I've started doing this (about 3 months) I have yet to hear any complaints. Normally my customers do not price match and shop around. Do your customers shop around? I am not used to dealing with those customers so forgive my comments if that is your situation.

 

Its in my opinion that your customer care, presentation, workmanship and warranty is a far greater selling point than a loaner car and free food. At the dealership you hardly ever if ever speak to your technician and the place has the feeling of being "ripped off" which consumers understand. Also your warranty I'm sure blows dealership warranty out of the water. When consumers choose your business they get YOUR support. Not some fast talking SA that might be gone the next day. These things should be a strong enough position to charge over list. How much over list is up to you. A Dealer parts matrix is a good start.

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  • 1 month later...

This is the matrix we are using currently for dealership sourced parts

Your cost Multiplied by:

.01-5.00 3.25

5.01-50.00 2.25

50.01-100.00 1.82

100.01-175.00 1.67

175.01 and up 1.54

 

Sometimes we have to adjust our price up or down, but for the lower cost items we try to mark up even more to compensate for the lower profit margins from the dealership parts.

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  • 2 weeks later...

Not sure what the big deal is with dealer sourced parts. I have all ways heard this from several business owners. They are parts and that is all they are, so we run them through our normal parts matrix. We provide the same customer service, warranty, etc. as other parts so why not mark them up the same?

Why does you customer have to know where you are getting the parts? I think you create problems telling them where they come from. It opens yourself up to price shoppers. I have done my shopping at the service departments at local dealers. Their parts are just as expensive when it goes through the service department.

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I have done my shopping at the service departments at local dealers. Their parts are just as expensive when it goes through the service department.

 

Oakville, we actually did the same exercise a few weeks ago. We called the dealer parts department and got a price. We then called the service department to get a quote using that part. Turned out that most dealers in our area are using the dealer list pricing when pricing the part for a job.

 

Therefore, if we matrixed the dealer parts, we would not be anywhere close to competitive, which is unfortunate.

 

Anyone else have insight on this?

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Here's something to consider. In my humble opinion, using a blanket price matrix just doesn't
make sense any way you look at it. Because there's different distributor pricing structures,
in every region of the country. In addition to that, it's only a matter of time before one of
your customers spills the beans that your pricing is off.

Think about it... if you can call up your competition and get their pricing, so can your customers.
And they are.

So, here's another way to look at parts pricing: It's common knowledge that if you're buying
straight from the dealer, you're not necessarily going to get the best price...
unless that dealer is big into the wholesale side of it, which most aren't.

So, if you're buying a lot of dealer-sourced parts, you want to look for a wholesale distributor
for that brand. You want to find somebody out there who is hungry for your business. And
there's plenty of companies that are hungry for your business.

Here's how you do it. You call up the parts dept. And you talk to the parts manager. And
find out if they can help you out.

You say to them, "We're looking for a supplier. Can you help us?" See what they have to say.
You need to be guiding the conversation.

If they get off track and start talking about how long they've been in business and how they're
a family-owned business, tell them that's great and it still boils down to:
"How can you save me time?" Or "How can you make me money?"

If he/she can't give you an answer, then next.

The first time I learned this was when a Chevy dealer across town - 20 minutes away -
approached the shop I was managing. Up until that point, we were buying dealer parts
from the Chevy dealer closer to us. But we were getting creamed on price.

After negotiating a deal with the one that had approached us, we ended up being able
to buy parts that were priced 10-20% better than the closer dealer PLUS we got shotgun delivery service.

So, not only did we get better pricing, we got better delivery. Plus they had a better inventory
because they were in the wholesale game. I found out later, they made daily deliveries to shops
over an hour away.

So, the point is: those opportunities are out there. You may have to do some research and
make some phone calls. But it's going to affect your bottom-line and pay big dividends, so it's worth it.

Even if you're in the middle of a cornfield. Tires, parts, TBA distributors. Those opportunities are out there.

The Mighty brake program is another example. We used to make 75% GP on brake jobs because of
how we were BUYING: http://www.mightyautoparts.com/brake-pads-shoes

So, if you take the time to do some research and interview these companies - in a couple months time,
you'll be set up. And you'll be doing business with people that WANT your business.

In addition to that...
Some parts and tire companies are independently owned and even have a consignment program.
For example, if you want to see if you can sell some tires, get on a consignment program. It doesn't
cost you any money.

Bottom-line...
You make money when you buy - not when you sell. And as you said, if you're pricing yourself
out of the market, it's only a matter of time, when a customer gets wise to it and the next thing you know -

the whole town will know you're not competitive.

There are very few shoppers these days that are not using the internet and other means to make sure
they are paying a fair price for everything they buy, including auto repair. And they will not hesitate to
post reviews about their experience. So, trying to make an extra few bucks on one ticket could cost you

tens of thousands of dollars or more... down the road.

One more point...
If you're not selling a lot of dealer parts or in the rare situation where you can't get hooked up with a
warehouse distributor, just set your pricing at MSRP and forget it. You're making whatever it is just
to open up a box... whether it's 5-20%. Averaged out, you should still be able to hit a fair GP percentage average.

The real money is in the labor and the service you're providing and the long-term relationship with
your customers that view you as the trusted shop.

PS When it comes to buying parts, tires, supplies, etc., there are group buy opportunities and
plenty of other options we can talk about, if you want.

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      It always amazes me when I hear about a technician who quits one repair shop to go work at another shop for less money. I know you have heard of this too, and you’ve probably asked yourself, “Can this be true? And Why?” The answer rests within the culture of the company. More specifically, the boss, manager, or a toxic work environment literally pushed the technician out the door.
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      Shop owners: Focus more on employee retention than acquisition. This is not to say that you should not be constantly recruiting. You should. What it does means is that once you hire someone, your job isn’t over, that’s when it begins. Get to know your technicians. Build strong relationships. Have frequent one-on-ones. Engage in meaningful conversation. Find what truly motivates your technicians. You may be surprised that while money is a motivator, it’s usually not the prime motivator.
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