by chartle » Thu May 22, 2003 4:20 pm
I would certainly agree that wholesale mechanical can be matrixed as long as you are not unrealistically pricing yourself way above the competition. I did it for years also and had very few complaints. I remember a shop owner calling me and telling me my prices were higher yet two things that kept him buying from us:
* We had the part &
* He took the cost of any parts purchase and divided it by the recipicol of .60 to make 40% gross profit regardless of dealer discounts and pricing.
You know, and this might be opening a can of worms, I can't believe that in our industry we have allowed the insurance companies to totally dictate what kind of margins dealership parts operations are able to make and forcing the competition to undercut each other to the point of losing money.
I just did several analysis for mid-size stores that "dabbled" in sheet metal and after we stripped the sheet metal sales out of the pie looked at the cost of being in the sheet metal business, gross sales would drop and gross profit would drop slightly but net profit would increase. In other words, without significant volume in the sheet metal business it was a loser!
I guess the question I would pose is that why are dealership parts operations willing to selling sheet metal at next to nothing yet wouldn't do the same for wholesale mechanical shops? You couldn't! I would think it would only be natural to reduce your discounts to body shops and let someone else do something for nothing!
I have slowly seen dealership parts operations throw their hands up in the air and get completely out of the sheet metal end of the business. The arguement against this, obviously, is that there is always a wholesale whore ready to pick up the business and discount it to ridiculous levels.
Sometimes I really wonder if it is outside sources, such as body shop owners and insurance companies, that are feeding the information back to parts departments that continue to reduce levels of profit. Maybe it is time to push back, reduce discounts and watch for the result? Just a thought. Anyone out there feel the same way or are contemplating getting out of the sheet metal business altogether?
Chuck Hartle'