What a difference a year makes, declared Kathleen Schmatz, Automotive Aftermarket Industry Association (AAIA) president and CEO, at the opening of the ballroom-filled AAIA Town Hall meeting during the association's AAPEX show.
After an economically depressed 2009, AAPEX attendance in Las Vegas increased 18 percent from last year and the 2,060 exhibitors was the largest number of participants since 2006, Ms. Schmatz said.
Most industries in America have not bounced back as quickly and as significantly and as robustly as the aftermarket, she said. Business has been good this year, agreed the four panelistsLarry Magee, Bridgestone Retail Operations L.L.C.'s chairman, CEO and president; Kevin Freeland, COO of Advance Auto Parts; Jeff Brekke, global automotive aftermarket president for Gates Corp.; and Eli Futerman, co-president/CEO, Hahn Automotive Warehouse Inc.
If new cars are not being sold, Americans need to repair the cars that they have, Mr. Freeland said. In a perverse sense, we've actually benefitted, everyone in this room has benefitted, from the difficulty of selling new cars. We've actually added 5,000 associates in the last two years based on growth in the business and industry.
Mr. Magee noted that the economic factors, along with the aging population of vehicles and deteriorating road conditions, are some of the perfect storm factors that the aftermarket is enjoying now.
Ironically, since the economy also forced the auto makers to close some franchised dealerships, aftermarket competition has increased as the remaining dealerships are changing their business models toward an increased focus on auto maintenance and some of the former dealerships are reopening as used car dealerships with automotive service bays, he said.
When the current perfect storm has run four or five years, 10 years, or four months, eventually the new car business and the OEMs will come back as credit markets open up, Mr. Magee noted. And it's the things we do today that position us for the future as a growth business.
The so-called recovery consumers today are still spending money but are moving into an era of frugality, Mr. Magee said. They very cautiously spend money. About 64 percent of people will keep their cars longer than they otherwise would and over 80 percent plan to do a better job of maintaining their cars.
He said 70 percent of sales in the average Bridgestone-owned Firestone Complete Auto Care and Tires Plus stores is auto service. So a lot of our strategies tie into our marketing mantra'We keep your car running newer longer.' He added that today's consumer typically researches online to find who can help them and partner with them to save money and keep their vehicle running longer.
Bridgestone continues to open stores in new markets, averaging about 75 new stores a year and adding 750 to 1,000 employees annually, Mr. Magee said. The Nashville, Tenn.-based tire maker also has been renovating old Firestone stores that have an average age of 39 years.
Besides benefitting the automotive aftermarket, the recession also helped businesses reevaluate their operations, according to the panelists.
The recession hit a lot of us by surprise, said Gates' Mr. Brekke, adding, We reset our business. We had to look at our business in a whole different way than before this recession. There was a lot of waste in our business, in the product, process, marketing plans, etc.
Today, we are a much wiser, stronger and careful company because of this experience, he said. So even though it was painful, I think it created a nice chapter in our book of lessons learned and what we can do going forward to be able to manage our way through another series of economic challenges. We learned so much from this recession.
I have never seen a cycle where we are right now and some of that is having an economic reset in the country and people are holding on to their cars, said Hahn's Mr. Futerman.
Consumers have changed what they are doing with their vehicles and that's a positive opportunity for all of us sitting in this room, Mr. Futerman said. The challenge to each one of us is, how do we capture it in whatever channel we're in.
Mr. Brekke also noted that the younger generation of consumers is different than their elders. Today we have to truly understand what drives their buying or purchasing decisions. What are those trends? What are those detailed analytics that cause a millennium, or the X and Y, generation, because they're bringing up their purchasing power.
Cars essentially fail rather predictably, Mr. Freeland added. Parts fail rather predictably by each make and model and we get a fairly good sense of where the industry is going to go and where the trends are going to take it. The aging of the vehicle is most pronounced in vehicles that originate from the Big 3. Cars are becoming much more electronic, and we're getting different trends in our business as the mix of vehicles move through their life cycle.
While all four panelists agreed that the automotive aftermarket should celebrate a rebound in sales, let's not lose sight of the fact that we went through some pretty difficult times recently. That drove a lot of the trends we're seeing in the industry, Mr. Brekke pointed out.
People have been holding onto their cars longer because of the quality. I'm not sure we'll ever see that level come back because I think a lot of the car purchases were driven by the creature features, the convenience features. They already have that now. So I don't think they're driving to get something different out there because most of them have all those features today.