Offering Up Wholesale
In the ’80s, Marin Subaru received frequent phone calls regarding parts sourcing for local independent shops. Operating in the bustling San Francisco bay area, maintaining relationships, along with building those in the industry was important for the business to survive, parts manager Antonio Grayson believes.
“We received inquiries from local independent shops for service and body parts, and recognized a growing need,” Grayson says. “We [also] understood that all of the cars in our area of [parts]were not coming to us.”
Time after time, the need to cater to the community became apparent in order to survive in the bustling location.
“When I started here as a driver, there were a few calls that would come in and we started to recognize the need to be able to provide OEM parts to local people,” Grayson says.
A few years later, Marin Subaru invested in building a wholesale department that could cater to more in the community and grow the business.
“It probably took a solid two years to get kind of going because we needed to recognize what the trends were for stocking inventory and getting the parts that [were desired],” Grayson says.
Through continual evaluation, the wholesale business has remained a successful part of Marin Subaru’s business.
“At its height [during 2005-2006], our wholesale gross profits were 38 to 45 percent of the departments total gross profit monthly,” Grayson says. “Once the business reached its foundation, it stayed at a very consistent steady [financial] pace.”
Requests Left Unanswered
While Marin Subaru had a working relationship with those locally, as more independent shops opened around the area, the Marin Subaru parts department was unable to adequately assist those who were looking for specific OEM parts, Grayson says.
“It was more about answering a call to our local independent shops,” Grayson says. “Nearly 50 percent of our total gross came from the sales to outside markets, which was unheard of in the industry. Typically the fixed operations service drives business, which retains a much larger gross percentage, [and] is the breadwinner for the parts business—that area was lacking.”
Catering to Customers
As the growth of local, independent shops began to rise, Marin Subaru decided to work toward creating a wholesale business.
“We saw a need to provide OEM parts to local people. As we got our feet wet, we recognized that there are a lot of businesses around here that are doing what we are doing, but without aftermarket parts,” Grayson says. “As we got started, we saw that it was a growing need and an opportunity to bring in more funds.”
In 1987, a wholesale department was created in order to better accommodate local shops that were seeking OEM parts.
Transforming a Business
After implementing wholesale into the business in 1989—around two years after the idea began—the new addition became a successful business venture for the dealership.
“We grew to become the top wholesale dealership in our area, despite the fact that we were physically much smaller than the others,” Grayson says. “At its height, our wholesale gross profits were 38 to 45 percent of the department’s total gross profit monthly.”
1. Build Relations with Customers
In determining what works best for the new wholesale offering, Grayson says the business was able to find success through trial and error and building relationships.
“We started contacting different shops and actually a lot of shops that we delivered to were right next to dealerships at the time, and we basically presented ourselves as an option for them,” Grayson says. “If you have a dealership that’s right down the street [then] of course you’re going to deal with them, but if they don’t happen to have what you need, give us a call because we’re staffing and stocking what we felt was a better mix of parts to serve their needs.”
2. Track Customer’s Interests for Parts
In order to stock appropriate parts for customers, Grayson says the business began tracking lost sales in order to determine what was sought after locally.
“Once we got into the business, we just tracked the interest of parts,” Grayson says. “We made sure that we recorded loss sales so that if we built up enough lost sales, we knew that we needed to have these items on hand.”
After the dealership’s wholesale business took off, departments made adjustments that accommodated the wholesale development.
3. Determine Prime Sales Opportunities
Each season brings new necessities for customers. In order to better understand what parts would be desired, the business began to take notes over what parts were requested throughout specific times of the year.
“There were noticeable trends throughout a given year,” Grayson says. “The final quarter and first month of a year were consistently strong due to weather patterns, so we’d bulk up a bit inventory wise to deal with the increased business.”
As demands for parts rose, the business simply increased the number of parts requested, Grayson says.
“This never impacted the number of personnel, just the amount of work needing to be done,” Grayson says.
Evolution Through the Years
According to Grayson, overtime, the wholesale concept changed within the dealership, but ultimately panned out to be a success for the business.
“For decades we were a ‘dual’ franchise dealership, servicing Mazda and Subaru, Grayson says. “A decision was made to sell the Mazda franchise cutting our wholesale business by 50 percent, but increasing our service drive business by up to 20 percent. In the end, the net profit stabilized and actually grew.”
Although company changes shifted the original venture, the company continued to adapt to changes that also began to occur in the industry.
“In the recent few years, insurance companies have affected the business quite a bit,” Grayson says. “They’ve been putting pressure on [body] shops to use used or reconditioned parts as much as possible.”
With the push for new products, certain shops have gone elsewhere, which can create strain for the business.
“They’ve forced shops to use certain vendors and particular ordering programs in order to cut their costs, which of course cuts the profits for the dealerships.”
However, there have been lessons along the way which continue to make the wholesale worthwhile in the business.
“[It’s] strong customer service and consistent pricing practices [that] are essential to maintaining a profitable wholesale department,” Grayson says. “[It’s] also taking advantage of ordering discounts from the manufacturer.”
Benefits of Wholesale
The company has seen an overall increase in growth since bringing in the wholesale department.
“The lasting effect of the wholesale business are the many relationships built with outside shops and indirectly their customers as well,” Grayson says. “Those relationships created not only parts and accessory sales, but we’ve received many new car purchase referrals as well.”
The venture allowed the business to offer up more to customers and connect in a way that wasn’t possible before.
“You can serve a larger community,” Grayson says. “Being a single-point franchise has the benefits of the single-focus business; in the end, financially, a year and a half later, our net bottom line has increased with half the employees, which allows for greater [growth].”
Incorporating a wholesale business can be beneficial when it’s done correctly, Grayson says.
“The most important thing [for us] was to not overextend our abilities by promising performance that we could not physically provide,” Grayson says. “You have to weigh all of the expenses versus the profits to be sure that you’re not working just to work—it has to financially make sense.”