2021 is proving to be a year of unprecedented optimism for dealerships focused on parts and service. After a year like no other, dominated by uncertainty from the pandemic and with the ongoing effects of equipment shortage expected to last well into the next year and beyond, there are tremendous opportunities to be had in the aftermarket.
Because as of late Q2 of 2020, the demand for equipment parts not only recovered quickly, but in some segments has in fact grown, now to levels never witnessed in the North American equipment industry.
The reasons for this growth pattern are noted below, however before we explore these, it is important to note that while the opportunity is there, harvesting it as not easy. Parts sales are extremely complicated. Virtually no other form of commerce requires their level of support of the buyer, for what tends to be, on average, an approximately $400 purchase.
To identify the right part(s) requires that the buyer know a great deal of information about their equipment – not just make and model, but also serial number (many parts are serial-number specific), equipment-use history, outstanding service alerts, etc. And to make the right purchasing decision, the buyer also needs to know a great deal about the dealer – price, availability, service support, etc.
Getting this transactional information married up to support the right purchase ultimately falls on the seller – the dealer. So, while parts sales represent a massive opportunity – especially as demand is expected to go through the roof for some time to come – they also come with a great deal of operating cost overhead.
Thankfully, technology can help turn this historically unprecedented occasion into an opportunity for high-revenue / low-cost, and therefore high-earnings e-Commerce.
How COVID-19 Impacted the Market for Equipment Parts
But first let’s explore what happened to parts sales during the pandemic. There were three stages.
1. March – May 2020
Many equipment owners put their planned purchase of new equipment on immediate hold, given tremendous uncertainty associated with the pandemic. The purchase of equipment parts, too, declined, due to a reduction in construction activity, and therefore of equipment use.
2. May – December 2020
While equipment purchasing continues to be significantly suppressed, parts consumption bounces back quickly, now surpassing pre-pandemic levels and continuing to grow throughout the year. Part of this growth is due to increased use of existing equipment (more usage means more service and repair). The other part of it is due to the average age of equipment fleets growing in the absence of equipment purchasing (older equipment requires more parts and service).
3. Q1 2021 Onward
By late first quarter 2021, parts consumption shifts sharply upward, in many cases by more than 20%! Why? Not only are fleets continuing to age in the absence of now being able to find new equipment, continuing to drive a need for more parts, but equipment use is also growing rapidly, due to a rapid increase in construction projects.
And where does that leave the dealer today?
Many dealers are reporting the triple experience of:
- Not being able to meet the high demand for new equipment, because equipment supply problems persist in the industry, while…
- Continuing to see record demand for parts and service from customers with aging fleets that are being put to greater and greater use, and…
- Not being equipped to make use of this historic opportunity at a scalable level.
Opportunity For 2021 and Beyond
By all accounts, equipment shortage is anticipated to last well beyond 2021, and the same is true with associated logistical services, such as the shipping of equipment and the like.
Similarly, construction activity, and therefore equipment usage is expected to increase further, with massive government stimulus and infrastructure projects slated to show their effects.
Therefore, the sharp and ongoing increase in demand for parts is here to stay. But so is the operational strain on dealerships seeking to maximize the opportunity.
Now is the time to scale your parts operation to radically reduce the operating cost associated with parts sales (both for the dealer and the dealer’s customer), and to bring scalability to the operation. Now is the time for an e-Commerce solution that can be implemented quickly with no significant upfront cost to the dealer, to immediately make use of greater sales volume at much improved margins.
SmartEquip e-Commerce Store is the Platform You Need to Maximize Parts Revenue and Earnings
A sophisticated platform, like SmartEquip e-Commerce Store, will allow authorized parts and equipment dealers to fully unlock the potential of the high-margin spare parts aftermarket for years to come by automating and streamlining the process.
What’s more, this is a high-touch platform: it can fulfill your customers’ needs – anytime, anywhere, with automated and innovative services. It is set up to provide annual recurring revenue at low cost, with virtually infinite scalability to meet growing demand.
Now is the time to build these relationships with customers so you can profit from current and future demand for spare parts. By proving yourself to be a reliable dealer, you can foster relationships that will yield recurring revenue for years.
The best part is that when you’re paired with the right e-Commerce platform, the system does the majority of the legwork – so you can focus on your customers and on growing your business.
The opportunity is here – unlock the full potential of the spare parts aftermarket with SmartEquip e-Commerce Store. It has all you need to maximize your returns in the spare parts aftermarket by:
- Streamlining the sales process
- Scaling seamlessly to meet higher demands during economic booms
- Providing real-time parts availability, including supersession management
- Automating dropshipping that allows vendors to ship directly to end customers, saving on time and labor, and also includes comprehensive integration options
- Leveraging data connector features that let’s dealers, fleets, and distributors use existing connections with their brands to build their online stores and integrate seamlessly with their inventory management system
- Providing customers access to comprehensive parts catalog libraries with updated diagrams and support materials for multiple brands
- Incorporating your brand that allows your business to engage with customers and upsell
Build a whole new stream of revenue (or maximize the margins of your existing spare parts selling efforts) with SmartEquip. See how you can capitalize on this spare parts aftermarket boom with SmartEquip e-Commerce Store.
Dr. Alexander A. Schuessler is the founder of SmartEquip and president of its International Group. He is also a member of the technology committee of the European Rental Association.