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Jason Lancaster

Jason Lancaster President

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Three Ways To Grow Dealership Parts Department Revenue

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Many dealership parts managers feel as if they're “hostages” of the service and sales departs. That's because – in many dealerships - the only way to sell more parts is for sales to move more metal and/or for service to write more ROs. While there's always the local parts wholesale business, a parts special in the next service mailer, or perhaps a point of sale display in the showroom, many parts managers feel their departments growth is inherently limited.

However, for parts manager who are willing to tackle eCommerce, there are several opportunities to grow revenue. What's more, revenue growth often leads to OE incentive payments and increased department profits.

While parts eCommerce is a massive topic with a lot of layers, there are three things that any parts department can try to find some additional revenue without a great deal of risk.

Get Started By Listing on eBay

eBay is one of the easiest places for first-time eCommerce retailers to get started. It's auto part retailer friendly, the listing process is straightforward, and the site is hugely popular (there are about 158 million active buyers on eBay). If you take the time to list your parts on eBay and follow the advice below, your efforts will almost certainly bear fruit.

In terms of strategy, some parts managers view eBay as a place to close out old inventory, while others view it as a steady stream of revenue and list every part they have. Whatever your strategy, the keys to success are the same:

1.Don't mess around with pricing. See what other eBay retailers are selling parts for and match the lowest price you can find. If you list parts on eBay for full MSRP - or MSRP plus 10% - you're wasting your time.

2.Pay close attention to your shipping and handling charges. Most eBay retailers "mark-up" their shipping charges in order to make money, especially on less expensive items. Selling an oil filter at cost is A-OK, for example, provided you add a couple bucks to the shipping and handling fee. In fact, you'll often make more money on an oil filter marking up shipping and handling than you would selling it for list price.

3.Get aggressive on old/distressed inventory. If you're going to list your troubled inventory, blow it out. Price your distressed parts to be below market, let the customer "win" so you can avoid taking a wholesale loss, and move on. It's better to leave a little money on the table than "hold the line" on price and take a big loss.

4.Take pictures. If at all possible, put part pictures in your listings. It makes a huge difference, especially on the distressed stuff.

5.Your feedback rating is your greatest asset. eBay is a steady stream of revenue for established parts retailers, mostly because they have great feedback ratings. If you ever want eBay to be a source of 50+ parts orders a day, you need a stellar feedback rating. Respond to every customer concern, be proactive to ensure fitment and avoid returns, etc. and you'll get there.

As you gain experience with eBay, you can play with different pricing levels, different shipping and handling fee approaches, auctions, etc. But in the beginning, just focus on getting your parts listed and priced correctly, and don't worry if your first few transactions don't make money. There is money to be made on eBay - many parts departments process dozens of orders a day via eBay - but success requires practical experience.

NOTE: Most retailers in auto parts are using eBay's "buy it now" feature rather than running auctions, and new retailers should do that as well.

Second, List Parts on Amazon

Selling parts on Amazon is a lot like selling parts on eBay, except your pricing strategy and the fee structure is completely different. Once you feel that you've got eBay figured out, listing parts on Amazon is a logical next step. Some suggestions:

1.Pay close attention to Amazon's fee structure. Amazon's fee structure is - in a word - convoluted. It's not necessarily easy to decipher. However, it's important to understand as it will help you avoid costly pricing mistakes.

2.Amazon is all about free shipping. While eBay buyers are accustomed to paying a shipping and handling fee - and retailers often make their profit on these fees - Amazon buyers would rather pay over list price than pay for shipping. If you do even a little bit of research, you'll find OE parts on Amazon are often sold for more than full MSRP. These over MSRP parts are usually available with free shipping, however.

3.Amazon buyers aren't as price conscious. While eBay buyers are typically hunting for a deal, Amazon buyers are all about convenience. Do your best to fill orders quickly and provide great customer service, and you'll find that Amazon is a nice source of steady revenue.

Finally, a word of warning: Amazon's policies are copious and somewhat complicated. Don't dive into Amazon with both feet until you get a few part sales under your belt and understand what they're charging you, what they expect in terms of fulfillment, etc.

Third, Launch Your Own National Parts eCommerce Website

It might seem hopelessly optimistic (or worse) to think your dealership parts department can become a national retailer of OE auto parts, but make no mistake - that goal is absolutely within your grasp. A quick Google search for "OEM Toyota parts" shows mostly Toyota dealers with their own eCommerce sites in the top 10 results. If they can do it, so can you.

In order to get started selling parts on your own website, you'll need:

1.An understanding of the marketplace in terms of pricing and profitability. Suffice to say, it's a low margin, high volume business. If you try to take a high margin approach, it will be difficult to sell in sufficient volumes that will cover all your costs.

2.A parts eCommerce platform. There are quite a few to choose from - we've got a good list here.

3.A marketing plan and strategy. eBay and Amazon are powerful eCommerce websites because they've invested in marketing. While dealers who want to start their own national OE parts store don't have to invest in a Super Bowl commercial or research package delivery via drones, they do have to market themselves online.

NOTE: Not to be self promotional, but we've created a free online marketing guide for new parts websites that you can download here. If you're launching a new site, or thinking about launching one, it's worth reading.

Last but not least, keep in mind that parts eCommerce is expected to grow dramatically over the next five years. Industry analysts Frost & Sullivan expect online parts sales to double between 2016 and 2020, and quite a bit of research shows that millennials are just as likely to buy parts online as over the counter. While predictions are hard (especially about the future), it should surprise no one if every parts department is listing parts online by the time 2025 rolls around.

But setting aside these bold predictions for the future, the crux of this article is simple: Selling parts online is a great way for parts departments to break out of the "service needs to write more ROs and sales needs to sell more cars" cycle. Parts doesn't have to be a hostage any longer.

Denim Simkins
@jason this seems like a daunting task. How much time would you say it would take to accomplish this as a parts manager on a daily / monthly basis? If you were to estimate how many other franchised dealers are doing this with their parts?
Jason Lancaster
@Denim - Most of the parts departments that are selling on eBay have 1 or 2 staff members checking emails hourly, and then managing listings 1-2 hours a day. Once they get going on Amazon, they usually have a staff member that's dedicated to listing parts and filling orders. A lot of our clients have multiple staff members working on ecommerce parts sales, with 2-3 people answering phones, 1-2 answering emails, and then a very strict process for pick, pack, and ship, with a dedicated person. But I think the best advice I can give to any parts manager: Don't do it yourself. Figure out which person on your staff is going to be happy emailing and listing parts, and then give them the time to do the work correctly. It's a small investment in the short term, and in the long term it could be a big source of revenue.

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