Retail

Year-End Review and a Look at What’s Ahead

Dennis McCarron
Posted on December 18, 2018

Doesn’t it still feel like early 2018? Wow, this year has simply zipped by. A blur. At the end of the year it’s good practice to reflect on the year’s performance, major influencers, and celebrate successes and think about how to improve on opportunities missed.

December is also a good time to get serious about planning and doing your best to predict what you think 2019 will hold for your store and for the industry.

2018 started out a little choppy for the industry, and quickly we had to dig out of a shortfall in unit sales for most of the country while surprisingly, automotive repair remained solid to strong. But market demand for units climbed back close to the second quarter and by mid-year, the industry as a whole was about par with the prior year. Manufacturers were reporting an uptick in orders, and most predictions at this point in 2018 were indicating the industry would finish the year with modest growth. If you finished the year down in units, your competitors were stealing shares from you – and you should figure out why.

The industry continues to see rapid consolidation at the corporate level in both independent dealer acquisition (Firestone, Monro, Pep Boys, Express Oil/Kaufman’s among others). Those major players are quickly expanding their footprint. At the distribution level, we have also seen extraordinary activity, among them Michelin/Sumitomo, Goodyear/Bridgestone, ATD, and other smaller acquisitions within the field. Regardless of your view on whether the impact for small business tire and automotive shops will be beneficial or harmful, the bottom line is the industry is indelibly going to be different in 2019 and beyond.

Speaking of massive changes, we have officially entered the gully of the talent gap. About 10 years ago, fewer and fewer people were entering the trades, while they opted for a college degree instead. This effort was led largely by the U.S. government. The intention was to prepare America’s youth for “jobs that require a degree.” The unintended consequence was that trade jobs were devastated. We are now fully, I believe, in the lowest point of a lack of talent entering the industry (or at least staying, as turnover at lower skilled positions is extremely high). This has created two problems: 1) the average age of cars is growing again thanks to the effects of “Cash for Clunkers” being over, and that means vehicles will begin to need more repairs as the older a car is, the more complicated repairs tend to get, and 2) according to several reports, the average age of master certified technician is now over 50. And there are very few 30 to 40 year olds ready to replace them.

Independent tire and automotive dealers continue to own well

over 50% of the market share, and by some estimates, just over

60%. So we are a dominant face and force in the industry.

That is the talent gap. When you get a gap that large, market forces are required to do one thing: raise wages considerably. The more unique your contribution to the market is, the more money you can command. If shops raise wages, they are going to be compelled to raise prices, they can’t simply absorb them; the jump is going to be too much, too fast. Somewhat thankfully, as wages increase this way, that will attract young people to enter the workforce, but it will take years of educating and gaining experience to get back to proper staffing at the proper skill levels. If anything, the next 10 years will be exciting in this regard.

Let’s also not forget many states, and some global companies’, decision to move minimum wages to close or to $15 an hour. If you have two employees, one making $18 an hour (flat rate or hourly, doesn’t matter) and the other making $11, and that $11/hr. jumps to $15, do we all really think the $18/hr. person won’t want to maintain the distance in wage earnings? Thankfully, this change is likely to evolve more than snap into place, but for the states it hits first, it will be interesting to see how everything ends up being affected. For now, we can only use wage theories and history to predict how the markets will react, but they ultimately are just theories and reality often can throw a curve ball and the results come out differently (which creates new theories).

To 2019, I say: Bring it. Low unemployment is likely to continue, and while that makes staffing harder, it means more people are driving to work and putting miles on their cars. The independents are making huge strides in technology, like digital vehicle inspections (DVI) — you are already doing it, right? — and new machinery designed to improve the process of working on cars through efficiency.

Remember, DVI’s don’t make for better inspections, they make inspecting and estimating faster. If your employees do poor paper inspections, they will do poor digital ones. The last couple years have been relatively good for the industry, and many shops are looking to invest and remodel, upgrade and attract customers on new levels. 2019, by all estimates (and to be clear, it’s just estimates, anything could happen — right?) looks to be another solid year, although big stories, consolidations and new technologies will continue to keep everyone on their toes.

Independent tire and automotive dealers continue to own well over 50% of the market share, and by some estimates, just over 60%. So we are the dominant force and face in the industry. It’s a good time to be small business owner in this space. But you need to stay on your toes, be open to change, and ready to adapt.

Good luck, good selling, recruit constantly, and join a 20 Group! ■

Dennis McCarron is executive director of Dealer Strategic Planning Inc., a company that manages multiple tire dealer 20 Groups in the U.S. (www.dsp-20group.com). To contact McCarron, email him at dennis@dsp-20group.com.

Related Topics: Business Insight, Dennis McCarron, retail, Year-end review

Dennis McCarron Executive Director of DSP
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