Aftermarket manufacturers jockey for brand positioning

Nov. 11, 2007

Representatives from BB&T Capital Markets observed an interesting trend at both the SEMA (Specialty Equipment Market Association) Show and AAPEX (Automotive Aftermarket Products Expo) during Automotive Aftermarket Industry Week: brand positioning.

"With the recent industry slowdown, many suppliers have turned to brand awareness efforts in an attempt to gain share," they wrote in a special post-shows report. "Throughout both the AAPEX and SEMA convention halls, we noticed an intensified effort by manufacturers to differentiate their product lines from the competition."

BB&T's Tony Cristello and Allen Hatzimanolis explained why they think that was the case.

"Professional installers -- the primary downstream customers of aftermarket suppliers -- such as Midas and Monro focus on turning bays and 'selling time' to drive the top and bottom line. When installers have to put vehicles back on the lift because a recently installed part has failed, it not only costs them the repair time, but more importantly it hurts their reputation as competent service providers.

"Installers have extensive memories when it comes to parts, and are very loyal to the brands and product lines that have served them well in the past.

"For suppliers, the loyalty of professional installers can be the pivotal 'make or break' factor, and now more than ever, manufacturers are placing additional emphasis on brand marketing and quality control to ensure their place on the technician's sourcing list."

Other key observations from AAPEX included the following:

* a "cautious optimism" from aftermarket participants about the next few months.

* new products geared toward technicians; and

* an increase in the number of foreign manufacturers -- particularly from Asia.

"The bottom line is, we think that it will take at least the next few years to truly evaluate the value proposition of these foreign-based entrants, but they are nonetheless changing the traditional landscape of parts procurement," they wrote.

"If nothing else, the influx of manufacturing competition from overseas has created an impetus for domestic suppliers to rethink the

scope of their own production operations. Whether through foreign (joint ventures), outsourced tooling, or relocating existing manufacturing plants to lower-cost countries such as Mexico, Malaysia, China, and Taiwan, domestic suppliers must become more cost competitive."