SEMA News - July 2010

The Recession Hurt, But Prospects Are Looking Bright Again

By Steve Campbell

	Restyling provides increased marketing opportunities for both independent businesses and vehicle dealers. While the OEMs have reduced the variety of their offerings, restylers are taking advantage of new techniques and technologies to provide products and services that are otherwise unavailable. Courtesy of Tops & Trends

One of the most profound effects of the recession was the decline in U.S. vehicle sales, which plummeted from nearly 17 million in 2006 to about 10.6 million in 2009, according to Ward’s AutoWorld. And while the downturn hobbled nearly every facet of the automotive aftermarket, some of the greatest damage occurred in the restyling category, whose very existence is predicated on available vehicle inventory.  Conversely, the recession and market forces also caused the original equipment manufacturers (OEMs) to change the way they develop and market their products. Gone are the days when each automaker produced a multitude of variants, each of which was dappled with seemingly unending options lists. In order to save costs, the OEMs have condensed their offerings to restricted trim levels in the most popular models of the strongest brands. That contraction in variety will prove to be a boon for restylers, industry leaders say. As the OEMs reduce the range of packages they offer, restylers can fill the gaps.

“Decontenting by manufacturers to lower costs will provide a lot of opportunities to accessorize and restyle,” said Karl Stearns, president of KMS Marketing Solutions and chairman of the Professional Restylers Organization (PRO).

“Manufacturers also frequently bundle certain popular items, such as spoilers, with other pricey options, and the whole package pushes the vehicle out of the price range for buyers. It produces vehicles that consumers don’t necessarily want, with upgraded trim packages or performance features that must be purchased to obtain the few items the buyer does want. Restylers can make the popular parts available to dealers so that vehicles can be niche-marketed while eliminating the expensive, undesirable options.”

Knowledgeable dealers have come to understand that restyling provides a significant marketing opportunity. While the OEMs reduce their offerings, restylers are taking advantage of new techniques and technologies to provide products and services that are otherwise unavailable.

	Innovative sales approaches can provide winning scenarios for all involved. For instance, Katzkin offers a premium leather upholstery and sunroof package, providing additional profit to the new-car dealer and a cost savings to the vehicle buyer. Courtesy of Katzkin

“Specialty-equipment manufacturers now have quicker access to vehicle specifications so that new products can be developed faster,” said Jeff Fink, general manager of Advantage Truck Accessories Inc. “New-product information, technical bulletins and marketing ideas can be communicated quickly so that restylers have ‘instant’ access and can offer better sales presentations and new accessories for each vehicle. Opportunities are created for restylers as vehicle manufacturers push to capture sales through accessory programs.”

The most popular exterior product accessories currently come in the form of bolt-on designs, according to Jeff Nowicki, president of Specter Werkes, an automotive prototype and fabrication facility based in Troy, Michigan. “Properly designed and executed products are really what the marketplace is looking for right now,” he said. “Smaller companies are able to ramp up quicker and don’t have to go through the validation and testing that the OEMs do. We’re able to get product to market a lot quicker.”

The buzz for his business currently is carbon fiber, Nowicki said, and the automakers have embraced it on high-end vehicles such as the ZR-1 Corvette and others. Carbon-fiber produces not only an aesthetic appeal but also offers weight reductions in components such as spoilers, chin pieces, lower front splitters and underhood accessories.

Eldon Bracken, president of Graphic Mart, said that printed graphics and vehicle wraps offer another cosmetic option. Many of the attendees at the recent PRO Technical Skills & Training Conference, held in Lima, Ohio, mentioned that graphics and striping are becoming a stronger part of their businesses again, Bracken said.

“Digital printed graphics can be repeated with consistency over time,” he pointed out. “Lower-cost digital printers allow shop owners to create their own graphics as they need them, and vehicle wraps are changing the way businesses advertise. We’ve also seen this technology being used with a niche of enthusiasts who want to be different and express themselves.”
The light-truck market—hit with the double whammy of escalating fuel prices and then the recession—seems to have stabilized somewhat as fuel costs first retreated and then steadied, and some restylers are seeing increases in their SUV and pickup business.

	The marketplace is looking for properly designed and executed products, said Jeff Nowicki, president of Specter Werkes, and smaller companies can get product to market quicker than the automakers. Courtesy of Specter Werkes

“We are seeing more and more trucks getting trimmed out with stainless-steel rockers and pillars,” said Mike Stanifer, director of sales and marketing for Innovative Creations Inc., “but the core products, such as step bars, have not gone away. They’re still the mainstay in this category, along with bed caps and bedrails. Sales are picking up with these products, especially on the new designs we launched in the last year.”

Nowicki said that leather remains the core restyling product for interiors, but he has seen a movement away from traditional perforated fabrics and basic flat leathers toward more unusual skins, with the market moving to high-end suede for steering wheels, seat inserts, door panels and shifter-ball boots. “Everything that your hand touches should have that soft touch so it doesn’t slip and you get better feedback,” he said.

Electronics have also become a significant interior restyling item. Several sources indicated that the Ford Sync system has led to a revolution in how consumers and the industry view electronics, and electronics manufacturers have been forced to review their offerings to ensure that they are compatible with factory systems. Not only navigation and entertainment electronics but also safety sensors have led to refinements in specialty equipment.

“New vehicle technology and safety systems continue to be a main focus for Kaztkin,” said Stefan Majlinger, regional manager for Katzkin Leather Interiors, “We work with independent testing facilities as well as OEM engineering departments to ensure that our products don’t hinder the operation of any safety systems. We also employ a fulltime person whose main focus is technical issues. Our technical specialist helps our customers understand how to properly deal with occupant classification system sensors and airbags in vehicle seats.”

Katzkin is also using unique, ultra-soft interior leathers in addition to its standard offerings, and the company has added a combination package to improve sales. The new package includes premium leather upholstery and a sunroof, adding value to base and mid-level vehicles. “It provides a great cost savings to the new-car buyer and an additional profit to the new-car dealer,” Majlinger said. “It’s a win-win for everyone, and it is selling very well!”

	Electronics have also become a significant interior restyling item. Not only navigation and entertainment electronics but also safety sensors have led to refinements in specialty equipment. Courtesy of Tops & Trends

Accessory manufacturers and retailers alike seem optimistic about the economy and the future of the industry. Stanifer, for instance, recommended that retailers prepare for economic recovery by ensuring that their credit lines are up to date and they are prepared to increase inventory levels. And Majlinger said that restyling retailers should stay informed about changes in OEM vehicle availability. “Not all vehicles are a perfect fit for all accessories,” he counseled. “Helping dealers make additional margins and move more vehicles should always be at the forefront of a restyler’s sales objectives to solidify relationships and increase business.”

Industry leaders also advocate taking advantage of educational opportunities as well as the ProPledge program, in which participating companies offer a minimum of 36-month/36,000-mile warranty coverage and provide minimum liability coverage of $5 million.

“SEMA and PRO have really pushed to make the ProPledge program a viable source of information for dealers so that they feel comfortable if they’re going to work with aftermarket products, whether it’s a sunroof, leather or navigation,” said Joey Johnston controller of the restyling company Tops & Trends. “The program verifies that dealers are going to get a quality product installed by a quality installation facility. Industry certification and the ProPledge program are two of the best efforts to put the dealers’ and retail consumers’ minds at ease.”

With the trend toward fewer new models and vehicle owners continuing to hold on to their current cars and trucks, restyling and accessorization can play major roles in providing the options and value that today’s customers seek. But the key is being proactive, business veterans said.

“There are a lot of opportunities out there for the industry,” Stearns advised. “If you’re dependent on car dealer business, get out there and strengthen your personal relationships with dealer principles. Do some PR and marketing work. Make yourself an invaluable part of the dealer’s operations. Find new products. Learn new skills. Don’t be afraid to tackle things you’ve avoided in the past. With good training, you can do it.”