SEMA News—December 2013
BUSINESS
By Steve Campbell
Trends for 2014
A Look to the Future With SEMA Council Leaders
SEMA News annually turns to the leaders of the association’s councils and networks for the December issue to seek their views about how the industry is shaping up for the coming year. The chairs or chairs-elect of each group provide responses based on what their organizations and their companies are seeing within their marketplaces. Their responses provide helpful insights for businesses in every segment of the marketplace.
Automotive Restoration Market Organization Chair:
Alex Tainsh, SoffSeal Inc.
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Most companies in our industry seem to be on an upswing as the economy slowly recovers. The companies that have been able to evolve in their selling and marketing strategies to take advantage of the Internet are doing better than those that have been slower to change.
The Internet has allowed anyone with a computer to start a company selling parts. This is both a benefit and a problem. It offers more outlets for the parts makers, but traditional pricing methods can be a problem. With their low overhead, Internet companies can sell at lower margins, putting more price pressure on traditional retailers.
Manufactures need to find a pricing structure that gives their historic customers a level playing field with the startups. Some manufacturers are choosing minimum advertised pricing (MAP) as the preferred system. If enforced, this system allows retailers to compete on service, delivery and other aspects the company has to offer as opposed to a bidding war on who will offer the lowest price. However, a manufacturer can be at a disadvantage in the marketplace if it sets its MAP but its competition does not.
The market is changing in that we are also seeing companies that were in different automotive markets adding restoration parts. Speed shops such as Honest Charlie’s and Summit Racing are increasing their restoration lines.
Hot Rod Industry Alliance Chair:
Del Austin, DA & Associates
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New young builders are taking traditional street rods to a whole different level. They’re fabricating coach-built and handcrafted parts on these cars, and that end of our industry seems to be really growing. There is no want for work with these new builders.
There may not be quite as many cars in progress, but the ones that are being built are very nice. And it’s happening across the country, not just in Southern California.
The buyers still tend to be a bit older because it takes money to build a car, but the older buyers are using the younger builders because they recognize the talent. Younger buyers are also building cars, but they’re building ’60s and ’70s models, and the early truck market also seems pretty good among the younger people.
I don’t know if we’ll ever see an economy like we had five or six years ago. Most of the builders that I’ve talked to still have some concern about bringing in new employees.
That being said, however, there are opportunities across the board. You don’t have to build a $100,000 car. You can build a nice $20,000 or $30,000 car, depending on what you start with and what you do to it. There is always room for nice driver-type cars.
Truck and Off-Road Alliance Chair:
Melanie White, Hellwig Products
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The most significant trends we’re seeing are the continuing increases in truck sales and the early release of the 2014s. Those new models have helped with the excitement around trucks and the resulting equipment purchases. The increases in vehicle sales are a great indication that our market is headed back in the right direction.
Meanwhile, mobile marketing is going to be one of the biggest changes we see. With so many consumers using mobile devices, smartphones and tablets, this is a trend that we know we’ll have to pay attention to.
The biggest challenge we anticipate in the coming months will be stimulating and maintaining consumer confidence. The strengthening economy can still be hurt if consumers become reticent to make purchases, but those ’14 truck models can help if manufacturers develop new products geared toward them.
Professional Restylers Organization Chair:
Jeff Fink, Advantage Truck Accessories
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Advancement in vehicle technology is an area that all automakers have initiated and have goals to increase.
As it relates to PRO members, the biggest challenges include determining vehicles that have high restyling opportunity and then properly presenting the opportunities to their dealer customers.
Forecasting the economy is difficult, but we see the opportunity for business gains in 2014. Whether these gains are from an improved economy or pent-up demand, I am not sure. In any case, electronic media should continue to grow as a marketing resource.
The high cost of properly training employees is another challenge for restylers. The typical PRO restyling member makes a large investment in employee training, especially in the area of product installation. New-car and -truck dealers would benefit from making sure that the restyling companies that provide products and services to them are SEMA PRO members.
Manufacturers Representatives Network Chair:
Thomas Jourdan, True High Performance Sales
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We started the year very strongly in my territory, and then business nosed over somewhat in the third or fourth month. Now it seems to be picking up a bit more, and while some businesses remained strong throughout, it does depend on the territory. For instance, I was speaking to a rep in the Northeast, and he said that he hasn’t seen many bright spots for a long while, even though his business was going strong a few years ago when other territories had declined. Customers who are more focused on a single section of the industry—i.e., engine parts or truck accessories––seem to be a little stronger in the marketplace. And that holds true for Internet sales as well as traditional distribution.
In the section of industry that I deal with most—high-performance parts—we are still reliant on paper. In typical distribution, where we’re going from the manufacturer to the warehouse distributor to the jobber, paper catalogs and flyers are still key. But that is changing rapidly. As younger people slowly come into the industry, they are much more technologically savvy and respond much better to electronic marketing and advertising. But for proof of how strong electronic systems are becoming, just look at the SEMA Data Co-op. It’s going gangbusters and is allowing the manufacturers to get clean data out to the receivers so that they can use it for their websites and their advertising.
People seem to be cautiously optimistic. Many retailers had scaled their inventories back when business slowed down, and now they are starting to reinvest. But some retailers aren’t expanding their SKUs. Instead, they’re expanding the numbers of existing products on their shelves; a big challenge is trying to get these guys to expand their inventories and invest in new products.
SEMA Businesswomen’s Network Chair:
Rose Kawasaki, Exports International LLC
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Will this electronic age force printed catalogs, flyers and giveaway publications to become a thing of the past? It is a strong possibility, but that remains to be seen. I’m sure many of us still enjoy having our favorite collection of catalogs and
magazines around.
It is exciting to see that many manufacturers have grasped the concept of expanding their marketing efforts through social-networking channels. These portals attempt to make their pages enjoyable to the end user by enlisting the support of their product by the consumer through postings of project cars, sharing product testimonials, participating in contests, etc. These portals also assist in driving people to company websites.
One of the challenges we see for manufacturers is finding a balance between direct online consumer sales versus supporting/directing the consumers to their authorized distributor or dealer network.
While manufacturers could have the opportunity to make higher margins selling directly to the consumer, that direction may create a negative situation and the perception of competing with their existing stocking distributors/dealers.
Young Executives Network Chair:
Dan Kahn, Kahn Media Inc.
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The biggest trend we’ve been hearing about lately is a focus on developing products and services for the latest trucks and performance cars. New tools, such as rapid prototyping machines and FARO arms, are making the R&D process easier, but small businesses have to increasingly develop high-tech solutions for both the R&D process and performance improvements. There is a lot of buzz right now about the SEMA Garage and the services it offers as a way to help minimize both engineering costs and reduce turnaround time.
Some of the traditional marketing channels, such as TV and radio, have undergone major upheavals over the past few months, and that will continue in 2014. The main TV network for car content is gone; many automotive radio shows have disappeared; and even traditional online outlets, such as forums, are changing the way they interact with both advertisers and consumers.
Content-on-demand has become the standard for consumers in every entertainment category. Those who can adapt to that model will thrive in a world where people want to take their entertainment with them in a smartphone or a tablet, and they want access to info in an instant through streaming channels.
The single greatest challenge facing the aftermarket and SEMA companies is apathy from young consumers. This issue also impacts the future industry leadership, as recruiting young people with talents in marketing, engineering and sales is a challenge.
Emerging Trends and Technology Network Chair:
Brian Reese, COMP Performance Group
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Credit is still cheap and easy to obtain, so buying habits are strong. If mortgage rates continue to rise into 2014, expect housing purchases to slow. This may increase disposable cash and help our industry, but rising interest rates may also slow the economy.
There are huge shifts in how and where we connect with customers. Mobile is probably the strongest growth opportunity, with consumers turning to it more frequently for Internet searches and buying convenience. More traditional methods should not be forgotten, however, as they still serve older customers who often show strong buying habits independent of credit and market swings.
While new-vehicle technology has jumped high and will slow the aftermarket’s ability to offer properly engineered products, new models still present the best opportunities. The difficulty in making products for those new models is also a huge opportunity in exclusivity or being first to market for those who are crafty enough to overcome the challenges.
From an ETTN perspective, it is a concern that many aftermarket companies are still very slow to embrace new technologies or changes. The market becomes less forgiving every day to those who fall behind. Plenty of companies are leveraging changing market trends, changing customer interests and changing business technologies to get ahead of competitors. This is how newcomer companies are taking market share from older stronghold companies that are snoozing. Looking forward, expect the business market to keep getting harder to compete in and get ahead.
Motorsports Parts Manufacturers Council Chair-Elect:
Rich Barsamian, GT Performance Products LLC
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Pro Touring and autocross seem to be bigger than ever, with many shows sponsoring competitions at their events. Targeting those markets with your company’s products or bringing new products to market to this niche present good opportunities.
The V8 Supercar race series that originated in Australia hit the United States in May of this year, but there is a new vehicle architecture dubbed “Car of the Future.” It mandates a single wheelbase and standard placement of aerodynamic aids. Engines are production-based 5.0L V8s, and all cars run the same independent rear suspension, the same rear-mounted six-speed sequential-shift transmission (with the same ratios), the same brakes and the same wheels and tires.
Many industry pros have said that this architecture can easily be adapted to the next-generation Camaro, Mustang and Barracuda, offering the possibility of extending the V8 Supercars franchise here and adding serious opportunities for motorsports parts manufacturers. Watch for this series to explode onto the American racing scene, and remember that you read it here first!
The healthcare reform law seems to be the 500-lb. gorilla in the room. I don’t know that we have any real idea of what the impact will be, but it will certainly bring challenges if it continues to be upheld.
Wheel & Tire Council Chair:
Joe Schaefer, Konig American
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There have been a number of changes to search-engine optimization procedures that will affect how websites display based on organic searches using Google. The biggest challenge is to consider how many users operate from mobile devices and making existing and new websites, applications and social media available to those users. As time goes on, our cars, smartphones, tablets and other devices will become increasingly integrated into everyday life, so it’s key that our marketing media follow those changes.
There has been noticeable and positive movement in the aftermarket industry during 2013, and 2014 appears to be on pace to continue this positive movement. Being able to display your knowledge, R&D and quality to customers is extremely important. A lot of companies are popping up in our industry, but while they may be focusing on niche segments, the end user may not be getting a product of decent quality, proper load rating or proper fitment. It is our job as an industry to educate retail customers and dealers so that they can share this information with their end users.
WTC is involved with the Clemson University International Center for Automotive Research, which will provide SEMA members with significant benefits through access to simulated testing and data. With the increased implementation and sophistication of electronic stability-control systems, this will play an important role in how we produce our products.
