BUSINESS SPOTLIGHT—CUSTOMIZE YOUR REAR ENTERTAINMENT OPTIONS

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With the introduction of the new Lamborghini Murciélago Superleggera, we wanted to check on the most popular parts in the Italian exotic league.

Between March 29–April 27, Ferrari, Lamborghini and Maserati enthusiasts spent $267,000 on parts and accessories via online auction, according to data from Terapeak, a developer of market-focused research software that monitors online sales and auctions (numbers rounded to the nearest hundred).

Ferrari fans spent the most—$162,000—perhaps due to the car’s relative high volume among this class. Lambo enthusiasts spent $72,700, while Maserati faithful accounted for $32,300 (more than 10% of it spent on the Biturbo model from the '80s).

Not surprisingly, exterior parts dominated sales, Ferrari and Maserati owners favored car covers and mirrors and Lambo owners leaned toward body-kit components. Exterior accessories comprised $64,000 of total sales.

Among interior parts—the next most popular category at $17,400—steering wheels, shift knobs and shift boots were most coveted across the board.

Not surprisingly, decals and emblems did a brisk trade—Ferrari insignia alone comprising $4,500 of total sales.

Terapeak's Motors P&A Research provides sellers with access to in-depth research on the past year of online auction data and allows users to get in-depth research reports on the competition and themselves. More at www.terapeak.com/motors. 

Accessories Can Rev Dealer Profits

Editor’s Note: SEMA commissioned Hedges & Company to complete a research project on behalf of its membership on auto dealership participation and interests at the SEMA Show. This article is a summary of various results from that project.

Dealership consolidation and shrinking profit margins have created an extremely competitive business environment for auto dealers. Even the parts and service department—often relied on as a mainstay of strong revenue for many dealers—is showing signs of dwindling income as better-built cars last longer and need fewer repairs. In search of ways to boost new-vehicle sales and generate revenue, more and more dealers are turning to specialty-equipment parts and accessories.

Attendance data from the 2006 SEMA Show points to growing dealer interest in specialty-equipment products. The number of dealerships attending the 2006 Show increased by 10% from the previous year even though the number of dealerships decreased during that time. More than 4,500 vehicle dealers representing approximately 2,500 dealerships attended the Show. The number of international auto dealers increased by 28% and included attendees from 61 countries and U.S. territories.

“There are several factors drawing more dealers to the SEMA Show,” said Ellen McKoy, SEMA senior director of dealer relations. “One is the fact that dealers are looking for new revenue streams and innovative ways to merchandise their vehicles. They are also looking for new ways to market their dealerships and attract customers they may not have traditionally attracted in the past.”

Peter MacGillivray, SEMA vice president of marketing and communications, said growing auto dealer participation in the Show is just the beginning of a trend that will benefit traditional SEMA member companies.

“It appears that we have a perfect alignment of opportunities right now, and it’s exciting to see some of this gaining momentum,” MacGillivray said. “There is consumer demand and heightened awareness of the products from this industry that are available for brand-new cars, trucks and SUVs. There is also a need at the dealer level for a new revenue stream, and there is the product and installation expertise of traditional SEMA-member companies that can meet both those needs. There is no industry that is better suited to address the accessory and personalization needs of consumers than traditional SEMA-member companies.”

Products Dealers Are Interested In

Not surprisingly, accessories was the top product category auto dealers attending the SEMA Show were interested in. Research showed that 69% of all dealers at the 2006 Show expressed interest in accessories. Wheels and tires was the second-highest category at 43%, and performance parts and accessories was third at 38%.

Accessories, safety equipment, sport compact and specialty equipment were the only categories to see an increase in dealer interest from the previous year. Sport compact had the largest increase in interest, going from 15% of dealers at the 2005 Show to 22% in 2006. Accessories and safety equipment both grew by 3%, and specialty equipment rose by 1%.

Restyling/ground effects was the product category that saw the biggest decline in dealer interest. At the 2005 Show, 26% of dealers expressed interest in the category, and only 15% selected it in 2006.

Product interest by region mirrored the Show’s list of top four products: accessories, wheels and tires, performance parts/accessories and audio, security and mobile electronics. However further analysis of product interests by region shows some unique preferences.

The Southern region showed a stronger interest in wheels and tires and audio, security and mobile electronics than the other three regions, with 52% of the dealers selecting wheels and tires and 42% selecting the electronics category.

Dealers from the Eastern region had more interest in paint, body & equipment (29%) and sport-compact (29%) products than their regional neighbors.

Safety equipment, paint, body & equipment and engine/engine parts were important product categories for dealers from the Midwest. These dealers showed less interest in performance parts and accessories, off-road parts and accessories and replacement parts than those from other regions.

Dealers from the Western region favored engine parts, safety equipment and specialty equipment. They had less of an interest in body shop service/repair and paint, body & equipment than other attendees.

A look at the product interests of auto dealers from the three countries with the highest attendance—Canada, Japan and Venezuela—again showed accessories as the product category attendees were most interested in. Canada’s interest mirrored that of attendees from the United States. Its top choices included wheels and tires and performance parts and accessories. Japan’s other top choices were wheels and tires and audio, security and mobile electronics. Venezuela’s choices were racing products, safety equipment and truck parts/accessories.

Advantage of Aftermarket Accessories

The concept of customizing a vehicle to fit the style and personality of its owner is familiar to the specialty-equipment market and easily understood by the companies that helped build the industry. Accessories allow consumers to put their own identity on a factory car or truck and create a vehicle that is a unique expression of themselves.

For auto dealers, accessorization can provide a new revenue stream that attracts customers to their showrooms and distinguishes them from their competition.

“We always try to point out to dealers the advantage of seeking products from our industry,” said McKoy. “The factories offer some very nice and attractive products, but the automakers are limited by what they can do to create product diversity and appeal to an individual’s tastes or lifestyle. That limits a dealer’s ability to stand out from the competition. Our industry, on the other hand, is notable for its product diversity and quality, innovation, speed to market and an array of product choices not available from the OEMs. Couple this with our industry’s ability to provide installation and marketing expertise, and you have a win-win proposition for both dealers and our industry.”

Proof of the industry’s innovation is seen at the New Products Showcase featured each year at the SEMA Show. At the 2006 Show, 1,634 new products were introduced from 515 companies. Of those, 252 were interior and exterior accessory products and 372 were performance–racing- and performance-street-related products.

MacGillivray pointed to the strength of traditional SEMA-member companies in understanding the market and meeting consumer needs. “It’s difficult for any company the size of the OEMs to have their finger on the pulse of what is going on at the grassroots level like our members have,” he said. “Our industry fills that role, and there is no group that can better meet the consumers’ needs.”

Dealers Bring Buying Clout

Dealers participating in the 2006 SEMA Show were there to do more than just kick tires. They had purchasing- and decision-making power. When it came to making the buying decision, 65% of the dealers at the Show were the decision makers for their businesses, and another 27% made buying recommendations. Combined, 92% of the auto dealers at the Show had the ability to make buying decisions or recommendations for their company.

Dealers provided the following information about their businesses: Nearly half (49%) were from single-location dealerships, and 24% reported having between two to 10 locations. The largest group (45%) of those attending reported sales of $5 million or less, and 10% had sales of $51 million or more.

Most of the dealers were experienced business owners; 58% reported that they had been in business for 11 or more years. The next highest segment was newer dealers that had been in business for two years or less, which comprised 17% of the attendees.

Whether for a small urban-based auto dealer or large suburban auto mall, McKoy said an accessory program could benefit dealerships of all types and sizes. Small operations that don’t have the volume or ability to offer special financing incentives or discounts can use accessories to gain a competitive foothold in a marketplace.

“One of the advantages of accessorizing is it allows a dealer to create an inventory of vehicles that are unique and distinctive and can’t be found on another car dealer’s lot within however many miles you want to drive,” said McKoy. “Smaller dealers can distinguish themselves from their larger counterparts by offering a special package that is unique to their dealership.”

An example of how a dealer can use accessories to create a unique product is by developing a special-edition package. Working with a local restyler, the dealership could create a special accessories and installation package that consumers can get only through them. This special-edition package offers the dealers a number of advantages, including drawing more traffic into the showroom, attracting a different demographic and giving the dealer the reputation of having products that can’t be found anywhere else.

Larger dealerships that routinely sell lots of cars do it through special discounts or incentives that reduce their profit margins. “Many dealers are looking for ways to boost their profit margin and sell more vehicles. They are also looking to entice more buyers to their showrooms and turn over inventory faster. Accessories can help them accomplish these objectives,” stated McKoy.

Teaming Up for Success

Growing auto dealer interest in specialty-equipment accessories, parts and installation expertise offers SEMA-member companies more opportunities to expand their businesses in this emerging market segment. Both dealers and specialty-equipment companies will benefit by working together.

SEMA members can benefit by finding ways to work with dealers to help them understand the value of accessorization. They can show them why it’s to their advantage to team up with specialty-equipment accessory providers who know and understand the business and can help them create a profitable and successful accessories program.

“There are programs offered through SEMA’s Professional Restylers Organization (PRO) council that give installers some very useful tools on how to do business selling directly to dealers,” said McKoy. “It’s to their benefit to take advantage of these tools.”

McKoy cautions auto dealers to not take on too much too soon, however. “Working with a local restyler or installer can be very helpful,” she said. “It takes a while to get the knowledge and resources to really do this well. When looking to launch an accessory program or expand on a fledgling program, it’s very valuable to tap into the expertise of a local restyler or installer—someone who knows the market, knows the trends, goes to the trade shows, has the vendor relationships and can provide just-in-time delivery. Those are tremendous assets that dealers can and should utilize,” said McKoy.

Show Attendance Makes the Sale

Dealer attendance at the SEMA Show gives them a better understanding of the industry and lets them see firsthand the accessories, parts and services aftermarket companies can provide.

“Going to the Show gives auto dealers direct knowledge about the industry,” said McKoy. “It lets them see that there is an OEM presence there, which lends a great deal of credibility to the relationship between our industry and what we do to improve vehicle sales for the automakers and dealers.”

Attending the Show gives the dealer a sense of the scope, the excitement and the value the specialty-equipment market can add to a business. McKoy encouraged accessory providers to invite their dealers to the Show and make a point of showing them around. “It sure is a lot easier to make a sale to a customer who is excited and gets it than to someone who is ho-hum,” she said. “I have yet to meet a dealer who has gone to the SEMA Show who hasn’t gone home saying: ‘Wow, I had no idea,’ or, if they’re a veteran and they’ve been before, ‘Wow, I’ve got so many great ideas I don’t know how I can implement them all.’ I can’t encourage dealers enough to go to the Show to learn about the industry and see how it can benefit their business and, ultimately, our industry as well,” said McKoy.

 Julie Hedges is a principal with Hedges & Company, a SEMA-member market research and marketing company. She can be reached at 330/474-1650 or www.hedgescompany.com.

4Wheel Parts, Colorado Springs, Colorado

It’s clear that the folks at 4Wheel Parts had layout in mind when they set up their store. Introducing a few small changes will give the facility polish, making it more visually stimulating to the customer.

I’ve said it before and I’ll say it again, break up the checkered floor. It is visual noise that distracts from the product the store is trying to sell. This can be easily done by using carpet runners that lead the customer throughout the store. Runners also indicate areas you want your customer to stop and take notice.

The store has a nice neutral base color. I’d continue this to the ceiling, covering the blue stripes. Use the new space for uniform signage above the display panels. The signage should be a simple font and should indicate the product being featured.

Be intentional with the merchandising tools provided by the vendors you feature. Spread these branded displays out evenly throughout the store, which will provide additional focal points while not being too overwhelming. I like the wheel display. Try placing it against a solid background. This will make the details of the wheels stand out more.

Another option I’d consider is changing the lighting. Florescent lighting has a tendency to be too harsh in a retail environment. Installing a simple track-lighting system will really warm up your space and make your merchandise pop. I’d also be curious to know what lies beneath the ceiling panels. It’s possible that they may be hiding unique architectural details such as beams or pipes. If you decided to remove the panels and paint the exposed space a uniform neutral color, this would give your store a more open feel. If you choose this route, replace the florescent lighting at the same time.

Remember, most merchandising appeals to your customer’s subconscious, so changes are often subtle but effective. Less is more. If a display is too complicated, chances are it is ineffective also.

Break up the checkered floor. This can be easily done by using carpet runners that lead the customer throughout the store. Runners also indicate areas you want your customer to stop and take notice.	Be intentional with the merchandising tools provided by the vendors you feature. Spread these branded displays out evenly throughout the store, which will provide additional focal points while not being too overwhelming.
I like the wheel display. Try placing it against a solid background. This will make the details of your wheels stand out even more.	Another option I’d consider is changing the lighting. Florescent lighting has a tendency to be too harsh in a retail environment. Installing a simple track-lighting system will really warm up your space and make your merchandise pop.

Design Help

Want to find out how simple changes to your store layout can increase sales and motivate your customers to buy and spend more? Submit photos of your store to editors@sema.org. Be sure the images are 300 dpi JPEGs, and be sure to include your name, company name, address, phone number, e-mail address and website URL (if applicable). Please include the words “Store Layout” on the e-mail subject line.

Todd Jacobsen is CEO of Utility Inc., a leading-edge design firm pioneering highly creative retail and environmental solutions. Located in Seattle, Washington, Todd can be reached at 206/467-8070 or via e-mail at toddj@utilityinc.com.

From the spy shooters at Brenda Priddy & Company comes these glimpses of the Lamborghini Murciélago Superleggera.

Here’s what the company had to say:

“Even pushing a reported near-700 hp, our camera crew caught up with this Lamborghini Murciélago Superleggera (so-called "superlight") near the Nurburgring earlier today.

“Lots of carbon fiber, plastic panels and even some traditional glass being replaced by clear plastic, and of course lots of money, make up this soon-to-be entry into the super car arena from Lamborghini.

“We are expecting an official announcement at the upcoming Frankfurt Motor Show.”

As SEMA has reported in the past, the National Highway Traffic Safety Administration (NHTSA) is targeting high-intensity discharge (HID) conversion kits for enforcement actions. 

The NHTSA has concluded that it is impossible to produce HID conversion kits (converting a halogen system to HID) that would be compliant with the federal lighting standard, Federal Motor Vehicle Safety Standard (FMVSS) No. 108. The noncompliant kits frequently include a HID bulb, a ballast, an igniter, a relay and wiring harness adapters. The NHTSA believes this equipment presents a safety risk to the public since the kits can be expected to produce excessive glare to oncoming motorists. In one investigation, the NHTSA found that an HID conversion headlamp exceeded the maximum allowable candlepower by over 800%.

Halogen equipment uses an electrical current to heat a metal wire coil filament to incandescence, while the HID conversion kit’s light source incorporates a discharge arc to produce light. HIDs require a ballast for operation. Under FMVSS No. 108’s Section S7.7 (replaceable light sources), each replaceable light source for headlamps must be designed to conform to the dimensions and electrical specifications for the headlamp source it is intended to replace. For example, if an HID kit is marketed as replacing an H1 light source, then it must match the H1’s wire coil filament size and location, the electrical connector size and location and the ballast design for use with an H1 light source (which is impossible since there is no ballast). Consequently, companies that are manufacturing HID light sources (e.g., D1S, D1R, D2S, D2R, 9500, etc…) with incandescent light source bases (e.g., H1, H3, H7, H8, H9, H11, H13, HB1, HB2, HB3, HB4, HB5, etc…) should be aware that this light source design would not be one that conforms to FMVSS No. 108, and could not be imported and sold in the United States without violating Federal law. (The importer is treated as the manufacturer and subject to the same fines and penalties that apply to a domestic manufacturer.)

The NHTSA has also determined that a commonly used disclaimer “for off-road use only” has no legal meaning and is not recognized by the agency as the manufacturer, importer and retailer are not in a position to control use once a product has been sold. Any equipment offered for sale which is covered by FMVSS No. 108 (headlamps, taillamps, side markers, etc.) must comply with the standard. 

On a related topic, the NHTSA has also stepped up enforcement against restyled combination lamps that are missing required functions existing on the original-equipment lamps. This would include replacement front- or rear-combination lighting equipment that do not have a required reflector, amber or red light, “DOT” marking or mismarked wattage. The issue is the same: any equipment offered for sale which is covered by FMVSS No. 108 must comply with the standard. 

SEMA published an article in the October 2006 edition of SEMA News which provides more information on how lighting equipment is regulated by both the federal and state government: http://sema.org/main/semaorghome.aspx?id=55913. SEMA is working with the NHTSA to ensure that the aftermarket lighting industry’s perspective is heard and, simultaneously, to remind its members to obey the current rules of the road. In this fashion, our SEMA members can offer a full range of cutting-edge, compliant motor-vehicle lighting products. For more information, contact Steve McDonald at stevem@sema.org.

A version of SEMA-model legislation to create a registration category for replica motor vehicles was approved by the Nevada State Assembly. Under the bill, replicas are defined as vehicles manufactured after 1968 to resemble vehicles manufactured before 1968. Replicas would be exempted from all emissions-inspection requirements. Registration as a replica vehicle would be open to 100 such vehicles each year and use would be limited to occasional transportation and other hobby-related activities. Titles for these vehicles would list both the year of assembly and the model year that the body of the vehicle replicates. The bill will next be considered by the Nevada Senate. For details, contact Steve McDonald at stevem@sema.org.

SEMA-supported legislation that would clarify that owners must pay only a minimal one-time registration fee for collector motor vehicles was approved by the Montana State Legislature and signed by the governor into law. Under Montana law, collector vehicles must be more than 30 years old and not used for general transportation. For details, contact Steve McDonald at stevem@sema.org.

SEMA-member companies have posted several new listings for job opportunities at www.sema.org/classifieds. Working for a SEMA-member company has many advantages. In addition to working for a company that supports and contributes to the success of the overall industry, being employed by a SEMA-member company enables the employee to participate in webinars, access free market research, join SEMA committees and more. The newest classified listings posted under Positions Available include:

• Warehouse Manager, Irvine, California
• Corporate Sales Representative, Irwindale California,
• Sales, Novi, Michigan
• Technical Support, Mooresville, North Carolina
• Sales, Mooresville, North Carolina
• R&D Technician/Designer, San Clemente, California

SEMA members: Have a job opening that you need filled? Members are invited to post classified ads at www.sema.org/classifieds free of charge. Categories include Position Available, Positions Wanted, Rep Opportunities, WD Opportunities, For Sale, Items Wanted, Business Opportunities and Internships. Visit the site for details.