Would you build a Wall or a Windmill?

Automologist, LILY, warns us to watch out for when and where the wind blows.

There’s a Chinese saying that goes “when the wind of change blows, some build walls, some build windmills”. There’s now plenty of research and reports at hand on automotive aftermarket trends in the next 10 years; for instance, this one by Frost & Sullivan. But with the information we have, we then need to ask ourselves whether we want to build a wall or a windmill. Do we want to be a frog in a pot of boiling water that doesn't realise the water is getting hotter, or do we want to be aware of incremental changes so that we can take action?

In these researches, the key words are “online”, “e-commerce” and “mobile service”, which are all related to digital and internet technology (let’s call it D&I here). E-commerce for business-to-consumers (B2C) has been long established in some parts of the world and it is expected that B2C e-commerce for automotive parts and accessories will become a US$20 billion industry by year 2020 in North America alone.

In Asia, most of the online B2C businesses are operated by Small and Medium industry players. Lately though, we see established international brands starting  to venture into e-commerce as well. For example, TMall, an Alibaba company, was established especially for this purpose - for international brands not available in China, and with a turnover exceeding RMB100 million. Bosch generated US$9 million in sales via TMall in the first year itself. It is a clever strategy to allow the local population to obtain international branded goods yet still retain profits within the country.

Once you are in the e-commerce arena, you are reaching your customers when they are in the house, at the bus stop and even…in the toilet! With smartphones, tablets, smart TV’s, smart watches and so on, your business suddenly becomes spatiotemporal! Is this a threat to distributors and dealers? At the moment, the business landscape is still in a transitional stage. We still need distributors and dealers in the value chain, which is already enhanced with the addition of D&I - for instance, there are now websites which match the requirements of the customers to the nearest suitable auto service centre. Online services like this have long been established in the West and is now gaining popularity in Asia. 

When a friend of mine from India, Rakesh Sidana, started a service like this in 2008 - with the tagline “My Dream, My City, 1000 Garages, 1000 Cities and 1 Dream” - I saluted his tenacity. From finding an angel investor to setting up the IT platform, to the pilot run and to convincing auto service centres to come on board, and then getting car owners in India to start accessing the service from their kitchens, bedrooms, gardens and everywhere else, it has been a tedious journey. But Mericar.com finally saw some success and the business is growing, and I see a smile on my friend's face (Congratulations, Rakesh!). The idea was not new, but when the wind started blowing from the West, Rakesh began building windmills. There are many similar portals in the Asian market now. Rakesh was an early adopter, and according to the Technology Adoption Graph in the diffusion process by Joe M.Bohlen, people in this category have very special personalities which spur them to take up challenges.

After-sales auto services have higher profit margins then selling cars. An Accenture study indicated that the US$9 billion of after-sales revenue that GM generated in 2001 brought the company more profit than the US$150 billion in car sales. Automakers are looking into more efficient methods to generate the downstream business. GM’s prognostic technology for auto maintenance is impressive - it allows the mechanic to access the car remotely to determine the condition of the car and can enable payment even before you send your car in! There are going to be more D&I technology emerging in the automotive market, such as “click-and-collect” and “click-and-fit”. In the US, the online spare parts vendors are experiencing double digit growth, which remains only a dream for brick-and-mortar businesses. 

Sometimes when the wind starts to blow, consumers are not ready for it and the wind of D&I will slow down. But if the consumers are ready to embrace the wind, businesses will have to provide superior online services and supporting customer service. The next question is how fast can you build the windmill before the wind changes its characteristics? For now, just be sure to not be the frog in the pot. Stand outside the pot and watch where the wind blows!