Are vehicle distributors running an anti-competitive parts cartel???

Darragh29

Ok, this is more for people in the trade, but all opinions welcome. As some here may know, I run my own independent garage. It's occured to me on more than one occasion recently, when I have to go to a main dealer (my competitor), to buy parts that I cannot get from my own independent suppliers, for example a seat belt tensioner assembly, a windscreen washer electric motor, an ABS cable, etc, etc, that as someone who is operating independently in the motor trade, I shouldn't have to go near a main dealer to source parts from a distributor. I know that at the present time, I do have to do this and to be honest it annoys me, because the dealer can charge me any price he/she wants, discount usually doesn't even cover the cost of going out to collect the parts from the dealer.

What I'm asking is:

(1) Should I not be able to buy any parts I need directly from a distributor on the same terms as a franchised dealer tied to that distributor???

(2) The fact that at present I can't do this, is this not hugely anti-competitive??? Imagine Ryanair having to buy parts for their planes from Aer Lingus!?!?!

Just trying to generate a bit of debate on this issue, I think with the way the motor industry aftersales sector has gone in recent years, there is now real competition between the main dealer and the independent garage. I'm seeing it more and more where people are dropping this facination they had in the past with bringing their car back to a main dealer because they are getting better service and value from good independent garages. Sadly, the independent garage is very much constrained in what it can do for the customer when it comes to sourcing and fitting parts that have to be bought through a main dealer. I think this set up is nothing less than weird to be honest, I'm forced to buy materials from my competitor, wtf!?!

colm_mcm

Do you expect the distributor to charge you the same as the dealer for parts? you will be buying far less of them. Do you really think the distributor wants to be dealing with thousands of garages and taking in small orders and distributing them all out?

If you were able to buy them diectly from the distributor, would you expect them to courier them to your door?

If you are regularly buying a large number of parts from a particular garage, then you should start negotiating your discount with the parts manager. Main dealers have always been in competition with independant garages, and these garages make up a fair chunk of a parts department's business. If your business is important to the dealers, they will do their best to keep you.

A franchised dealer has big overheads, and one of the advantages of having a franchise is making profit from parts sales.

maidhc

Darragh29 wrote:

(1) Should I not be able to buy any parts I need directly from a distributor on the same terms as a franchised dealer tied to that distributor???

Probably should tbh. I know most distributors (toyota for a fact) ship down special order items on a daily basis to the dealers. It wouldn't add to their burden to have a pallet every evening for DHL...

colm_mcm wrote:

A franchised dealer has big overheads, and one of the advantages of having a franchise is making profit from parts sales.

... I think that is the point Darragh is making...

Darragh29

colm_mcm wrote:

Do you expect the distributor to charge you the same as the dealer for parts? you will be buying far less of them. Do you really think the distributor wants to be dealing with thousands of garages and taking in small orders and distributing them all out?

Yes, I do! I see no reason whatsoever why I should not be able to set up an account with a distributor just like a franchised dealership.

colm_mcm wrote:

If you were able to buy them diectly from the distributor, would you expect them to courier them to your door?

Not necessarily. I'd expect to be able to collect them or have them delivered to me on the same terms as a main dealer. You are forgetting that many main dealers spend a substantial amount of money on parts from independent motor factors.

colm_mcm wrote:

If you are regularly buying a large number of parts from a particular garage, then you should start negotiating your discount with the parts manager. Main dealers have always been in competition with independant garages, and these garages make up a fair chunk of a parts department's business. If your business is important to the dealers, they will do their best to keep you.

There is no point in negotiating with a main dealer parts dept. They have their discounts set up for trade customers and that's what you get, take it or leave it, usually 10%-12%. They don't want to "keep you", as you only use them when your stuck for a part. Thankfully these days, there are more than enough OEM quality aftermarket parts out there that are distributed independently so I can buy excellent quality parts most of the time without going near a main dealer. Your point above about independent garages making up a fair chunk of a parts dept business is all the more reason why an independent garage should be able to buy directly from a distributor. The fact that a main dealer is involved as an unnecessary middleman is just keeping the end user/retail cost of a particular job unnecessarily high.

colm_mcm wrote:

A franchised dealer has big overheads, and one of the advantages of having a franchise is making profit from parts sales.

Welcome to the real world, big overheads is something that any business operating in Ireland today has to cope with! A franchised garage is by no means unique when it comes to big overheads! Yes, a dealership should be able to profit from parts where a retailer comes into the counter and wants parts, but there is no reason I can see why an independent garage should have to go knocking on the door of his/her competitor for parts that are priced specifically for them to be uncompetitive for him to buy.

Darragh29

maidhc wrote:

Probably should tbh. I know most distributors (toyota for a fact) ship down special order items on a daily basis to the dealers. It wouldn't add to their burden to have a pallet every evening for DHL...



... I think that is the point Darragh is making...

What I mean is, if I want one part worth 15 Euro over a two month period, grand, I've no problem going into a dealer and paying for this. In a situation such as this, I'd probably be a retailer or a very small independent garage/mechanic/trader.

What I'm complaining about is running a so called "independent" operation and having to spend 1,000 Euro a month upwards to a competitor, who is marking up the price of a part 100% on the price he gets from the distributor and giving me a 10% discount!?!?! If this isn't anti-competitive, I really don't know what is!?!?!

maidhc

Darragh29 wrote:

What I'm complaining about is running a so called "independent" operation and having to spend 1,000 Euro a month upwards to a competitor, who is marking up the price of a part 100% on the price he gets from the distributor and giving me a 10% discount!?!?! If this isn't anti-competitive, I really don't know what is!?!?!

I agree fully!

peasant

Another issue is the supply chain.

It's not only the dealers that make good money on parts but also the automotive companies themselves AND the companies that actually make the parts.

Parts that end up in actual cars on the assembly line carry minimum profits for everyone involved, parts that are destined for the aftermarket/repair sector get a much bigger mark-up allr ound.

So nobody in the chain has any great interest in "spoiling the prices".

Only when the actual model car is nearing end of production is when parts manufacturers are usually released from their stringent contracts with the auto makers and can start selling into different channels

Mr.Diagnostic

Hi Darragh,

Go and google BER (block exemption regulations) when you have time, loads of time.

colm_mcm

Darragh29 wrote:

a competitor, who is marking up the price of a part 100% on the price he gets from the distributor and giving me a 10% discount!?!?!

Where do you buy your parts?! Is this figure based on fact or just a presumpmtion?

VeVeX

To please a small independent or piss off a main dealer chain ?? hmmm

Like it or not Darragh you are small fry in the scheme of things. The distributor will never sell you parts because it will rock the boat with every single Dealer in the franchise for reasons already outlined in this thread. Your €1000 a month while nice is nothing to the Distributor.

One of Dublins biggest part distributors "CD Group" will not supply to independents either, they only deal through factors. The parts food chain obviously goes downwards and every step of the way someones adding a cut and normally the Independent is on the bottom rung of the ladder.

Your best bet in my opinion is to forget the concept that a main dealer is your competition. The approach i'd take is to attempt to win over more custom doing a good job and being well priced. These two obvious attributes are often what takes people away from the Dealers and into your garage.

MercMad

Darragh29 I think you are way off the mark here in your expectations. Why on earth would the distributor agree to sell directly to you ? The whole parts network/supply chain is there to support the dealerships !

You want to byepass this whole netwrok because it suits you ??

Why then should we not bypass you and get stuff directly from the production line ??

There are established procedures in place for various people along the way who have invested time and money in their business, but you would prefer this was ignored so you can make more money??

I think I'll go down to St.James' gate this afternoon and buy a keg for the weekend !

Darragh29

MercMad wrote:

Darragh29 I think you are way off the mark here in your expectations. Why on earth would the distributor agree to sell directly to you ? The whole parts network/supply chain is there to support the dealerships !

You want to byepass this whole netwrok because it suits you ??

Why then should we not bypass you and get stuff directly from the production line ??

There are established procedures in place for various people along the way who have invested time and money in their business, but you would prefer this was ignored so you can make more money??

I think I'll go down to St.James' gate this afternoon and buy a keg for the weekend !

No, I'm not saying that the distributor should sell directly to me on compassionate grounds or on a charity basis. I'm saying that I think it breaches competition law that I have to buy what are essentially raw materials from a competitor, and that is what a main dealer is, a competitor. The fact is that under block exemption rules, a consumer can by-pass a main dealer and have his or her servicing needs met by an independent garage, without effecting his or her warranty on the vehicle. The irony is that if that person exercises their right and brings their 06 Laguna to an independent garage, that garage might have to go back to the main dealer that his customer was trying to avoid by going to an independent garage!?!

crosstownk

The distributor is not set up to sell parts retail. They only have warehouse staff and not parts people. It is the partsman in the dealer that identifies the part number and places the order. The guy in the distributor warehouse takes the order printout and fetches the part from a vast warehouse by using the storage bin location. He probably has absolutely no idea what the part is, let alone what it's function is.

maidhc

MercMad wrote:

I think I'll go down to St.James' gate this afternoon and buy a keg for the weekend !

But if you owned a pub would you think it fair to have to go to a "guiness approved" pub and get your pints pulled individually?

Darragh29

crosstownk wrote:

The distributor is not set up to sell parts retail.

If a distributor was to sell parts to an independent garage outlet, they would not be selling to a retailer, they would be selling to trade, just like when they are selling to a main dealer. I see no reason on earth why a distributor cannot provide an independent garage with a CD like they do to main dealers. It's not rocket science, it's very simple if you have the system to look up a manufacturers part number, after that, its just a matter of picking it off a shelf as you've said above. Obviously there would be a cost involved in getting the software, which I know I'd have no problem with. The only reason a distributor will not do this is because they are protecting main dealers in the aftermarket, the word for this is anti-competitive. It keeps retail maintenance costs artificially high in two ways:


(1) The independent garage has to buy from a middleman for no reason other than the distributor has decided that the middleman cannot stand on his own two feet like everyone else in the industry and has to be protected.

(2) Some independent garages couldn't be bothered with the hassle of ordering and collecting the parts from a main dealer for little or no discount, and losing money in transit to collect parts from a main dealer. Also, some independent garages don't want their cashflow being tied up in parts that are sometimes hundreds of Euro in value that are incoming from a main dealer, where the money that they have tied up is paying for what are mainly over the top profit margins to a main dealer, so the independent garage just says to the customer that the car has to go back to the main dealer for repair and then the customer ends up being driven back to the main dealer where labour costs are substantially higher.

crosstownk wrote:

They only have warehouse staff and not parts people. It is the partsman in the dealer that identifies the part number and places the order. The guy in the distributor warehouse takes the order printout and fetches the part from a vast warehouse by using the storage bin location. He probably has absolutely no idea what the part is, let alone what it's function is.

And it's the mechanic who tell's the partsman what the part is and what it's for. The partsman usually doesn't know what is in the box either when he picks a part from the shelf. When I go into a main dealer parts dept to get a part, I always bring the old part with me, and 95% of the time the first question I get asked is, "what's that?". A mechanic always has to check it to make sure it is the same as what has come out of the car. There is no huge knowledge gap on the part of independent garages that requires a main dealer to "interpret" parts information for them, other than what is on the computer in the parts dept, which is restricted to main dealerships.

As I said above, any independent garage can look up a part number given the absolute minimum of information. For example, if I want to order a Valeo clutch, I run a program on my PC that I got from Valeo that lets me pick the make, model, year, engine type & size and gives me the Valeo part number. I ring the supplier, give them the part number, I can see a picture of the clutch to compare it to the one that has come out, I can see the measurements, etc, if I'm happy I have the right part number (not that I need to check as the system has it all done for me), I order it in and it's on its way to me. There is no more complexity involved when a main dealer orders a part from a distributor.

Alun

MercMad wrote:

I think I'll go down to St.James' gate this afternoon and buy a keg for the weekend !

Whilst you may get a frosty reception there, many breweries in the UK and the continent will actually let you do exactly that!