2021 is proving to be a year of unprecedented optimism for dealerships focused on parts and service. After a year like no other, dominated by uncertainty from the pandemic and with the ongoing effects of equipment shortage expected to last well into the next year and beyond, there are tremendous opportunities to be had in the aftermarket.
Because as of late Q2 of 2020, the demand for equipment parts not only recovered quickly, but in some segments has in fact grown, now to levels never witnessed in the North American equipment industry.
The reasons for this growth pattern are noted below, however before we explore these, it is important to note that while the opportunity is there, harvesting it as not easy. Parts sales are extremely complicated. Virtually no other form of commerce requires their level of support of the buyer, for what tends to be, on average, an approximately $400 purchase.
To identify the right part(s) requires that the buyer know a great deal of information about their equipment – not just make and model, but also serial number (many parts are serial-number specific), equipment-use history, outstanding service alerts, etc. And to make the right purchasing decision, the buyer also needs to know a great deal about the dealer – price, availability, service support, etc.
Getting this transactional information married up to support the right purchase ultimately falls on the seller – the dealer. So, while parts sales represent a massive opportunity – especially as demand is expected to go through the roof for some time to come – they also come with a great deal of operating cost overhead.
Thankfully, technology can help turn this historically unprecedented occasion into an opportunity for high-revenue / low-cost, and therefore high-earnings e-Commerce.
But first let’s explore what happened to parts sales during the pandemic. There were three stages.
Many equipment owners put their planned purchase of new equipment on immediate hold, given tremendous uncertainty associated with the pandemic. The purchase of equipment parts, too, declined, due to a reduction in construction activity, and therefore of equipment use.
While equipment purchasing continues to be significantly suppressed, parts consumption bounces back quickly, now surpassing pre-pandemic levels and continuing to grow throughout the year. Part of this growth is due to increased use of existing equipment (more usage means more service and repair). The other part of it is due to the average age of equipment fleets growing in the absence of equipment purchasing (older equipment requires more parts and service).
By late first quarter 2021, parts consumption shifts sharply upward, in many cases by more than 20%! Why? Not only are fleets continuing to age in the absence of now being able to find new equipment, continuing to drive a need for more parts, but equipment use is also growing rapidly, due to a rapid increase in construction projects.
