2010 Auto Accessories Sales - A Trend Report

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1 Trend Report February, 2011 Overview 2010 Auto Accessories Sales - What accessories are the volume leaders at dealerships? How do sales vary regionally? What profits are dealers driving with accessories sales? How can dealers become accessories sales champions? The auto accessories market is enormous, with projections - even in this still-challenging economy - for solid growth ahead. And, while the recession brought the accessories market to a five-year low ($28 billion) in 2009, recovery is now clearly taking hold. Accessories represent a huge market opportunity for automotive dealers, but one that, until recently, has remained elusive: franchised dealerships share of the market dropped from 10.9% in 1999, to a paltry 5.3% in 2009, with the lion s share of accessory sales captured by specialty install and automotive chains.* A host of factors are making the time ripe for auto dealerships to capture a greater share of this profitable market: the economy is improving and consumer purse strings are relaxing, new-vehicle sales are projected to rise by double-digits this year; and innovative tools using online platforms have emerged that make in-dealership accessories sales far easier and more effective, while also reducing the pain, and avoiding the cost, of keeping cumbersome inventory. The average dealership analyzed increased accessories sales by $475 pervehicle-sold, with average gross margins of 45% and average net profit margins of 28%. The following report is designed to help dealerships address this huge market opportunity by providing data around the latest dealership accessories trends, based on reporting from dealerships that have had significant success with accessory sales in The report highlights the accessories that are most popular with consumers, which accessory categories have the most traction across different U.S. regions, and the vehicle models that are attracting the highest volume of accessories sales for these dealers. Trend Report Sample This report is based on sales data from a diverse sampling of 140 dealerships, representing 13 brands and 5 regions across 30 states. These dealerships, in aggregate, have sold $20 million in accessories in The average dealership analyzed increased accessories sales by $475 pervehicle-sold, with average gross margins of 45% and average net profit margins of 28%. The final section of this report shares key best practices that enabled such extraordinary accessories sales performance. * SEMA 2010 Annual Market Report AO: 2010 Auto Accessories Sales 2011 izmocars. All Rights Reserved Page 1

2 The Top 10 Accessories Categories of 2010 Consumers Seek Style, Utility, Economy & Technology In terms of sheer retail sales dollars, the high-price-point Upholstery category was #1 overall in 2010, dominated by sales of leather and heated seats. Upholstery also led the pack in terms of dealer profits. However, analyzing the leaders in volume of parts sold, and other dealer profit winners, another story emerges: a 2010 consumer putting a lot of emphasis on style and a little on utility - with a strong showing for add-ons with wallet-friendly price points (that drive big dealer profit numbers through sheer volume and ease-of-sale). Technology is also a powerful chapter in the 2010 accessories story, with electronics, particularly remote entry systems, performing especially well. Top 10 Accessories Categories, 2010 By Volume of Parts Sold By Retail Sales By Dealer Profits 1 Factory Exterior Upholstery Upholstery 2 Body Side Moldings Electronics Electronics 3 Floor Mats Step Bars Step Bars 4 Electronics Wheels Wheels 5 Factory Interior Navigation Dealer Packages 6 Window Tint Body Side Moldings Body Side Moldings 7 Step Bars Factory Exterior Navigation 8 Upholstery Video Paint Protection 9 Hitch and Accessories Window Tint Window Tint 10 Dealer Packages Hitch and Accessories Factory Exterior In this chart, accessories are grouped into relevant categories and analyzed by volume ( parts sold ), retail sales and dealer profits. The 2010 consumer put a lot of emphasis on style and a little on utility Style & Economy Factory Exterior parts ranked as the #1 accessory category by volume in As much about style (the cool factor) as about utility, the category encompasses products like splash guards, bumper protectors and visors that provide consumers with an opportunity to add that little extra something to their vehicles, a personal style statement, at low enough price-points for post-recession budgets. (This probably explains why the category ranked in the top ten for both overall sales dollars and dealer profit.) A popular and easy sell, Factory Exterior parts drive up dealership profits by volume sold. Body Side Moldings, typically as much a style statement as a utilitarian choice, ranked #2 in volume sold, while also landing in the top ten for both overall sales dollars and dealership profits. Floor Mats ranked #3 for volume, but their relatively low price point excluded them from the top ten for overall sales dollars or dealer profits. AO: 2010 Auto Accessories Sales 2011 izmocars. All Rights Reserved Page 2

3 Interior Utility - A New Opportunity Factory Interior, a purely utilitarian category, made an impressive showing by volume sold. Dominated by parts that add interior utility/organization to the vehicle (i.e. cargo trays, cargo nets, etc.), the category currently shows much higher consumer demand than impact on dealer profits. But these clearly popular, relatively low-cost ways for car buyers to make their vehicles more functional and user-friendly on the inside could provide a strategic sales opportunity for dealerships. Top 10 Parts by Category, 2010 Factory Exterior Factory Interior Electronics 1 Splash Guards Cargo Tray Remote Start 2 Rear Bumper Protector Cargo Net Security 3 Mudguards 4-pc. Kit Cargo Cover Keyless Entry 4 Moonroof Visor Trunk Tray Bluetooth 5 Door Visors Emergency Assistance Kit Backup Sensor 6 Rear Bumper Applique First Aid Kit Backup Camera 7 Mudguards Cargo Organizer Electronic Trailer Brake Controller 8 Bed Extender Cargo Tote Wireless Headphones 9 Black Mudguards - Set Of 4 Center Armrest Media Hub 10 Door Edge Guard Under seat storage Handsfree Link The Profits of Technology The consumer obsession with all things high-tech and wired is played out in the strong showing for the Electronics and Navigation categories, both revealing a crucial impact on the dealership bottom line. Electronics (which includes remote starts, security systems, keyless entry, and Bluetooth, etc.) ranks an impressive #2 in overall retail sales and dealer profits, while Navigation and Video categories rank in the top ten for overall sales dollars (with Navigation proving the bigger profit generator, coming in at #7 for dealer profits). Drilling down within the Electronics category, remote start technologies are strikingly dominant, with regional data revealing that dealerships in colder climes are reaping the greatest benefits (Warm up the car before I get in!). Bluetooth, ranking #4 in this category, was probably strengthened by recent, regional legislation over cell phone usage in cars - and Security Systems also have respectable showings within the overall Electronics category, ranking in the #2 spot. A Step Up Step Bars (ranking #7 in parts sold) are clearly providing a real lift to dealerships: ranking #3 for both total sales dollars and profits. The consumer appeal may be utilitarian or a style statement, depending on which generation you ask: the aging Boomer population increasingly may need a little help stepping up into that pick -up, SUV or mini-van, while younger buyers may be seeking higher profile trucks. Window Tint ranks in the top ten in volume sales and profits; and the regional data reveals that window tint is most popular in the South and West where the sun shines brightest. The Dealer Packages category, which allows dealers to maximize profits by offering consumers customized accessory packages that are in tune with the customer needs within that market, makes an impressive #5 showing for dealer profits, while ranking #10 in volume sold. AO: 2010 Auto Accessories Sales 2011 izmocars. All Rights Reserved Page 3

4 Accessories Breakdown by Region Not surprisingly, the types of accessories sold can vary significantly by U.S. region, with climate apparently having the biggest impact. Electronics is the dominant volume leader in both the Mid-Atlantic and Northeast, while ranking #2 in the Midwest. A closer look at the Electronics category reveals why: Electronics top-sellers are almost exclusively iterations of remote starters, most attractive to consumers living in cold climes. (Although security systems and Bluetooth creep into the top ten in the Mid-Atlantic.) Predictably, Window Tint ranks #1 in the sunny South, but doesn t break the top 5 for any other region. Step Bars rank in the top five everywhere except the South - while towing accessories only hit the top five in the Mid -Atlantic states. Overall, Factory Exterior is a consistent big seller (ranking either #1 or #2) across all regions, while Body Side Moldings spread the wealth everywhere except the Mid-Atlantic. Top 5 Parts by Region by Total Units Sold MidAtlantic Midwest Northeast South West 1 Electronics Factory Exterior Electronics Window Tint Factory Exterior 2 Factory Exterior Electronics Factory Exterior Factory Exterior Floor Mats 3 Step Bars Floor Mats Body Side Moldings Factory Interior Body Side Moldings 4 Hitch and Accessories Body Side Moldings Floor Mats Body Side Moldings Factory Interior 5 Floor Mats Factory Interior Step Bars Floor Mats Step Bars America s Best Dressed Models (and Makes) Among the dealers studied, Toyota and Honda represented the top two brands for both overall accessories revenue and profits-per-sale, with import siblings Lexus and Scion also making a strong showing, and Ford rounding out the top five. And when analyzing the most-accessorized model within these top brands (in terms of overall accessories sales), the results are surprising to industry insiders as the top five models are dominated not by trucks, but cars. The Top 5 Most Accessorized Brands #1 Model for Each Brand Make #1 Most Accessorized Model within each Brand # 1 Toyota Toyota Camry # 2 Honda Honda CR-V # 3 Lexus Lexus RX # 4 Scion Scion tc # 5 Ford Ford Fusion AO: 2010 Auto Accessories Sales 2011 izmocars. All Rights Reserved Page 4

5 Dealership Accessories Champions Timing is everything with accessories sales. When we put the right tools in place so our customers could configure and visualize their dream-accessorized vehicle right at the moment of purchase everything changed! Josh Coutts, Accessories Champion at Michael s Toyota of Bellevue. Each of the 140 dealerships represented in this study improved their accessory sales and profits over the last year by using an online configuration tool (AddOnAuto from izmocars) and a new process that virtualized their inventory and streamlined the co-ordination of accessory sales across all departments But four of these dealerships were standouts among standouts, accelerating accessories profits at breathtaking speed and demonstrating that not only is cracking the accessories code within any dealers reach, it can literally transform the numbers on the dealership Income Statement. Trying to sell a customer something they can t actually see or imagine is an un-engaging, ineffective proposition, said Richard Bustillo, General Manager of Rick Case Honda of Ft. Lauderdale. But when we let customers configure their exact vehicle with thousands of accessories, on the fly, online our sales dramatically increased. Closing ratios for these dealerships in 2010 ranged from 50% (i.e., one in two customers bought accessories) to 96% (closing nearly every new-vehicle buyer), with three in four hitting closing ratios above 80%. All at least doubled accessory sales, with Dick Brooks Honda growing sales thirteen-fold, and Michael s Toyota tripling sales in just 8 months. For these dealerships, accessories sold-per-car reached at least $475 by year-end 2010, with Germain Lexus achieving an accessories revenue per-car-sold of $1,082! Time on AOA Before AOA After AOA Average* Close Ratio Avg Acc. Sales per Car Sold Michael's Toyota 8 Months 30, ,000 50% $475 Rick Case Honda 9 Months 60, ,000 86% $738 Germain Lexus 10 Months 31,816 62,000 96% $1,082 Dick Brooks Honda 1 year 3,000 49,000 82% $520 *Q averages AO: 2010 Auto Accessories Sales 2011 izmocars. All Rights Reserved Page 5

6 How Did They Do It? Best Practices of Accessories Sales Champions: 1. Understand your accessories market: i.e. which accessories are more likely to be popular with your specific customer base. Use that information to develop your sales strategy 2. Identify/adopt an online tool that can configure the exact vehicle (down to year, make, model, interior and exterior color) with accessories on the fly, so customers can immediately and richly visualize the enhancements. 3. Take advantage of any wait time after the purchase has been negotiated and financing is being arranged to let the customer digitally configure their new vehicle with accessories. 4. Dealers are most likely to sell genuine OEM accessories, but aftermarket accessories can play an important role in supporting your OEM sales and prices, by filling in the gaps on fast -moving accessories not offered by the OEM (e.g. window tints, remote starters, etc...). 5. Interior accessories and electronics are critical to your accessories profitability, so make sure the tool you choose has interior, as well as exterior, visualization capabilities. 6. Ease the financial pain for consumers by calculating the enhancements into the overall financing and monthly payment, along with providing the upfront price. 7. Ensure that the accessories sales, financing, and installation process is seamlessly coordinated across the entire dealership, facilitating the efforts of everyone involved (the customer the sales, F&I, service and parts departments - management). Your accessories sales efforts will crash and burn quickly if any member of the value chain has a bad experience. For more information about the AOA 2010 Accessories Trend Report and/or for more in-depth information, contact Melanie Webber at melanie@mwebbcom.com. For more information about AddOnAuto from izmocars, contact mike.martinez@izmocars.com or go to AO: 2010 Auto Accessories Sales 2011 izmocars. All Rights Reserved Page 6