Mark Giammalvo specializes in driveability diagnostics at his family business, Sam Giammalvo's Auto Sales & Service, Inc. in New Bedford, MA.
Mark, who has been with the business for
over 20 years, is an ASE
Master Technician and Parts Specialist. He also holds the ASE
L1 certification, and has an associates degree
in business management.
(Printed in the Journal of The Alliance of Automotive Service Providers, AASP)
What is your discount rate on OEM parts? Is it 15, 20 or 25 percent? Which amount is the discount taken from? Ah, ha! Got ya!
This week I had yet another offer of a "great" parts discount. A dealer from another state actually sent their parts counter person out 50 or so miles to drum up new business. Boy, now I really know winter business is slow. The salesperson was one of the few types that I like. Upbeat, low pressure and dressed in a "clean" uniform. An offer was on the table: "Give us your parts business and we'll give you 30% off, for six months." In my mind, I was willing to bet this guy had quickly signed up a lot of new accounts with that positive little statement. However, sometimes in life you're the fish and sometimes you're the person fishing. It's all about knowing what side of the fishing pole you're on. Unfortunately, for him, I was not going to take the bait. Twenty plus years has afforded me a tad bit of knowledge about the OEM parts industry. At this point, I asked him what the 30% off was. The salesperson said that it was the exact discount off "the price." Then I asked: "What price? The factory list price or a list-plus matrix price?" I've got to tell you. This guy's face lost all color. Either the lights had just gotten a lot brighter in my office or a sudden surge in gravity had just forced all bodily fluids to his feet. He stuttered a bit and said that they would take the 30% off the list price. I questioned him further to make sure they would take it off the manufacturers MSRP list. Then I questioned him about the "for six months" part of his sales pitch. I asked him what happens after the six months are up. Is it anything like those introductory rate credit card offers? He said that if we purchased "enough" parts the part's manager would probably keep us at the 30% discount. Now I asked him which parts qualified for the 30% discount. His voice softened as he stated that body parts would get the discount. Well, that was not going to help us since we don't have a body shop. He did agree to look into the possibility of getting us the 30% off on other parts. Overall the salesperson was a good sport. He took my questioning pretty good considering it caught him off guard. It's just that I've fallen for the marked up discount scenarios in the past. "We'll give you 30% off list." Then you call another dealer selling at 20% off list only to find out he's the same price or cheaper than the 30% off dealer. Fool me once shame on you. Fool me twice shame on me. Occasionally, I call around just to see if anyone has changed the pricing. Remember, you can't tell by the invoice. Anyone can tinker with both the cost and list amounts to tailor any discount they want.
As stated earlier: Which list price are we referring to? Which parts qualify for the discount? Then the most important question: How often per day can you deliver given the distance between your facility and ours? Other questions that can be important are things like restocking fees and restocking dates. Two long time dealers we have been using have recently revised their restock policy. In years past there was never a restocking fee. Now, if the part is special ordered and you have to return it, you pay a 20% restock fee. (20% of the price you paid just in case your wondering). Many dealers do not want to charge this fee but now have to. This is charged to offset the restock fee they have to pay the manufacturer. This is usually a percentage of their monthly or quarterly returns. Another dealer we use will not allow parts returns after 30 days has elapsed, period. This even applies to parts they stock. After 30 days go by, you own it. This is becoming a problem for us since not all customers will come back in within a 30-day period. Sometimes the customer no longer wants to perform the repair. Unfortunately, we may now have to charge the customers for the parts up-front when ordered. Also, watch out for the high-line manufacturers that do not have a well-disbursed and saturated dealer base. I am finding that we receive extremely low discounts from same brand dealerships that are 15 or more miles apart. Lets face it, these dealers can charge whatever they want if the next closest dealer is at least a half hour away. It's those old laws of supply and demand. Just some things to think about the next time you're faced with a seemingly, better offer.