Competition Intense in Parts Business; Parts Volume and Personnel Salaries Up

Oct. 1, 1997
INCREASED competition and more demanding customers have forced changes in the parts business for most trailer dealers and truck equipment distributors.

INCREASED competition and more demanding customers have forced changes in the parts business for most trailer dealers and truck equipment distributors. Trailer/Body Builders recently conducted a phone survey to determine what problems dealers and distributors have faced over the last five years, what they've done to solve the problems, and what they will do in the future to remain competitive. The survey also determined nationwide inventory trends, turnover rates, and projected sales. Survey results are based on 90 responses to phone calls made to truck equipment distributors and trailer dealers.

The single largest factor affecting most parts houses in the last five years has been increased competition. Both dealers and distributors said that original equipment manufacturers are offering parts at lower prices than the aftermarket distributor can offer. Many truck equipment distributors worry about the many discount stores, auto parts stores, and hardware stores that are entering the truck accessory market.

Companies have reached different solutions to keep from being undersold. Many have cut margins and increased volume. Others have increased profits by reducing their inventories and finding niche markets. Several truck equipment distributors said they are competing with discount stores by offering more complete service and higher quality products than non-specialty stores.

The TBB survey showed a trend toward retail type sales. Many companies have converted existing space into showrooms, updated and expanded existing showrooms, or built new buildings for retail sales.

Inventory and Sales Despite stiffer competition, overall parts sales figures are up 18% from last year, according to the TBB survey. Trailer dealers saw the largest average growth with a 21% increase, while truck equipment distributors were up 15%. Growth was nearly universal among truck equipment distributors-as much as 100% for one of the survey respondents. Of the 52 distributors interviewed, only one reported a decrease, and that decrease was a small (2%) one. Trailer dealers showed less fluctuation, with a high increase of 50% while only one reported a low of no increase from last year.

Truck equipment distributors have undergone explosive growth in parts sales since the last TBB survey in 1991. That year, average parts sales for distributors was $668,026. This figure has grown to more than $1.8 million in 1997. Although these figures represent different samples, the findings indicate considerable growth for truck equipment distributors.

Survey respondents expect parts sales to climb another 6.5% next year. Among the respondents, trailer dealers are expecting a 3% increase. Truck equipment distributors anticipate a 10% growth on average.

Selling Parts Faster More than 25% of responding truck equipment distributors said they are adding to or improving an existing showroom. The same changes are common among trailer dealers, with more than 19% responding similarly. Owners agreed that having parts in front of the customer makes them easier to sell. "Getting the parts out where customers can touch and look at them makes them sell faster," said one owner.

Ten percent of responding truck equipment distributors said they will need to add sales personnel in the near future.

Communication technology is changing the parts business. Several companies said that they will be improving their online services to better communicate with customers. Buyers will soon be able to search dealer parts inventories and place orders via the Internet. The future likely will bring fewer non-networked terminals to the showrooms and stockrooms of dealers and distributors. Bar coding will help several distributors managetheir inventory more efficiently in the future.

Salaries In 1991 TBB conducted a similar mail survey that also produced industry average salaries for parts personnel. Based on the latest survey, compensation has increased moderately during the past six years. Due to the widely varying nature of means of compensation, it is important to recognize that the average salary figures listed below do not include additional income from commissions or annual bonuses.

Industrywide, parts managers earn an average of $36,337 annually, an increase of more than $4,600 from the 1991 figure. Sales positions also have seen significant salary increases. Salaries for inside sales people saw the most dramatic increase-from $22,268 in 1991 to $27,151 now. Average salaries for outside sales people also increased-from $29,250 to $32,779.

Average salaries for trailer dealers are: parts manager $39,377; outside sales, $30,668; inside sales, $27,341. Truck equipment distributors average salaries are: parts manager, $33,297; outside sales, $34,892; inside sales, $26,960.

Parts managers at truck equipment distributors are not paid a typical salary nationwide. The TBB survey showed a range of more than $33,000 for parts manager salaries across the country. The highest paid respondent listed a $50,000 annual salary, three times that of the lowest responding parts manager at $16,640 annually. The same is true for inside sales people at truck equipment distributors. Inside sales salaries ranged from $16,640 to $45,000. The maximum reported for outside sales people is $40,000 while the minimum is $30,000.

Trailer dealers also exhibit fairly wide ranges, according to the survey results. Parts manager's salaries range from $27,984 to $51,600. Inside sales people are paid anywhere from $18,500 to $41,600. Trailer dealers pay outside sales people between $15,600 and $40,000 annually.