For decades dealers have struggled with the question of whether to be in or out of the body shop business. Our dealer clients have struggled with that question as well. Even though we make our living supporting body shop operations — both dealer and independent — we do not always recommend the dealer to stay in the body business.
Properly run, the dealer collision center can be highly profitable and a great way to maintain customer relationships from cradle to grave. However, a poorly run body shop operation can sabotage a lifetime of goodwill over one botched claim or improper repair.
The stakes are subtlely high. Our research shows that the collision customer is 65% pre-disposed to look to the dealer for collision repairs. However, dealers are rarely market leaders in this category. As one Toyota guru told me at one of our management classes, “If the customer is 65-80% predisposed to buy our services and we only fix 25% of the market opportunity, we don’t have a sales program, we must have a “sales prevention program.”
As the complexity of the vehicle increases, so does opportunity. Customers and some insurers are becoming more aware of the necessity for precision in modern vehicle damage diagnosis and repair. Electronics, ADAS (advanced driver assistance systems), cameras and radar are today’s reality. The backyard body shop should never be allowed to fix these cars.
And you better believe equipment costs are significant. Scanning tools, pre-measuring electronic systems for damage analysis and structural repair benches or racks are expensive yet essential. Welders are constantly evolving in order to properly weld new and changing metallurgy. Rivets and adhesive systems are often brand specific and must be kept up to date. Refinish technology with both solvent- and water-based capabilities are important pieces of the properly equipped shop. We can’t get by doing what we have always done.
“Educate and invest or get out” is our mantra.
Does your body shop parallel your overall brand identity?
I remember working with a large dealer from Ohio a few years back who needed to consider his body shop brand compatibility. His sales facility was second to none. Sales performance and gross retention were epic. The body shop, however, was a dog.
It was so dissimilar to his overall brand identity I enclosed a few photos of the body shop with my report. I wanted him to simply evaluate from a visual perspective just how dilapidated things had become. When we drilled down operationally, it was even worse. He had a decision to make. To my delight, he chose to modernize (most people would have thrown in the towel). Within two years his collision operation was the talk of the town — satisfying customers and attracting top talent.
Unfortunately, many dealers believe the cost benefit for maintaining a top-level shop is not worth it. You will have to decide for yourself. My final words of advice are for you to get in and stay in if you are willing to invest, educate and market in a first-class way. Get out if you feel the hill is too steep. The need for great collision repair is still high, if properly handled.