The economy has dominated my article coverage over the past few months -- what impact it is having, how resellers have been coping and readjusting to make ends meet, what the current situation means for next year in the aftermarket, and so on. This month was no different.
In speaking with an industry analyst about the inherent "shakeout" -- the sifting out of the weaker business players -- that economic instability is having on all markets, we devled into what the stable companies are doing to stay afloat.
Among focusing on commercial sales and increased global sourcing, he highlighted the use of private-label products. Because products manufactured overseas come with a cheaper price tag, resellers have been falling back more often on these white-box brands to help boost revenue. Profit margins when selling name-brand items are typically 30 to 40 percent, while the margins made when selling private labels are closer to 70 to 75 percent, says Kyu-min Oh, senior industry analyst for the Automotive & Transportation team with Frost & Sullivan.
And though consumers used to be plagued with concerns over the quality of products coming in from other countries, recent changes are making this fear much more obsolete. More and more U.S. manufacturers are creating plants in what some call "low-cost" or "best-cost" countries. The product quality is the same as found in the U.S., but it comes at a cheaper labor rate, saving money for all consumers throughout the supply chain.
What impact will this have on the aftermarket? Well with more private-label products expected to start gracing the shelves to keep profits and companies stable, I think it leans in the direction of continued pricing wars. The industry has always been competitive on price-point issues and the threat of private-label products to name-brand recognized products will only mean a further battle of the bargains.
JHedges, 2 years ago | FlagAlthough recessionsare notoriousl y difficult to predict, trends that occur in recessions aren't. Three of these trends are: 1). An increase in private-la bel products; 2). Innovation s in products and services; and 3). Some companies cut advertisin g/marketin g expenses, but these companies tend to lose market share after the economy has recovered. Companies with the largest market share in their particular segment typically sell a broad line of commodity products and are forced to compete on price. One key to avoid competing on price is to specialize . I wrote an article for SEMA News back in 2003 that covered market share and market dynamics that can be read at http://www .hedgescom pany.com/m arketshare .htm Smaller aftermarke t companies can avoid being forced to compete on price if they can specialize in a market segment, avoid commodity products through innovation , offer exceptiona l service and quality, and react quickly to market trends.
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