Uberization of Global Auto Aftermarket

Uberization of Auto Aftermarket – it’s enough to bring a smile on Dara Khosrowshahi’s face…and yours. First, Mr. Khosrowshahi will be a happy man, because there’s an innovative trend emerging in the vehicle servicing space that, in a nod to the original paradigm buster, has been termed “uberization.” It’s good news for you, if you’re a car owner, because it means you get to select, with nothing more onerous than a couple of keystrokes on your computer or mobile, which workshop best meets your car servicing requirements. And, finally, it is a great development for small, independent vehicle servicing workshops, parts dealerships, and service aggregator platforms because it means a wider target audience and more revenues to spread around.

A Winning Proposition for Car Owners and Service Businesses

The premise behind the uberization of vehicle services is quite simple. Similar to the Uber model, vehicle workshops (think drivers in Uber’s case) can list themselves on online platforms or mobile apps. Among the more established platforms are Whocanfixmycar.com, Autobutler, Openbay and Caroobi. A customer requiring, for example, an engine oil change can go onto these platforms and search for workshops located in close proximity. They can also instantly get comparative estimates on how much each workshop will charge for that particular job. There’s the additional benefit of workshop ratings and reviews. Armed with this knowledge, they can make an informed decision about which workshop to go with, schedule an appointment, and pay online.

In my opinion, it’s a win-win-win situation. An overwhelming number of vehicle owners in mature markets do online research before purchasing parts or servicing their cars. In this context, online service marketplaces are extremely convenient since they include price quotations and customer reviews, and allow customers to make their service bookings through a digital platform. In short, convenience, value, and transparency in pricing and service quality. What more could a customer want?

Today, after-sales are becoming an increasingly important component of profitability for parts dealerships. For original parts dealerships, it offers better access to out-of-warranty and independent aftermarket customers, and helps build brand trust and transparency. In other words, the prospect of customer retention and expansion, and the ability to develop multi-brand repair capabilities. What more could a parts dealer want?

The uberization model is also a powerful tool with which independent vehicle servicing workshops can withstand the onslaught of franchise chains. Establishing a digital presence helps boost their competitiveness, widens their access to customers, and allows them to build brand trust. What more could an independent workshop want?

The uberization of vehicle services is then, in many ways, a mirror of how Uber upturned the mobility industry. It marks the emergence of new tech-based intermediaries who are using the power of e-commerce, digitization, and connectivity to completely disrupt traditional after sales dynamics. It’s a trend that has transformed every aspect of the service delivery process and marks a definitive move away from traditional vehicle “repair and service” models to a revolutionary vehicle ownership “management” paradigm that offers end-to-end solutions for car owners, fleets and installers.

Show Me The Money!

It’s clearly a change that has appeal. When I talked about “more revenues to spread around,” I was talking in the range of about $1.5 billion, a figure that a new study by Frost & Sullivan expects will collectively be generated by 2025, by job bookings on online vehicle servicing platforms in the U.S., U.K., Germany and France. The obvious question then is: where are the revenue streams and what are the key performance indicators (KPIs) in this new model?

Service aggregation platforms draw revenues from two primary channels: B2B, where revenues derive from job referrals and services provided by workshops, and B2C which center on vehicle owners.

In the workshop centric B2B model, service aggregators make money on service commissions and subscription fees. Every mobile application/online platform will charge a commission—either flat or tiered—for every job acquired on it. Typically, the platform keeps about 10-15% of the total job value of each individual job, while the workshop retains the bulk of 90%.

Subscription fees represent another approach to revenue generation. Here, workshops pay a fixed monthly fee—say, anywhere in the range of $15-$200—to either be listed on the site, to qualify for tiered commission plans, or to maintain an online presence with CRM support. A third way for service aggregators to profit is by charging a commission on parts. Here, they supply replacement parts for jobs booked on their platform, but tack on a slight mark up.

Revenues from the customer focused B2C channel come from having drivers pay for a telematics application in order to access onboard features that also include service aggregation. However, this channel has not yet been widely tested and its success could be crippled by customer unwillingness to pay for a service they might otherwise expect for free.

Measuring Success

It’s a new and evolving business, with competitors constantly working to improve a range of workshop centric KPIs. Among these include the conversion ratio or the ratio of quotes to jobs completed. Currently, this ratio currently varies between 10-30%. Then there is network size which relates to the number of workshop partners. Another important KPI is subscription penetration which focuses on membership subscription ratio by package type. Currently, only about 5% of workshops subscribe to a premium package in the case of tiered plans.

Equally distinct KPIs are used to measure the model’s success with vehicle owners. One is the average bill value per customer, which currently hovers at about $250-$270, globallyOther indicators include customer retention levels or the ratio of repeat business; the average quote for every job request and the mix of quotes from franchised, large groups or independent workshops; and reviews of customer scores for workshops which reveals levels of customer satisfaction.

As the uberization of vehicle services continues to win adherents, vehicle manufacturers and parts suppliers—BMW, PSA and Shell, among them—are showing increasing interest in stepping into the fray. I advise they not wait too long since I strongly believe that such digital service marketplaces will be integral to building a comprehensive, integrated mobility solution for the future.

trends in auto service

Notes from the Author:
Sarvant Singh
Managing Partner – Middle East, Africa & South Asia at Frost & Sullivan

I am a Senior Partner in Frost & Sullivan where I head the Automotive & Transportation practice and also founder of a think tank group that works on future (Mega) trends. My team and I pioneered the “Macro to Micro” approach in analyzing Mega Trends in 2008, which has since been tried and tested with Fortune 1000 companies in developing white space opportunities. I authored “New Mega Trends,” published in 2012 with Palgrave Macmillan, which has since been sold in over 30 countries and is currently being translated into Chinese for a China market release in 2014. I consult Fortune 1000 companies (clients like P&G, Ford, Philips, BMW, Fiat group, Nissan, Toyota and UNIDO). I am an Engineer and have a MBA from Leeds University Business School, for whom I am now a member of their Advisory Board. I have also done an executive course at the Kellogg School of Management. I am a well-known thought leader and a charismatic futurist who combines engineering acumen with strong commercial experience. Follow me on Twitter: @Sarwant.

This article was written with contributions from Anuj Monga, Program Manager with Frost & Sullivan’s Aftermarket Mobility team. RI

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