Embed Size (px)
Citation preview
The China Aftermarket: Beware of ‘Cut and Paste’
By Dave Barbeau CEO, Barbeau Consulting
Exclusive Thought Leadership from AASAApril 2019
The China Aftermarket:Beware of ‘Cut and Paste’
By Dave Barbeau CEO, Barbeau Consulting
Every business in every industry has an imperative to grow. This is true for the Automotive Aftermarket Industry and the participants in it; whether they are a manufacturer, distributor, service provider, marketing group, or service companies (marketing services, technology providers, mergers & acquisition companies, private equity). For companies looking to grow outside of their home markets, China is the place to be. The China aftermarket is projected to grow in excess of 10 percent per year; the car parc is surpassing five years into prime aftermar-ket years where vehicle maintenance and repair matters more as does consumer value and quality. It is expected that this growth rate will continue for the next two decades, and by 2030 will catch the U.S. This is a compelling scenario for companies to enter the market, or for companies already there, to grow their market position.
Successful companies are proud of their business models, policies, and practices. When a com-pany is pursuing global expansion, a typical approach is to implement their traditional business model as this is what brought success in their home market: “Copy, cut and paste,” or “Plug and play.” Sounds logical and reasonable, right? Sharing “Best Practices” will lead to success, right?
I say, “No, maybe not.”
Successful business models in a developed market may not work in a developing market. “Cut and paste” or “Plug and play” can be costly and dangerous. There are some glaring examples of very successful companies that have entered the China aftermarket and failed. There is also some conventional thinking that the growth in the China aftermarket will follow the growth pat-tern of the aftermarkets in Europe and the United States. To this I say, “Probably not.”
At the Automotive Aftermarket Summit at Shanghai Automechanika in November 2018, there were some very interesting insights into the China aftermarket. This market is transforming, maturing. The distribution channel is evolving and there is increasing concentration, and there is an emerging “New Retail,” seamlessly blending online and offline retail setting a new technology model that the rest of the world may follow. Many of the China aftermarket leaders have come from technology backgrounds and not “parts” backgrounds. They are taking a very different approach to developing a supply chain to reshape the ecosystem of the automotive aftermarket. Ironically, perhaps they are in a position to share their best practices with developed markets. New approaches in a developing market are not impeded by significant imbedded infrastruc-ture. The China aftermarket has the luxury of a “Clean Sheet of Paper.” Developed markets do not. In China there is more freedom to innovate at this stage of the market development.
Something that is important to note, there is also a very different consumer dynamic in China. The Chinese people manage their lives from a smart phone—purchases, payments, information is delivered through their digital devices to a greater degree than in Europe or America. The Chinese motorist also has alternatives to car ownership, e.g. shared mobility—car sharing, e-hailing, and low cost/efficient public transportation in their cities. Such alternatives can create a different level of expectation for car repair/service. Maybe “30 minute” parts delivery and same day repair is not important to the Chinese car owner. To meet the time expectations of car repair in America which the industry has created, a significant investment has been made in “brick and mortar” and forward deployment of billions of dollars in inventory. Chinese aftermarket leaders are taking a different approach to this supply chain model.
So, as you plan to enter or expand your investment in the China aftermarket, I would like to offer suggestions for you to consider:
• Make a commitment to understand the market. Nothing beats seeing it operate first hand.
• Forget what you have done in your market; observe, listen, study and then begin to formulate ap-proaches to market success which may be very different than what your experience has taught you.
• Learn about the market from the workshop’s perspective, and then work backward. Responding to customers’ needs always works better than imposing a prescribed process. Understand their success factors; don’t impose yours.
Avoid the temptation to enter the market with a “Cut and paste” strategy. It probably will not work.
About Barbeau Consulting / AMI Insight
Barbeau Consulting is an associate member of AASA. Dave Barbeau is a past chair of the AASA Board of Governors.
Dave Barbeau is CEO of Barbeau Consulting. He has extensive experience in the China aftermarket having led the global aftermarket business units of two Tier One manufac-turers, and their development and growth in the China aftermarket. Barbeau Consulting partners with China based AMInsight Consulting, which provides added market intelligence, expertise, support and insight into the China aftermarket from their office in Shanghai.
CMYK
C: 0M:100Y:100K:10
C:0M:0Y:0K:97
USA Office: Shanghai Office: Barbeau Consulting LLC AMInsight 5319 Fenwick Way Court No 2965 Capital Land, Sugar Land, Texas 77479 No.6088 Hu Min Road Min Hang District www.BarbeauConsulting.com Shanghai, P.R.C. [email protected] [email protected] +1.248.808.3213 [email protected]
