Retail channels move toward digitization and additional services
The impact of the Covid-19 pandemic lockdown on the auto-repair industry compelled distribution networks to review their plans and accelerate the digitization process of their affiliates. During the two months of lockdown, many companies took the opportunity to make the technological leap needed to remain competitive in an ever-changing automotive world
The impact of the Covid-19 pandemic lockdown on the auto-repair industry compelled distribution networks to review their plans and accelerate the digitization process of their affiliates. During the two months of lockdown, many companies took the opportunity to make the technological leap needed to remain competitive in an ever-changing automotive world. However, if on the one hand, workshops, increasingly oriented towards becoming multiservice businesses, are updating services and equipment, on the other, given the drop in the volume of work due a two months lockdown, they are also asking for incentives and liquidity to overcome this phase.
Training, additional services and digitization represent, in the words of Dario De Vito, general manager of Conti Trade Italia and responsible for the BestDrive network, the perfect recipe for the recovery of the car repair sector.
What was the economic impact of the Covid-19 pandemic on your network?
"As with the industry as a whole, in the earliest phase of the pandemic many affiliates were forced to choose between staying open to provide a service, though the costs would hardly be met by dropping revenues due to a lower demand, or temporarily closing down while waiting for better times, making use of all government incentives wherever possible. Being located in different regions, affected in different ways by the pandemic has, in many cases, made the difference in the choices of the entrepreneur. During the months of lockdown, market demand in the car sector dropped sharply and those affiliates who did not have a trucking division in their core business as a safety valve, suffered more from the prolonged crisis. A situation that has taken a different direction as the pandemic loosened its grip and restrictive measures were downsized. Between the end of April and the beginning of May, most of our partners returned to full capacity, relying on the growing demand for rentals".
How are you supporting your network partners?
"From the very first days we started working on several areas at the same time by setting up different initiatives. The need to have timely information on the forced coexistence with the virus and safety in the workshop, was effectively dealt with by consultants and partners currently revolving around the BestDrive world. In order to better face the economic uncertainties now linked with the future, we have set up a team of experts who have supported our partners in cost analysis and in managing finances and personnel. Due to the forced "break", we invited our affiliates to participate in online training courses on sanitizing vehicle interiors, a service that enriches their offer and goes in the direction of a more professional approach and safety throughout the network".
How will the service model change?
"Whether we like it or not, these months have changed some of our entrenched habits and will inevitably affect consumer behaviour. Defining now what the future will hold is not easy, but we know that new types of services have come to the fore, for example, everything related to the safety and hygiene of the vehicle. All this will be a standard procedure in the future, and being able and equipped to offer it will become a necessary condition. Tire dealers will have to expand their offer and meet the changing requirements of their customers. Well-structured networks and multi-service centres seem to be the normal evolution of the market, a response to consumer expectations and the needs of the tire dealers".
For Alberto Zanoli, CEO of Pirelli's Driver Italia network, three are the elements that need to be addressed in order to give new impulse to the vehicle service and maintenance sector: planning, scheduling and digital services.
What impact is the Covid-19 pandemic having on the Driver network?
"The impact is considerable but at this stage one needs to be able to react quickly. Our operators have always been quite resilient, but now they must be able to intercept the new trends and new consumer habits that the Covid-19 pandemic has created. I am thinking, for example, of how people will adapt to this new situation with different mobility models, perhaps making greater use of private cars, which would need regular maintenance. And that’s not all. The drop in new registrations will have the effect of ageing the vehicles currently circulating on the road, which will need more assistance, if they are to move around safely. In addition, at this time, vehicles will need additional services related to health and safety. So we need to carefully analyse the changes that have taken place and adapt our methods to these new requirements".
How do you reconcile the need to respect the rules on social distancing with every day work in the workshop?
"Timing and safety for both operators and customers are issues that need to be addressed. This has prompted us to rethink our business model using innovative services, such as, picking-up and returning vehicles directly from the customer’s premises or replacing tires on-site. The latter is an activity that our network has been carrying out for a long time thanks to our "Driver on the go": a mobile workshop that serves mainly fleets or companies. So a lot of work needs to be done on quality and not just quantity, while focusing on offering additional services at the same time".
Digital services are bound to play a key role in achieving a full recovery. How are you organising yourselves?
"The evolution of our online offers is one of the new features of the Driver’s network. In February we presented our "Digital Showcase", a new feature of our website Driver.it that allows the user to plan and schedule any repair work directly at his trusted dealer. Through this tool, one can choose a product to buy and select the related services, and then book online the date and time of the appointment at the Driver Centre. This approach to planning and scheduling is certainly a habit that is being consolidated in all sectors. Having launched this tool at this time allows us to remain competitive in the market".
Being digital also means being trained to use these tools. How are you supporting your network?
"The inclusion of these digital tools, in addition to a new approach to planning and scheduling requires specific preparation. For us, training our staff is crucial and that is why we have never stopped investing in this area. This year, in March, we had planned a full calendar of training courses to help our dealers manage our new “Digital Showcase”. With the lockdown this was not possible and so we decided to focus on online training. We were pleased with the results because compared to traditional formats we had a higher number of participants from our dealers. Digital training is an additional resource that we will use in the coming months and years to intensify our relationship with our dealers.
The Michelin group's franchising network confirms the investments planned for 2020 by accelerating on the digitization of its centres, staff training, consulting and development of light mechanical work. For Cristiano Oliviero, Euromaster's managing director, the car repair sector’s recovery depends largely on the ability to intercept new consumer needs.
What impact did the lockdown have on the auto repair sector?
"Before the pandemic, some already had a number of problems related to liquidity and financial autonomy, and the Covid-19 emergency caused even more distress. This situation will certainly lead to a reduction in the number of market players, but at the same time, I believe we will witness a process of increasing knowhow. This means that many, in order to stay in business, will expand their expertise and provide an increasingly comprehensive support to the clients and not just one type of service. A real push towards a multiservice activity".
How did you organize yourselves?
"During the lockdown we worked with our partners to adapt their workshops to new consumer needs, but most importantly we provided guidance on how to operate safely. We took advantage of the slower months to speed up the use of digital tools in the stores, we continued to guarantee our support, although from a distance, we rethought the service and maintenance system and moved towards a predictive model. Together with Michelin, we have also worked alongside the Red Cross - and other humanitarian bodies - supporting them free of charge in troubleshooting and assisting their vehicles. But above all, we have widened the range of services in both the car and truck sectors".
However, these investments have to deal with the spectre of a looming economic crisis.
"These are special times and we're expecting some economic setbacks. We have estimated that this situation will have an impact on the year ranging from minus 15 to minus 20 for the automotive side of the business. However, there is another aspect that needs to be highlighted: people, given the health emergency and the economic repercussions, will make greater use of their private vehicles and in many cases will postpone the purchase of new ones. This will lead to increased maintenance requirements. But in order to intercept this demand, it is necessary to be in the position of offering professional assistance that focuses on the quality of the service".
According to Claudio Guella, First Stop retail manager South Region, the new needs of consumers, determined by the Covid-19 emergency, will push the service and maintenance networks to propose new services through digital tools.
What impact did the lockdown have on the network and how did you manage it?
"Covid-19 had a major impact on the network. At the beginning of the emergency, most of our stores, especially in the so-called red zones in Northern Italy, decided to close and were only available by telephone for urgent intervention. As the situation stabilized and following government decrees, several owners began to slowly reopen and return to normal. It must be said, however, that, as a network, we have tried, despite the difficulties in moving, to give continuity to the business both in terms of logistics and product delivery. And we did this by exploiting new digital tools".
How did you support your network?
"During lockdown we activated training courses and webinars. Starting from the requests we received from our customers, we carried out an internal assessment in order to outline training paths tailored to their needs. In the first webinar, we highlighted the guidelines on Covid-19 prevention and the measures to be taken throughout the store. In essence, we told and trained our partners on the measures to be applied in the store in compliance with current regulations. In the second webinar, managed with Gfk, one of our partners, we tried to understand how people's behaviour and habits will change. Finally, through 3IO, an external partner, we created a financial webinar with the aim of providing all the information needed to apply for public aid as required by the regulations. In addition, to ensure safety before reopening, we have sent to all our customers templates, safety devices and guidelines to be adopted inside the store by both employees and customers".
Digital services are crucial as retailers resume business. What are you doing about it?
"Having a “smart store” is vital. Our sector needs to move faster on this issue. At the beginning of February, we presented a concept of the new First Stop store, where digital services are the basis of a new business model. This represents a leap forward compared to what we had already started in mid-2019. Through BeKube we have embarked on a path of simplification. A platform that encompasses in a single integrated environment, an ecosystem of services and solutions for the digital management of the point of sale: acceptance and privacy management, warehouse, calendar and worksheets, quotes and electronic invoicing. If the use of these digital tools becomes routine, the results will be positive".
For Mario Pontiggia, Kwik-Fit field manager, digital tools and additional services are the elements on which to build a new business model.
What impact has the lockdown had on your network and what measures have you adopted to support your affiliates?
"In the worst period of the health emergency we have seen a widespread drop in the volume of work due to the spread of the virus and the following lockdown imposed by the government. Predicting how things will turn out is not easy. At the moment, for many of our members, work has resumed quite consistently, due in part to the postponement of the date for the seasonal tire replacement. During the lockdown phase, we tried to stay close to our network by offering them additional services for their customers. For example, we offered a pick-up and delivery service by appointment, especially appreciated by companies whose vehicles had been standing for a while. We have activated this service for the first time as a network and we think it will develop in the coming months. We are living through a transition between what we used to do and what awaits us in the future. This is the moment when new services should be activated, such as picking up the vehicle from the customer’s premises, on-site tire replacement, extending the opening hours of the point of sale or guaranteeing a 24hr service. Several elements can lead to a positive change in our sector, but we need to be able to analyse the situation, be farsighted and invest in technological innovation".
Is there a risk that some workshops will cease to operate due to a reduced demand?
"The situation is delicate. However, we must also look at the opportunities that have been created and be able to seize them. If we think that people will use their private vehicle much more than they would any public vehicle, because of social distancing, if we think of the increase in last mile deliveries, and the collapse of new car registrations, which have dropped following the decline in people’s purchasing power, we can foresee an increase in business volume for the car repair sector. Furthermore, as vehicles age, spare parts and maintenance will be sorely needed. These are the elements that we need to think about if we want to be competitive".
Training plays a key role. What are you doing in this regard?
"During the lockdown, we started training our network’s staff through webinars focusing on some requests from our affiliates. In particular, we tried to provide information on the renegotiation of rental contracts. 2020 for Kwik-Fit centres will be a year of great experiments".
For Marco Posdocimi, Goodyear Tire & Rubber Company retail director, great attention must be paid to how consumers' behaviour will change and how to calibrate new offers. "The approach may change, but not the service model".
What impact is the Covid-19 pandemic having on the SuperService network in economic terms?
"As with most sectors, the impact was very strong, especially in March and April due to the lockdown. Turnover in those months fell by about 60%, with some differences between geographic areas as the lockdown come into effect at different times. Fortunately, as things slowly started going back to normal, we had some positive signs and after the second Phase of the reopening, our stores intensified their activity. Obviously, due to the strict rules on social distancing and safety measures, the number of operations that a retailer can perform in a day is limited. For these reasons we expect a negative sign compared to the same period last year".
How are you supporting your partners?
"From the outset, Goodyear has been working hard to answer and clarify the situation, interpreting regulations and offering tools and support to its customers, but that's not all. Through our Warm Up initiative, Goodyear offered the entire network many webinars on hot topics such as law decrees, customer approach and business digitization. At the same time, these topics were explored and analysed through an online training program dedicated to the SuperService Network: weekly content to provide ideas and support on how to adapt the business to the new conditions. In addition, we directed all our points of sale to the rules of sanitation and social distancing, with visual material to guide employees and customers and quality products such as masks, gloves and gels, some of which were provided free of charge, while others were offered at reasonable prices. This period was also an opportunity to focus on the digital presence of our members' stores: we wanted to make sure that schedules, services and the possibility to make appointments online were included".
How will the service change?
"In the immediate future, we do not expect any upheaval caused by the pandemic. The customer tends to go to the tire shop out of need. We will see over time if things change. The importance of offering an increasing number of services to respond to ever-changing needs will continue to grow and we expect drivers to pay more attention to health issues and consequently the demand for safe environments and services needs to be stressed. Once again, the approach may change, but not the service model".
How will the car repair market change? Will it increasingly move towards structured networks and multi-service centres?
"Surely things were more difficult for those who were not affiliated to any network, because they could not benefit from the range of tools and information that networks can provide. The advantage of receiving privileged support and views on the market is now, more than ever, a competitive advantage. So it is possible that, after this crisis, networks might attract more potential partners”.
According to Giancarlo Veronesi, president of Federpneus – National Association of Tire Dealers, the sector is dominated by many uncertainties, but the important issue to face in the coming months is to try to defend the value of one’s product and service, without falling into the error of chasing the lowest price.
What are the key aspects affecting tire dealers at this time?
"Surely the most important issue, at this stage, is the great uncertainty that one can almost touch. On the one hand, tire dealers are back in action, although mainly with services, and the extension to 15 June of the seasonal tire change undoubtedly gives us a margin of opportunity to take advantage of, but we will still have to wait a few months to take stock of the real situation and understand how much of the work that was lost in March and April has been recovered. In addition, there is still some uncertainty about how to work safely, how to implement the safety protocols, and as Federpneus we are committed to supporting our members from this point of view too, but there are many operators who are receiving confused or conflicting information, and this does not help. The industrial sector deserves a separate consideration, it is still difficult to understand how things will turn out in the coming months, but for the moment road haulage companies work, on average, at 50% of their normal activity: without specific measures by the state, the sector will risk irreversible damage".
What are the ingredients for a full recovery?
"Things are rather complex at the moment, and it is not surprising if the trend to increasingly diversify the range of services offered by tire dealers should pick up: in addition to light mechanical work, we can see several new products being offered by an increasing number of tire dealers, like sanitizing vehicles. However, I think we must also be careful not to fall into the error of devaluing our offer in order to be more aggressive on the market: services are certainly important, but their value must be recognized. Quality of service and a professional approach are still vital. Falling into the trap of wanting to recover business volumes by lowering the prices of services, could prove a counterproductive strategy. The same is also true for tires: these represent an essential element of value for any tire specialist, and if this value were to disappear, it would jeopardise the possibility of keeping staff in the company. It is therefore important that tire manufacturers are also aware of this situation, and that they keep a careful and responsible eye on the retail side of the business".