We’re in the midst of the holiday season which, under normal circumstances, would mean that OEMs (Original Equipment Manufacturers) and part shops would be gearing up for some of the largest price drops of the year to drive holiday sales. But these are far from normal times.
The COVID-19 pandemic and economic crisis has had a devastating impact on the manufacturing industry. And as a result, OEMs throughout the manufacturing sector have already been forced to stretch their margins far beyond where they typically would feel comfortable, and for an extended period of time to boot. Therefore, OEMs and part shops are having to walk a fine line this holiday season when it comes to cutting margins even further.
With that in mind, here are three things for OEMs and part shops to keep in mind to help them navigate the holiday season, and ensure they can strike the perfect balance between appealing to consumers and long-term financial security.
Focus on customer service and loyalty
The operating margin from the aftermarket business globally is about 2.5 times larger than the operating margin from new equipment sales. And one of the easiest ways to drive value is with customer service. Customer service and loyalty are key for two reasons. First, they have a direct impact to the bottom line, and increase the lifetime penetration of a product with the end-customer. Secondly, providing a strong customer experience helps boost referral rates among customers. Keeping customers happy and meeting their expectations is imperative even in the best of economic circumstances, and doing so through the holiday season 2020 can be a straightforward way to buoy sales.
Underpin commerce platforms with data intelligence
Being able to dynamically optimize inventory and pricing is central to helping OEMs drive sales and remain as appealing as possible during highly competitive periods such as the holiday season. And while this may seem like a challenging prospect, by adopting advanced data intelligence, OEMs and part shops can achieve much greater visibility into inventory and pricing operations that can greatly optimize their ability to maximize margins while remaining competitive on price. For example, data-enabled commerce solutions can help OEMs and part shops to dynamically tweak underpriced items to capture better margin potential, maximize revenue potential for parts with low market share, adapt pricing to local market conditions, and more.
Deliver strong customer experience at the point-of-sale
Dealers and part shops provide point-of-sale (POS) to end-customers, enabling them to drive personalized engagement and interactions. POS enables retail dealers to focus on customer experience and make the inventory management—such as how to optimize the stocking strategy—second nature for them. Solutions such as RIM (Retail Inventory Management) help to automate inventory replenishment, incentivize dealer participation by offloading inventory costs and provide volume discounts.
Another way to improve customer experience and satisfaction at POS is to ensure that any part requested by the end-customer can be delivered within their preferred delivery window. This improves the dealer and distributor satisfaction and confidence, and minimizes complaints on non-moving and aging parts. Further, utilizing data at POS can help improve forecasting, inventory levels, stock positioning, pricing and retail promotions.
Given how tight margins are this holiday season, managing them is about more than just cutting prices. It is about combining multiple facets such as dynamic pricing, inventory management and customer experience to create a better all-round experience. And those that are able to bring all of these factors together will not only be well-positioned for the holiday season, but for 2021 as well.
By Venkat Eswara, vice president, product marketing with Syncron