Date:         Thu, 19 Sep 1996 12:19:05 -0400
Sender:       Vanagon Mailing List <vanagon@vanagon.com>
From:         Derek Drew <drew@interport.net>
Subject:      VW Parts Retailing 

Somebody sent me this recently and I thought it was instructive enough to
forward to the list (probably the air cooled list too for that matter if
somebody wants to forward there). I am not involved in this area, really, so
don't respond to me personally on this issue.

They preferred to not to be be identified but said the reposting to the list
was OK in the interest of airing the issues.

>Please keep in mind the type of operation of Overland Parts Express (not
>Press) in Gilroy CA, Western Automotive Warehouse Distributors in L.A.&
>Sunnyvale, CA, Piscataway NJ, Houston TX, Atlanta GA, IMC in Chatsworth &
>Newark CA, H&H Distributors in San Leandro CA, IAP in L.A. CA amongst a
>bunch of others.  They are purely distributors/importers that we
>and almost every other advertiser in the magazines buy from.  They don't
>take kindly to the retail customer calling them for this and that to save a
>buck and tying up their phone lines from their bread and butter quantity
>buyers.  And they're good enough to spot a retail customer trying to get
>parts at that price level.  Many of them are requiring Credit applications
>before signing someone on, don't take credit cards and won't ship COD cash
>to a someone unless they have that prior-checked info on the customer as
>well as the aformentioned minimum first time order.  In some cases, they
>have additional minimums per month (about $500 to $750) as well as order
>minimums at the time of ordering (most I buy from $100 to $200).  (Many of
>these places I buy once a month or every two weeks, depending on inventory
>movement).  Most of these items mentioned are sold at a very slim mark-up
>and is contingent on the volume of such sales movement of items.  I know
>this from experience working at various levels of the import car & VW
>business for over 20 years from the importer level to retail.
>
>A few years back Overland (they've been in business since the early 80's)
>tried to break into the aftermarket retail end at those kind of prices and
>almost went under from the backlash of other importer/distributors.  All of
>the above companies heavily trade back and forth with one another
>(scratching each other's back, so to speak) and OPE got cut off basically
>when they tried to break into retail.  The exporter in Germany under
>pressure from Volkswagen and other OE manufacturers almost cut them off.
>Plus the vehicle installation experience level to provide to the retail
>customer is practically nil with them as well as the other
>importer/distributors.  They also lost a lot of their good wholesale
>customers because they were under-cutting them.  If a retail customer is
>lucky enough to get through to a salesperson, they will find that they are
>talking to a person who knows practically nothing about the installation,
>quality and even less about the vehicle in question.  They're order-takers
>with very little mechanical knowledge and often they call us or someone in
>the market at our level to get an answer (usually it is another one of their
>wholesale accounts needing info).  You essentially get what you pay for in
>the area of expertise.  Heck, have you tried to get a qualified experienced
>answer outa RMMW/BusStop these days?  Over 1/3 of the phone calls received
>these days are people referred to us by them because the so-called
>saleperson(s) don't have the faintest idea what's involved in installation
>or possible related side effects of said installtion of that and other
>parts.  I'm sure I lose a percentage of parts to RMMW after the phone call
>(giving advice) because of underselling, but I get the majority of the
>sale(s) because the customer appreciates talking to a knowledgeable person
>and calls back to order the part because they don't like dealing with
>unknowledgeable order takers.  And I'll be the first to say I don't know
>everything, because if I can't answer a customer's question, I'll find the
>answer from a more experienced person if need be.
>
We sell retail and
>wholesale as well as import direct a great many items just like the big boys
>in the first paragraph.  I could probably sell these shocks at $19.95 (or
>near that if I could afford to buy 250 shocks at a time, no mixing of other
>part numbers), but BOGE would cut me off in a New York Minute.  The biggest
>reason we don't sell at what would be our normal cost from a middleman
>distributor (such as Overland) on most of these items is that it would
>result in our being cut-off from the the big boys above for the other things
>we have to buy from them because of market lock-ups, etc.  Some people would
>call that price fixing, but it really isn't because their price lists are
>thinly veiled as "Suggested Retail Price" (which few in the market at our
>level goes by anyway, usually discounting it between 20 to 40 percent off
>that Suggested Retail Price).  However, if the OE mfrs get wind that their
>items are being "dumped" at perceived giveaway prices, they get real hostile
>- I know - it's happened to me more than once.  How does JC Whipme get away
>with it?  Well, they happen to buy their stuff by the highest quantities
>possible in multiple container shipments received on a weekly basis from
>their suppliers.  I had a chance to visit one of their suppliers a couple of
>years back and I was completely blown away by the enormous quantities of
>packages destined for Whipme not only at their Chicago address, but also to
>various drop-shipment addresses across the country.  Another reason is some
>mark-ups HAVE to subsidize the VERY POOR mark-ups on other items that we
>have to be competitive on, especially items that we pay big $$$ to repro and
>manufacture here in the USA.  For VW parts retailers to provide the
>highest quality across the board at the fairest market prices possible, it
>is a necessary evil and is something I have to put up with every day.  If I
>were (like "regular auto parts stores") to use an ideal basic standard
>markup on everything I manufacture, import or else buy, some prices would
>appear outrageous and I'd never sell some of my products, no matter how
>excellent the quality.  The way this market functions, it can't and never
>will happen. 
>
>The Independent Domestic and Foreign Car Parts Market (your typical FLAPS),
>with the exception of the Vee-dub suppliers generally live on an average 38
>percent markup on most replacement parts (Example - Part costs $6 markup 38%
>equals $9.68).  After discounting from that markup 10 percent to local car
>club guys or 20 percent to a repair shop (except those integrated with a
>parts house), they have little left over to pay the overhead as well as
>replacing the part (if stocked). Looking back for the past 20 years, I've
>seen "VW parts whores" come and go in the magazines primarily because of the
>lack of experience and service to help the customer - again they're just
>"order takers".  Sometimes they have dented the market enough for qualified
>and mechanically experienced persons running a small, but sometimes better
>quality business to say "to heck with this", go belly-up and get into
>another line of work.  One example comes to mind - he got fed up, liquidated
>everything, sunk it into the right stocks/bonds and made a killing and is
>happily retired at the age of 48.  He was (and still is) a highly respected
>private source of parts, info and experience, loves VWs of all kinds.  He
>told me the other day that he is not envious of my position (or others in
>the market) these days because of so many out there in for the short-term,
>"in it for the buck" and having to give it away, creating more pressures for
>him to meet the rent, lights, banknote(s), payroll, etc.  He originally got
>into it for 2 basic reasons - 1)To help others with their VWs & 2)Help
>support his own VW projects.  Now he's out of the biz, just worrying about
>taxes (not much tho, he's got a good CPA) and finishing his VW projects at
>his own leisure.
>
>If it comes to that for me, I'll probably do the same thing.  And then
>another decently qualified source of parts, experience and service will be
>long gone.
>
>Don't get me wrong - If a listmember (V@L or Type2) wants to get into the
>business, we welcome the competition, keeps us on our toes.  I tried doing
>this type of work out of my house with a below average markup for two years
>and wound up almost losing my shirt because of overhead and operating costs
>eat into extra storage for stocking, shipping, payroll, etc., and I have the
>ulcer pop up sometimes to remind me of it.  Don't tell me someone's gonna
>stock just the minimum amount of popular things because it's not gonna
>happen that way - it sucks you in and you've got a tiger by the tail before
>you know it.  Remember there's only so much of the pie you can slice and
>before long no one can or will make a living at it.
>
>But enough of this - I've got to go and finish the the Quarterly Payroll
>Taxes and Quarterly Sales Taxes now and hope there's enough profit in the
>account to pay it on Wednesday. :-)  Your private comments and suggestions
>are appreciated & thanks!
>
--Friendly Parts Supplier
=========================================

>>As for the issues discussed, I have the idea that you would take the
Overland catalog each month, add a suitable markup (I promise not to repost
the Overland prices :-) ), and post to the list the catalog under your name
(or Overland's) with whatever other parts you have for sale that
you want to mention. We'd love it.<<

SUPPLIER COMMENT:  I would have a hard time ethically doing something like that.
I've thought of doing it.  Gave it alot of thought.  I've done it piecemeal
before and while receiving favorable comments from some, there were others
who privately expressed their opinion that it was tacky.  I really don't
want to make either List appear commercial.  I'm not trying to please
everybody, just trying to exercise the best judgement call I can make.  The
appropriate place for something like that would be a Website/Webpage (or
pages) which would be updated periodically (like once a month, say the
15th?).  I have such a plan in the works and hope to have it up and running
sometime this year, hopefully late in the fall/early winter.    

>>I think there is a difference between the air-cooled market and the
water-cooled market. I've never seen anything like these Overland prices in
the water-cooled market and I think there is a real pent-up demand for
water-cooled parts at these prices.<<

SUPPLIER COMMENT:  I agree to a point that there is a difference between both
markets.  Problem is that there's alot of "grey area", vis-a-vis some of the
advertisers that wanna make that fast buck like they did with the air cooled
stuff.  They're finding that the Wasserboxer crowd is a different breed and
don't take well to "shark" tactics.  WCM has made a darn good inroad into
the market in regards to rubber and plastics for them. 

____________________________________
Derek Drew                              New York, NY
drew@interport.net
DerekDrew@aol.com (backup; rarely checked)
'90 Syncro Westfalia... 
...seen off-road at http://www.anet-dfw.com/~ddes/vw/drew/index.html