CAN A DETAIL BUSINESS TODAY MAKE MONEY DOING WHOLESALE WORK? OR IS RETAIL THE ONLY WAY TO GO?
Since the emergence of the retail market for detailing services in the 1980’s, a controversy has arisen in the industry whether a detail business should, or could, profitably continue to do wholesale work for the auto dealers at lower prices than they would receive from the retail customer.
Those who argue in favor of wholesale work are the majority of operators whose sole source of detail work or 90% of it is the auto dealer.
On the other side are those detail businesses who have emerged in the 80’s and 90’s who feel five cars a day at $200 is better than ten at $95 - $100, especially with the rising cost of the minimum wage and scarcity of good labor.
Depending on your perspective, an argument can be made for either side.
A Case for Dealer Work
Those who advocate doing dealer work take the position that it is steady, can be depended on year round, and, if you do a good job, will always be there.
Furthermore, they argue, it is less costly to do for several reasons:
- Because all cars get the same job, employees are more productive and consistent. And if you pay by the car, they are motivated to complete as many cars as possible per day.
- You do not need a fancy facility. A garage, warehouse, or lean-to is all that is required. The dealer never visits the shop and does not care what it looks like.
- You do not need to worry about your employees’ appearance or deportment. They never come in contact with the dealer.
- You do not have to advertise because you only have one or two dealers you call on personally.
- You do not have to pay workers comp or withholding taxes because you hire “contract labor.” (Many detail shop operators still operate under this incorrect assumption and could be liable for huge fines. The issue of contract labor should be discussed with your IRS office, CPA, or a bookkeeper.)
- You do not need insurance because the dealer already has it. (another false assumption)
Whether these assumptions are correct or not is subject to discussion, but this is not the issue at hand. Suffice it to say that many operators believe them to be true and operate their detail business accordingly.
A Case for Retail Work
Many operators of retail-oriented detail businesses simply will not do dealer work, even if the dealer comes to them. Why do they take such a strong position against this type of work? For several reasons, involving a combination of profit and emotion.
- From a profit point-of-view why do cars for $75 to $100 when you can get $150 to $300 for the same work doing retail? And, sometimes for even less work because retail cars are in better condition. (You should note that a dealer sees what the detailer does not do, the retail customer, on the other hand, sees what you do.) Retail work is really easier and for double or triple the revenue.
- Labor is less of a problem. Because you do less cars at higher revenues you can hire better quality people and pay them more, thereby creating stability in your work force.
- Greater stability. You are not subject to the whims of a dealer who may change to another detail shop that will do cars for $5 to $10 less.
- Bigger market. There are far more retail cars on the road needing some detail services than used cars brought to you by one or two dealers.
- Respect. Dealers by and large have a very low opinion of detailers and they show it in their actions toward the detail business owner. (Of course, much of this disrespect is brought on by the detail owner themselves, by their appearance and that of their employees and the way they conduct themselves and their business.)
There may be more arguments for either side, but these are the most common. And, as you can see, they present a strong case for either point of view.
If I were operating detail business again I would lean toward the retail position for most of the reasons presented. However, I would also keep my options open. We always contacted with a few dealers daily, looking for any overflow that will bring us an additional $100 to $200 per day in revenue.
Certainly never displace retail work for dealer work, but will use it only as a supplement on days when retail business is slow. Use it to give your part-time employees more hours. Dealer work can also be used for training new employees since every car is a complete. Care has to be taken in final inspection; however, to be sure the work is done to the dealer’s exacting standards.
Enter the Full Service Detail Shop
As a supplier to the detail industry, it is our responsibility not only to offer equipment innovations, but as important, to provide operational information that will help operators become more profitable in the operation of their detailing business.
As a result, after considering the controversy between dealer vs. retail work, and my own personal experience as an operator, and after talking with many detail shop operators, it became very clear that there was an answer to the dilemma. One that was not necessarily new, as most ideas are not, but one that offered a different emphasis on an old idea. And, one that could satisfy both those who believe in dealer work and those who believe in retail work.
That idea is what I call the “Full Service Detail Shop.” Keep in mind it does not just have to be devoted to dealer work. You can have a detail business that does retail business too.
What is it? To answer that let’s look at what services an auto dealer will typically have performed on a late model, low mileage used car that he wants to resell in his used car lot. These services include:
- complete detail
- paint touch-up
- pin striping
- door edge guard
- body side molding
- windshield replacement
- windshield crack & chip repair
- vinyl top dyeing & repair
- exterior trim painting or restoration
- interior vinyl & leather repair & dyeing
- dash repair & dyeing
- fabric upholstery dyeing & repair
- carpet plugging & dyeing
- carpet replacement
- Paintless dent repair
- Carpet dyeing and recoloring
There may be more services but these are the most common ones performed on a used car before resale. In some cases the dealers will do a few and have variety of other suppliers do the remainder. Some detail shops will perform a few of the services and leave it to the dealer to get the remainder done elsewhere.
But it seems that no one shop does all the service in one place. Herein lies the case for a full service detail shop: you can provide services for both dealer and retail customers.
Doesn’t it make more sense that it would be more convenient for the dealer to have all the work done to a used car in one place? This means not only one delivery, one billing, and one company to deal with, but probably a much faster turn-around, getting the car on the lot for resale faster.
From the detail business owner’s point-of-view, revenues per car are substantially increased, without a major increase in operational costs. In fact, by quoting the dealer a total price to recondition a vehicle, the detail shop operator can hide an increase in the price of the detail by several more dollars.
Believe me; most intelligent dealers would wait in line to have a detail business that could provide all or many of these services.
If you have my other articles dealing with the sale of extra services as a potent source of increased revenues, the benefit of offering these services to your retail customers should be quite clear. Keep in mind that extra services like the detail itself, will sell to retail customers for more than double or triple what the dealer will pay you.
For example, dealers usually pay $30 for undercoating. A retail customer will pay $70 to $80. Dealers pay $25 for a windshield rock chip repair. The going retail price is $40 to $45. (Most insurance companies waive deductible up to $45.) And a $20 to $25 pin striping for the dealer will bring $45 to $50 for the retail client.
There Is a Commitment Necessary
The potential benefits, like most things, do not come free or easy. To be an effective full service shop at either the wholesale or retail level requires a major commitment. A commitment in time, money and training.
As the operator you will have to devote the time to become knowledgeable and even capable of performing these extra services. You will have to make a financial investment in equipment and supplies to have everything needed to perform the services. And, finally you will have to make a commitment to training some of your staff or hiring and training new staff to perform the services.
Whether you are a wholesale or retail detail business you must be the on-site operator. As an absentee owner it is difficult enough to absentee manage just detailing services, let alone the commitments in time, money and training it would take to operate a full service shop.
You could also broker these services through two or three other businesses that provide them and mark them up to your dealer or retail customer.
This works very well for the retail shop that can more than double the price, but it might not work for the detail business doing dealer work because you’d have to sell them at a price near what the dealer would buy them for. But remember, you are providing the dealer a time and money saving one-stop service. So taken in terms of total revenue per car you could easily charge enough to come out ahead.
Now let’s look at these various services, what they are, and what it may cost to provide them.
You already do this, so the only additional commitments you would need to make would be to upgrade your operation with the latest equipment innovations to increase your productivity (that is, more cars completed per man hour) and to provide more training for your employees.
#2 Paint Touch-Up
The only way to do this is to use the sophisticated airbrush method of perfect repair as both dealers and retail customers want a perfect fix to rock chips, scratches and bumper scruffs.
Purchase a paint touch-up system that provides the ability to mix over 60,000 different paint colors for U.S, Japanese and European cars.
Cost: $10,000 with training necessary.
#3 Windshield Crack & Chip Repair
What started out as a high cost franchise business has now been reduced to a low cost “buy a kit” business. Kits vary in price from $300 to over $6,000 depending upon the type of system and supplies that are included. All include some type of training either onsite or through video.
#4 Complete Interior Repair
Probably one of the more complicated services to perform, but one that can bring big dollars. Novices in the business can buy complete kits with everything needed to perform all these services, including dyes, glues, paints, tools, supplies, and training.
Cost: $3,000 to $4,000. Extensive training required.
#5 Paintless Dent Repair
A big money maker and in-demand service by dealers and the consumer. However, PDR is a complicated skill that only certain individuals can master. It takes weeks of training and months of practice to master this skill. Bottom line, a detail business owner should broker the service or hire a person already skilled in PDR. The cost of tools and accessories can range from $1,500 to $3,000 but training can run up to $1,000 per day and you need at least two weeks training.
#6 Carpet Dyeing and Recoloring
Systems now on the market feature water based dyes that are color matched to the main automotive carpet colors.
All one has to do is match the color for recoloring or use a darker color to change the color.
Cost: $1,300. Self training with manual.
#7 Gold Plating
A very popular service some 10 years ago. It is not as much in demand now. Only certain vehicle brands actively use gold plated emblems: Cadillac, Lexus, Toyota, Infiniti.
Systems run from $1,500 to $3,000 depending upon the sophistication, supplies and amount of gold solution included.
#8 Invisible Film Protection
A relatively new service. This is another in-demand service by dealers, especially luxury car dealerships.
The technician places a protective clean film over any painted surface on the vehicle subject to rock chips.
You can purchase pre-cut kits or the film in rolls and cut yourself.
Suppliers of the film can provide the training. Pre cut film kits range in price up to $150.
Rolls of film are expensive but the return on the investment is excellent.
This is a relatively easy service to perform if you have the facilities. It can be messy so you need an isolated area with a lift, either in the floor or a two or four post system. Application equipment is simple: a pump gun, spray nozzle, and filter.
Cost: Lifts, $2,000 to $4,000. Pump: $1,250.
#10 Pin striping
The most common method of striping is vinyl tape, which comes in a variety of colors, widths, and designs. An inventory sufficient to service most cars is not too expensive. You will also need a hot air gun and supply of adhesive remover to take off old striping and adhesive residue.
In recent years special tools have been offered to the industry that allows you to paint a stripe on the vehicle like an expert. It is relatively easy to use after a few practice runs. There is also a wide selection of adhesive-backed stencil tape available that you place on the vehicle and then simply paint in the stripe. When dry, remove the stencil tape and viola! You have a professionally painted pinstripe of any width or color.
Cost: minimal for tool and/or tape. Training available.
#11 Body Edge Guard
There are two types of side moldings: rubberized stick-on adhesive backs, which are the simple and the least expensive type; and the metal channel style that must be riveted or screwed into the vehicle body. Then a choice of colored rubberized trim is placed in the channel. Requires an inventory of different sizes colors and types of molding.
Cost: varies with inventory. Training available.
#12 Windshield Replacement
Requires an individual trained in windshield removal and replacement. Some tools are required. Windshields can be purchased from the dealer, a wrecking, or glass company on an as-needed basis.
Cost: Minimal. Training available.
#13 Vinyl Top Repair & Dyeing
We are not advocating you totally replace vinyl tops, but simply repair small tears. The dyeing is very simple. Latex paints are available that can be sprayed, brushed, or rolled on, and dry streak-free.
Cost: minimal. Training available.
#14 Exterior Trim Painting & Restoration
Most newer cars sport black or grey rubberized bumpers and trim, and many, after exposure to the sun’s ultraviolet rays, fade. They can be renewed with a simple latex paint designed specifically for this purpose.
Paint is also available to restore side mirrors that are subject to rock chipping. Requires only a small inventory of paint.
Cost: $25 to $30. Training not necessary.
A detailer today can consider an outsourcer detailer operation with any or all of these services to cater to the dealers or the public or they can pick and choose the easier services to perform themselves.
Bottom line, there is money to be made if you can afford to diversify.