Aftermarket Insider Issue 79 - (Page 23)

checking in with chinA MARKET inTElliGEnCE A Look into Chinese Service Garages – Part II B Y S T E V E N H . GA N S T E R, M A N A G I N G DI R E C T O R , TE C H NO M I C A SI A In the last issue, we described the development of service garages in China. In this issue, we’ll briefly look at how a typical independent service garage buys parts in China. Garage sourcing channels in China are complex and multiple, including OES, dealerships, manufacturers, distributors, retailers… but all use the platform of “parts cities” as their main physical source (see previous issue on “Part Cities” in Aftermarket Insider, vol. 75, p. 22). Sourcing parts is often the job of garage owners and senior management due to trust and relationship factors. Basically garages source parts and materials by managing stacks of business cards of vendors and then making calls to them or sometimes personal visits to “parts cities.” In some cases, Internetbased video (e.g., QQ: the Chinese work with some distributors. In some cases, sending a disassembled broken part to a distributor is also an alternative to get a correct new part back. Various modes are used for parts delivery including self-shipment by garages, distributors’ delivery service (often paid by garages) and third-party logistics (paid by garages in most cases). Typically, a garage in the outskirts of a major urban center will have a buyer shuttle by motorbike between the parts city/cities and the garage. Couriers (often by motorbike as well) are also often used for convenience and speed. Depending on distances that a courier travels, garages typically pay RMB30 (US$5) per delivery in Shanghai but maybe RMB20 ($3.5) in a smaller, second tier city like Hangzhou. Parts turnaround time is typically a couple hours to half a day in parts hub cities (e.g., Beijing, Shanghai, Guangzhou, Hangzhou). Actual turnaround time depends on parts type, vehicle model and geography. Parts turnaround time is longer in many non-parts hub cities (most of which are Tier 2 or 3 cities). Basically zero parts inventory is the norm in most cases except for some high frequency maintenance and light repair parts and consumables. Distributors generally do not provide credit for repair shops and transactions are often cash/check at counter or at delivery by distributor or third party courier. There is limited offering of credit for parts (typically one month) on basis of a distributor and garage having known each other well. This technician at a garage in Shenzhen is struggling to identify several transmission gears (for a Mazda 6) before placing an order with a distributor in Guangzhou (120 km from Shenzhen). The distributor sent the technician a sketch with codes for different components for easier communication. The technician says that it will take at least 3 days before he receives delivery… a headache Basically garages source parts and materials by managing stacks of business cards of vendors and then making calls to them or sometimes personal visits to “parts cities.” equivalent of Skype) is employed to help facilitate communication and to visually describe the part. Typically, garages order parts by quoting vehicle makes/models. In some cases, the 17-digit VIN and OE number will While garages are accustomed to the current model of sourcing parts, garage owners admit that sourcing parts is definitely a pain. It is especially difficult finding parts for some older models. A major concern is also to pay a premium and still get a knock-off or lower level part which is supposed to be a genuine or branded part. Some vendors practice mixing genuine parts with knock-offs so buyers/garages rely on observing packaging to make judgments and decisions on authenticity. Unless very close friends to each other and the garage is a location with easy access to parts (e.g., next door to a “parts city”), vendors rarely would tell them the various differences between genuine, branded, and counterfeits and make recommendations in the interest of the garage. Often they just recommend the garage to buy the most expensive ones. Providing credible, one-stop sourcing to a garage is an attractive proposition. AFTERMARKET INSIDER | VOLUME 79 | 23

Table of Contents for the Digital Edition of Aftermarket Insider Issue 79

Aftermarket Insider Issue 79
President’s Message
Campaign Update
Industry All-Stars
An Aapexceptional Event
Member Profile
Technology Update
Campaign Update
Head of the Class
Impact Award
Market Intelligence
Government Affairs
Inside Technology

Aftermarket Insider Issue 79