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Why Many Heavy-Duty Parts Companies are in Trouble and What to Do About It

Our industry is facing many changes and some of those changes are driven by technology and changing buying habits.  How do we adapt and respond to the changing landscape? Fortunately, we can learn from history because it repeats itself.

A Retailer That Changed Everything

I want you to guess what company I am describing.

This company got its start at the end of a century.

It has been a significant disruptor of the retail sector, taking advantage of technology and a direct-to-consumer model where its wide range of products can be purchased and shipped directly to the consumers, and this has resulted in the closure of thousands of retail stores all over the US and Canada, hitting the rural stores particularly hard.

Did you guess Amazon?

While this above description applies to Amazon, I’m not describing Amazon.

Let me give you one more clue.

Amazon, Walmart, JCPenney, Macy’s, Home Depot, and Lowes were listed as major competitors in its chapter 11 bankruptcy protection filing on October 15, 2018.

If you now guessed Sears, you would be correct.

Now, here is something that is important for you to know. As of the writing of this article, of the six competitors listed in Sears chapter 11 filing, JCPenney also filed for chapter 11 bankruptcy protection on June 5, 2020.

And then there were 5.

What does this have to do with the heavy-duty parts industry?

Sears was a distributor with $11 billion in assets in 2005 but only $6.9 billion in assets and $11.3 billion in liabilities in 2018 when it filed for bankruptcy.

While there are several heavy-duty parts manufacturers that are worth between $1 and $2 billion, most manufacturers are valued between $10 and $100 million which is small compared to a company like Sears and tiny compared to a company like Walmart or Amazon.

How much is your company worth?

The largest aftermarket heavy-duty parts distributor is FleetPride. They were acquired a couple of years ago by American Securities LLC. The price was not disclosed but we can guess at the valuation based on readily available industry information.

We know that American Securities LLC has $23 billion under management. They advertise that they buy companies that have between $200 million and $2 billion in sales and/or EBITDA between $50 million and $250 million. This means that FleetPride is at a maximum worth $2 billion.

We know that FleetPride advertises that it has 270 locations, 490 brands, 2150 suppliers, and 100,000 customers. My guess is that FleetPride was sold for under $1 billion.

Here is how I came to that conclusion.

TruckPro LLC has 150+ locations and when they were acquired by Platinum Equity on October 10, 2019, they were sold for $500 million. When I worked for them in 2019, I was told that they had been doing $600 million in revenue. That means that they were sold for a little less than one year of sales. Divide $500 million by 150 locations and you get an average of $3.3 million per location.

FleetPride has 270 locations and if you use the TruckPro average of $3.3 million per location you get a company that has revenue of about $891 million.

To learn more about how FleetPride was started and its valuation (my estimate was a little low but not that far off) you can watch my interview with FleetPride founder Bill Wade.

Why is this important to know?

Because comparatively speaking we are a small industry, our largest manufactures and our largest distributors are small beside companies like Sears, Walmart, and Amazon.

That means we are more vulnerable to disruption, not less.

I believe that very soon something is going to happen that is going to disrupt the traditional distribution model in the heavy-duty parts industry so profoundly that it is going to fundamentally change the industry forever.

I will explain what is about to happen in the next segment but first I need you to understand something important about the heavy-duty parts industry. We are like the general stores of the late 19th and early 20th century that Sears put out of business or the retail stores like Sears and JCPenney that Amazon has been putting out of business in the early part of the 21st century.

Our industry uses a traditional distribution model that is no longer relevant and is about to be replaced. In our next segment, we will learn about the 4 different types of people in our industry and how the traditional distribution model will end.

Why Many Heavy-Duty Parts Distributors and Manufacturers are in Big Trouble

In the last segment, I said that I believe that very soon something is going to happen that is going to disrupt the traditional distribution model in the heavy-duty parts industry so profoundly that it is going to fundamentally change the industry forever.

I will explain what is about to happen in a moment but first, I need you to understand something important about the heavy-duty parts industry. Our industry uses a traditional distribution model that is no longer relevant and is about to be replaced.

There are four categories of people in the industry:

1.  This group believes that the way things have been done is the way things will continue to be done. They have convinced themselves that what they aren’t doing, doesn’t work.

2.  This group doesn’t want to change, and they don’t understand things like social media. They recognize that they must do something. They will throw up an eCommerce website and hope that will be enough to survive the tsunami wave of disruption that is headed our way.

3.  This group sees what is happening and knows that they must change but they don’t know what to do about it. They are using social media and are also making plans to add eCommerce, but they know they need to do more, and they are searching for the answers.

4.  This group is small and has been working behind the scenes for several years putting a plan into place to disrupt and replace the first three groups.

What group do you fall into?

Unless you’re in the fourth group you are in trouble. I now want to explain the chain of events that have already happened and what is coming next that will unleash hell for most distributors and manufacturers and will end the traditional distribution model as we know it and replace it with something new.

Let’s imagine that several years ago an all-makes aftermarket manufacturer hatched a plan that was not all that original. They decided that they were going to copy the Amazon business model and disrupt the heavy-duty parts industry.

They realized that to accomplish this they would need to do three things:

1.  Supply a very wide range of heavy-duty parts.

They started buying up inventory and sending it to their engineers and they started to copy those parts. They became a leader in providing once “dealer-only” parts to the aftermarket.

2.  Build a great website.

They knew that it wasn’t enough to just have an eCommerce site, you needed to empower users to be able to identify parts without the help of a local parts person. They invested heavily in a cross-reference tool and they also provided users with lots of high-quality information that includes descriptions, images, diagrams, and make and model information. They have not yet turned on the eCommerce function because that would alert people to what they were planning. They knew that before they could do that, they needed lots of traffic because without sufficient traffic the best eCommerce website in the world is worthless. They currently have 200,000+ unique visitors using their website every month.

3. Deliver parts quickly.

To make this all work you must be able to deliver parts quickly, ideally within a couple of hours in urban areas and the next day in rural areas. To accomplish this, they have been opening larger and larger distribution centers in strategic locations around the US and Canada so that they can fulfill orders.

Everything I have described has already taken place but what I describe next is still in the future.

They will abandon their traditional distribution model and will go directly to the independent repair shops, vocational fleets, and owner-operators.

I imagine that they have been quietly selling direct to a few strategic customers already. This has allowed them to test and refine their systems so that when they go direct North American wide they will be able to fulfill orders efficiently and the end-users will be thrilled with the prices and the speed at which they can get their parts.

I can hear some of you thinking, “even if this is all true, it’s not like they are going to get every customer and every sale because there is still a lot of power at the distributor and dealer level and the other competing manufactures and distributors are going to respond.”

If that is what you’re thinking you’re not wrong, but it is in that response that the whole industry will be changed.

In the next segment, I’ll talk about the impact of this scenario unfolding as a real event instead of just a story.

The response is where the whole industry will be changed.

In the last segment, I told you a story about a manufacturer who was planning on selling directly to end-users with an Amazon model and I explained what they would have had to do in the last few years to implement this plan now.

Now I will explain what will happen when this story becomes reality.

While this manufacturer has been hard at work laying the foundation for all of this for the past several years, I can tell you that most aftermarket distributors and manufacturers have been resisting the disruption. They have doubled down on the traditional distribution model.

I have personally been frustrated to the point of wanting to scream when I have been ignored by the C-Suite of all the major distributors. I have had meetings with the executives of technology companies that provide manufacturers and distributors with eCommerce and other technology solutions and they share in my frustration and are shocked at how our entire industry is turning a blind eye to what is happening in every other industry globally.

“The water has gone out and a tsunami of disruption is headed directly toward the heavy-duty parts industry. You can either be on the beach with your head in the sand, or you can move to higher ground.”

The response of the manufacturers and distributors is the very thing that will undo the traditional distribution model. This is how I see the largest aftermarket distributors and the other manufacturers responding to a manufacturer who abandons the traditional distribution model and starts selling directly to end-users.

Phase One: The Obvious Response

The major aftermarket distributors will cease buying from the manufacturer that goes direct and they will try and return all the stock they have on the shelf. The manufacturer may accept some of those returns with a heavy restocking fee. This will bolster the manufacturer’s inventory at a reduced cost.

The distributors will contact competitors to the manufacturer that went direct and secure distribution deals.

Competitors to the manufacturer that goes direct will see their sales initially go up.

The manufacturer who goes direct will see its sales initially drop.

Phase Two: The Mistake

The distributors will roll out eCommerce websites to compete with the manufacturer that has gone direct. But they don’t have the traffic and they don’t have the cross-reference tools and parts identification information. All that will happen is customers who already buy from the distributors will buy online instead of phoning in orders. The user experience won’t be that good, the delivery systems won’t be that good, and the prices will be notably higher.

Manufacturers will be monitoring all of this and they will assure their distributors that they will never violate the sanctity of the traditional distribution model.

The only problem is that within a few quarters the manufacturers will start to see their sales drop. This is when the mistake will be made. They will start to talk about creating a hybrid model where they offer their products direct to the end-user customers and they will try to price protect their distributors.

Like the distributors, most of the manufacturers don’t have the traffic or the infrastructure to do this correctly and it will just accelerate the end of the traditional distribution model.

The distributors will be angry with the manufacturers, the manufacturers will be frustrated with the distributors and the industry will start to fracture apart.

Phase Three: The Final Move

While the industry is in turmoil the manufacturer that went direct will have captured a respectable amount of market share. I project that once they have annual sales similar to the largest distributors, they are going to enact the final part of their plan.

They will sell to Amazon.

This is when the end of the traditional distribution model happens. That is when we see a major aftermarket distributor go bankrupt, and then a second, and then a third.

In the next segment, I will talk about what aftermarket distributors and manufacturers can do to mitigate the impact of the end of the traditional distribution model.

What to Do About It

In the last segment, I talked about what will happen when a manufacturer abandons the traditional distribution model and starts selling directly to end-users. In this segment, I want to focus on what to do about it before it happens.

If you are an aftermarket distributor you only have two moves and that is to get into the service side of the business and try to compete directly with the dealers or time the market and sell just before the whole thing comes crashing down. Your business model is obsolete and there is nothing you can do about it.

If you are a manufacturer there are several things you can do right now to mitigate the hell that is about to be unleashed.

1. Assess Exposure

How much of your total revenue comes from aftermarket distributors?

What will happen to your company when they go bankrupt?

Notice I didn’t say “if they go bankrupt.”

You need to start planning for that today. Stop kidding yourself, it’s not IF but rather WHEN and you need to start radically accepting reality.

2. Build a Better Brand with End-Users

Whether you want to or not, you need to make sure that you build as much brand loyalty as you can. You also need to get end-users of your products interacting with your company directly. I don’t mean you should start selling directly today but you better start capturing their information and know who they are because one day you may have no choice but to sell directly to them.

Part of your brand should be providing your end-user customers with value. Value can be defined in many ways but make sure you are allowing your customers to define it, don’t sit in a board room, and make decisions about how you think your company adds value.

Also, stay away from focus groups of small numbers of your end-user customers, don’t let your salespeople be the spokesperson for the end-user customer, and don’t allow unfavorable answers like, “you don’t actually add any value”, cause you to put your head in the sand.

Now is the time to be a leader and radically accept reality.

This is my area of expertise. If you want someone to consult with your company and help you develop your brand and reach your end-user customers then reach out to me.

3. Find as Many Niches as You Can

There are emerging technologies and problems with trucks and trailers today that are costing the industry millions or even billions. Start finding innovative solutions to difficult problems and be an industry leader.

The Amazon model is all about taking commodities and making them readily available. Solve problems with solutions that aren’t easily turned into a commodity.

4. Embrace Technology

Whether it is embracing the communication tools used by the younger demographics of your end-user customers, partnering with companies that are specialists in eCommerce and parts identification technologies, or reimagining your manufacturing processes, you need to get out in front of all of this and that means embracing new technology and leveraging it to transform your entire business.

5. The Rise of the Online Distributor

If you are not going to go direct as a manufacturer, then you need to start setting up online distributors, and you need to start thinking outside of the box.

Diesel Laptops – Diesel Parts

For example, one of my clients is Diesel Laptops and they are going to be what in the future we will view as a prototypical online distributor.

Diesel Laptops started off selling diagnostic tools for heavy-duty trucks. Their founder Tyler Robertson worked for several dealerships and he saw the traditional distribution model for what it is – obsolete.

When he started his business, he made the decision to build it in the 21st century, using 21st-century tools and tactics. His business quickly moved from a product-based company to a software company that also sells products. Within a few short years, he grew from nothing to $50 million in annual revenue, and by the time you read this article that number will have grown.

Diesel Laptops have over 12,000 users on their platform and that number is growing by the hundreds every month. These users are the people who install the parts you manufacture. Diesel Laptops have the traffic also, they will generate 200 million impressions in 2020.

How did they do that? They listened to their customers, created a place for those end-users to go every day to get the value that they asked for, and the end result is that Diesel Laptops should be set up as an online distributor for your products. If you want to start talks about that you can schedule a meeting with me here.


Another great example of an online distributor is FindItParts.com

David Seewack CEO and Founder of FindItParts.com and his team have built a business using eCommerce from the very beginning. They are innovating and developing new technology that is going to make it easier than ever to find heavy-duty parts efficiently. 

As time goes on I think we will see more and more of these types of companies with innovative leaders building solutions that will serve the industry and will help to mitigate some of the impacts of the traditional distribution model coming to an end. 

The Conclusion of the Matter

Time will tell how accurate my predictions are, but I am convinced that my thesis is correct. The traditional distribution model that we have used to distribute heavy-duty parts is finished.

A manufacturer using the Amazon model will be the catalyst that will start the chain reaction.

Distributors will go bankrupt and honestly so will some manufacturers.

That’s the bad news but there is good news.

Steve Jobs once said that “death is a gift because it clears away the old and makes room for the new.” I take that to mean that although the traditional distribution model is going to have to end, there will be opportunities for those that position themselves now to capitalize on them.

I interviewed Scott Boltz as a result of publishing this article and we had an in-depth conversation about the future of the heavy-duty parts industry. 

Would you like some help to develop your strategy?

Jamie Irvine works with forward-thinking heavy-duty companies as a consultant. Developing a Digital Sales Channel and Business Development Strategy that encompasses adopting digital technology is the most common consulting work that Jamie does with heavy-duty truck & trailer companies.

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Author: Jamie Irvine

Jamie Irvine is the host of The Heavy-Duty Parts Report and a consultant that works with manufacturers, distributors, and SaaS companies serving the heavy-duty truck parts industry.


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