Mark Ups, Shipping, Wholesalers, and More
With virtually any shop, a large amount of money that comes through the business is in the form of repair and modification parts. These items are a necessity to business, so it’s important that we take a close look at what’s going on–in the form of ordering shipping and installing as it pertains to the parts business.
It’s common knowledge that large parts dealers like XDP and Alligator Performance sell to the public but it’s important to note that if you do enough business they also will sell at wholesale prices. Premier Performance is another huge parts retailer that is based only in the dealer market and does not sell to the public. When it comes to ordering though, it will probably be from one of these places. With certain items, it may be impossible to order them from a parts dealer. A lot of companies only sell direct so if you think you’re going to buy from one of these types of companies it’s good to have a working relationship as soon as possible. This may mean buying a large amount of stock up front, but in the end it’s usually worth it.
After a part is ordered there is still the matter of getting it to a business. Shipping is actually more complex then one might think, and involves a number of factors. If a part is ordered through a shop that the owner or another facility is going to install, it can be drop shipped. This means that the part is shipped directly from the manufacturer to the end user with the shop just being the middleman. A more common form of shipping involves sending the part from the manufacturer or wholesaler to the business to be installed. Virtually all the shops we talked to have markups on shipping. These markups usually are small, in the 10 to 20 percent range, but with the amount of business going through a busy shop these types of markups can be greatly beneficial. After all, many hours are spent waiting for delivery trucks, un-boxing and on packaging and lifting parts, none of which the customer is usually charged for. The labor for this action is made up in the shipping markups.
Our last item of business involves the actual markup of the part. Well the internet can be great for some businesses a lot of times for Brick and Mortar repair shops it can be highly annoying do to rock bottom pricing and free shipping. Thankfully, if you’re buying from a dealer, or even the manufacturer, there is usually a 15 to 20 percent benefit to ordering if you have an actual shop versus the general public. This means you can match price whatever the customer can find on the internet and still make money. It can also be of great benefit to stock hard to find, OEM, or commonly backordered parts, as these can command a premium. The highest profit margin usually comes from working with a company that can rebuild existing parts; as in a set of rebuilt injectors can be marked up virtually to the price of new ones.
There is no denying the importance of the parts business in a busy shop, but it’s not everything. Don’t let a vehicle sit waiting for a good deal on parts, after all most of the profit that comes through a shop is in the form of labor so the important part is to get the vehicle in and get started to work!