I’ve been contemplating whether or not to take ActiveTuning to another level of eCommerce or not. For those that don’t know what ActiveTuning really is, it’s one of the company’s that I won. We manufacture aftermarket car parts, and specialize in Nissan and Infiniti vehicles. We literally make the parts that we sell in-house, from fiberglass grilles, to auxiliary input audio plugs. I was lucky enough to partner up with a mastermind in manufacturing and product design. On top of the parts we manufacture, we have also offered just a few select products that we resell. The products that we chose to resell have been pretty uncommon parts that allows us to have a decent price margin on (from what I’ve seen on other common aftermarket parts).
There are a few issues that have drastically hindered any sort of large growth:
- Both my partner and I have full-time jobs, but unfortunately my partners is quite a bit more intensive and requires much more of his time.
- This is a major issue because Mike does the majority of product development. No new products means no more money, no innovation, less excitement and hype on the company, etc. This all affects bottom line sales as well as future growth.
- We’ve kept production of certain things like fiberglass manufacturing outsourced to local companies, when we have the knowledge and capability to do this 100% in-house. What we don’t have is the time and resources without some sort of investment or capital to allow us to go at it full-time. By outsourcing these things, it increases the cost to make the product, which obviously gets pushed to the customer. Since the cost to develop is high, we have to raise our prices pretty high. This reduces sales, but even worse, it cuts into profit margins. It sucks when you have a $300 part that you’re barely making any money on.
- Mike and I live pretty far away from each other. I live in Virginia, while Mike lives in Wisconsin. This hinders us quite a bit, you never realize how productive you can be for a business like this when you’re closer to each other. Mike’s job is actually moving him to Virginia over the next 6 months. He’ll be living about 1.5-3 hours away from me, still far, but much better than 13 hours like it is now.
For these reasons I have always considered getting into more resale as an optional route to take the business. I’d still like to do manufacturing as it has some real huge benefits:
- They are normally higher profit margin
- They offer exclusivity. You can only get the parts that we make from us. That gets people to our website, and essentially can help upsell other parts.
- Branding opportunity. Having our own products help build our brand name, which brings more customers and more sales to both the manufacturing and resale parts of the business.
At this point I’ve gone as far as setting up relationships with several wholesale distributors as well as directly with manufacturers in order to be able to get access to good pricing on reselling parts. I’ve got the ability to carry parts from over 250 different brands like HKS, Stillen, Volk, HRE, NOS, Greddy, and many many more. For right now I’ve set it up so that our customers can see the brands we carry, and can just e-mail us directly for a price quote. The process now is once I get an e-mail, I have to contact our distributors, and wait for a quote and availability from them. It’s a pretty unstreamlined and slow process that I don’t like. So with reselling parts I’ve come across a ton of concerns:
- This is a very competitive market in terms of pricing. Sometimes I’ve seen prices online lower than what I can get a part for at a wholesale discount. This means profit margins are slim, which also means it will take a lot of sales in order to make any money.
- It seems that the best pricing are direct relationships with manufacturers, but this usually requires a large buy-in to get the best pricing. Something we don’t have the capability of doing.
- Since we sometimes cannot get the absolute best pricing, we’ll make up for it in customer service. I’d personally prefer to order a part from a reputable company that I can count on over some no-namer with a crappy website.
- I have concerns about product returns. We’ll see how this works out over time, but I hope that it’s not a losing formula, and that customers don’t take advantage of us.
- Especially at first, we will not have an inventory of products. This will of course mean there will be some delays from our end to a customers end as a product either gets drop-shipped to our customer once ordered (ok time), or goes to our distributors, then to our customer (not good time).
At this point I’ve decided that I’d like to at least try and add the resale route to the business, but now I have a few options as to which direction to take it:
- Keep it the way it is now where a customer can e-mail us for quotes.
- Choose select products to actually promote and sell as products on our website.
- While we can get products for any cars, it may make more sense to specialize and create a niche in specific makes and or even models to sell products to. This way we’re more knowledgeable in what we’re selling, and can make it easier to advertise and promote specific things.
I’m really leaning towards option 3, but I’m torn between keeping the company specializing in Nissan/Infiniti or take it further and add some new specific cars that we would also specialize in. For example we’d still specialize in Nissan/Infiniti, but we’d also specialize in Toyota Supra’s, Subaru STI’s, Mitsubishi Evolutions, etc. We would choose certain cars that are generally known for a strong aftermarket community, and work off of those. The only things I’m contemplating with this is that one, for those cars there is a lot of competition, and two, one of the reasons we’ve gotten as successful as we are now is because we’ve really specialized in cars that don’t have a large aftermarket following. By specializing in cars that don’t have a large aftermarket following, we’ve been able to corner the market.
With this information in mind I think it may be best to continue to specialize in just Nissan/Infiniti, but add an entire line of parts that are not manufactured by us. We’ll still offer parts that people can request pricing on for other cars, but we won’t actively promote specific parts outside of what we specialize in.
Knowing all of this information, what are your opinions?? Do you think I’m making the correct decision, or should I try something else?? Got a better idea then anything I’ve mentioned?? Let me know.
Now I just need a better production solution for an eCommerce platform!