Aftermarket Lured By Expediter Market

By Amy Gilroy On Sep 3 2007 - 6:00am

Although car A/V expediter sales are down, suppliers said the market is poised for growth and many are entering the segment in hopes of winning extra niche business.

Total sales for the expediter sector are not tracked, but industry members said there is a "top 15" tier of expediters in the United States who sell a ballpark estimate of $100 million to $150 million in electronics sales to car dealerships.

In total, there are an approximate 500 "true" expediters in the United States. Expediters sell directly to car dealerships and often do not have showrooms. Expanding the market further are an approximate 2,000 to 3,000 12-volt retailers who also sell to one or more local car dealerships as a side business, said Audiovox.

In the past two years Eclipse, Pioneer and most recently Kenwood have entered the expediter market in hopes of winning some plus business, particularly in in-dash navigation products, and also to steer some of that business to their retailers.

Pioneer estimated that 30 percent of its retail specialists act as expediters.

Audiovox Electronics president Tom Malone explained that expediters in the past relied on key products to drive sales, which at varying times included security and mobile video. "From a pure electronics standpoint, [the expediter market] is at a low point because mobile video, which is the last category that really carried them, has changed dramatically with all the OE involvement. So what's readily replaced that at this point? Well, nothing yet. Right now, they don't have that horse that's always carried them," he said, noting, "Vehicle tracking systems, we think, will be the next wave of volume business."

In the interim, suppliers such as Eclipse, Pioneer and Kenwood are finding a niche market with in-dash navigation. Expediters are also pushing Bluetooth kits and iPod adapters as well as backup cameras.

Bluetooth device maker Parrot said the expediter market has become "a very important segment for us" over the past year and a half, according to marketing and communications VP Mike Hedge. He noted that in some new cars, OEM Bluetooth kits are bundled with other accessories that drive up the cost to the consumer as high as $3,000. By comparison, a top quality retail/expediter Bluetooth kit costs $400.

A similar "math" drives expediter navigation sales. Jeff Fuller, owner of Micorp, an expediter just outside of Boston, explained, "If a car comes through with factory mobile video and navigation and costs $30,000, we try to find the base cars for $23,000." He then adds a navigation/mobile video package for a total customer cost of $27,000 and saves the customer $3,000.

Seth Weingast, president of Car Spa, an expediter in Arlington, Va., noted that Toyota offers navigation in only about 5 percent of vehicles. But in a "transient" market such as the Washington area, navigation is in unusually high demand, so Weingast fills in the gap.

To capitalize on this niche, Eclipse entered the expediter market approximately two years ago, followed first by Pioneer and then by Kenwood in June. Eclipse and Kenwood offer special expediter navigation models while Pioneer sells products from its aftermarket line. Ed Sachs, Pioneer mobile electronics group presidenty noted that Pioneer is also considering offering dedicated expediter product.

Audiovox is also planning to offer separate expediter navigation products in the near future (See TWICE, Aug. 6, p. 42.)

Kenwood said its expediter business is growing faster than expected and it plans to sign up 100 dealers to the program by this summer.

Kenwood is shipping two expediter products, including a CD receiver that essentially offers an embedded Garmin Nuvi. The Kenwood DNX210EX is a double-DIN CD receiver with a built-in 3-inch screen that has a navigation section designed with Garmin. The unit announces the names of streets for upcoming turns, has nearly 6 million points of interest and features an SD card slot.

The Kenwood DNX710EX is an all-in-one AVN, double-DIN, in-dash DVD receiver with built-in navigation. It has an SD card slot and optional real-time traffic capability through either ClearChannel or XM NavTraffic. It also has external relays to activate garage door openers, a security gate or other devices and is compatible with iPod, Bluetooth, HD-Radio and satellite radio tuners and adapters.

Both models offer three-year warranties.

Many suppliers said the expediter market is ripe for expansion, although it remains to be seen if car dealers capitalize on the profits to be had through car audio.

Pioneer's Sachs said, "Car dealers are finding their margins are shrinking as they have to be more competitive to sell cars. So how do you make up that margin? By offering aftermarket products."

Eclipse said car dealers are starting to offer dealer options on lease "turn back" vehicles (that are returned the dealer when the lease term expires). Marketing director Michael West estimated that 4 million to 5 million "almost" new cars sell per year. "It's a great opportunity to make some profit with those vehicles. If it's not growing, it's definitely going to grow in the future," he said.

Car Spa services about 400 dealer accounts and sells about $8 million a year in car electronics to car dealers. Sales are down 4 percent to 6 percent year to date through June, as the market shifts away from overhead mobile video, said Weingast. Although sales of Bluetooth and iPod kits have been brisk, profits for these items are about half those of mobile video.

Audiovox believes that vehicle tracking will become the next big growth segment because expediters and car dealers are expressing interest. Weingast said the tracking sales are still encumbered by high monthly service fees, but he's hoping the category will take off as the fees shift to a "per usage" basis.

Fuller, however, said tracking sales have already taken off. He sells 9,000 tracking devices to consumers a year through about 300 car dealers. "Business in vehicle recovery has doubled each year for the past four years," he claimed.