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KnowledgeFest Keynote: Time to Change

Louisville, Ky. — The Mobile Enhancement Retailers Association (MERA) held its largest KnowledgeFest to date last month, attracting over 1,500 members and prompting debate on a number of key aftermarket issues.

MERA’s clout as an industry organization appears to be growing as it takes on political issues affecting the aftermarket and as it strives to become a catalyst for change in the industry.

MERA rallied members behind a new REV IT UP awareness campaign against the banning of aftermarket shops for car repair and held its first town meeting to discuss OEM issues.

One of the more galvanizing messages at KnowledgeFest, according to a straw poll of members, was the keynote address by Alpine marketing VP Stephen Witt, which addressed the current trends affecting the industry.

With many members decrying the design-out problems in new cars, Witt said the real industry nemesis is its own failure to keep pace with trends in the youth market. OEM design-out problems involving non-standard radio openings affected only about 6 percent of cars in 2003, Witt said. While this statistic is expected to increase to 60 percent of vehicles by 2008, design-out issues are not the main cause of current aftermarket double-digit declines, said Witt.

Recounting his keynote address in a telephone interview with TWICE following KnowledgeFest, Witt said, “An even bigger factor right now is that mobile is losing its appeal to the growing youth population. The youth are spending their money on other cooler — in their perceptions — products and technologies like computers. They want multimedia, e-mail, instant messaging, gaming; they want to rip music and they want to play video. But they want to do it from a computer. So yes, in the higher end cars, there is this OEM factor, but you also have to appreciate the youth, our biggest target, aren’t out there buying BMW 5 series and 7 series and Mercedes E class cars.”

Witt cited a 2003 J.D. Powers Report that states 70 percent of the youth in the United States are driving used cars. “We, the aftermarket, still have a great opportunity to sell the youth products, but fundamentally, mobile electronics just isn’t that appealing to them today because they want computers, PDAs and portable MP3 players.”

Witt said he was originally asked last year by MERA to speak on the key issues affecting the aftermarket. After 10 months of research he determined the following points, questions and suggestions regarding the shift in the aftermarket.

A specialist is defined as “one who devotes himself to a special occupation or branch of learning,” said Witt, quoting the Merriam-Webster dictionary. He asked, “You guys call yourself specialists, so what is it that you are devoting yourself to, or what is the special occupation?” Retailers who are intimidated by the weekly fliers of Best Buy or Circuit City have focused on trying to drive volume in a commodity market rather than on promoting innovation, he claimed.

A solution is to promote new technologies, such as 5.1 multichannel sound, hard-drive-based players, wireless connectivity (Wi-Fi) solutions for the car, Bluetooth, overall sound quality, navigation and rear-seat entertainment. “2004 is the beginning of the opportunity for specialty retail to redefine itself because there is a massive wave of new technology and product entering the market,” Witt concluded.

We can’t be complacent with the business model of the last 15 to 20 years,” Witt said. CD player sales will begin to significantly decline in 2005, followed by a decline in DVD sales within seven years. “Therefore my message is, guys, you have to stop looking at the AM/FM in-dash CD player as the core of your business. So get on board with DVD, in-the-dash as well as rear-seat entertainment, because DVD is the mid-term opportunity for disc players. But even DVD will start to decline as we get out to 2007 to 2009. So the shiny disc players will give way to hard drives in five to seven years,” said Witt “Our primary consumer target is now the download culture. They are into broadband and wireless broadband because today is all about content and access to content.”

Witt continued, “Why did iTunes in six months dominate the whole download industry. Because it’s so easy to use, it’s 99 cents a song and now consumers want this seamless experience from home to car.

Production for portable or automotive hard drives (HDD) will increase from approximately 220,000 units in 2003 to 380,000 units in 2007. By 2008, the typical system in a car will be DVD and HDD, Witt predicted.

The opportunity here is for the specialist to return to his roots and start demonstrating full DVD multichannel systems and navigation systems, claimed Witt. Retailers need to put a computer on the sales floor and demonstrate downloading maps to a navigation unit, and to demonstrate Wi-Fi, he said. When queried by TWICE, Witt said the computer in the store should be the key demo center, and that if the aftermarket doesn’t start producing and promoting Wi-Fi products and HDD systems in a big way, then Apple, Intel and others will.

He said out of about 100 dealers polled at the KnowledgeFest only a few were stocking Rockford’s new OmniFi Wi-Fi system, and many retailers were not yet familiar with the technology.

Four million new drivers will come of age each year through 2010, creating a customer pool of 40 million people during this decade, according to Witt’s findings. Gen Y will surpass baby boomers as the key audience by 2010. “This is the key to our growth,” he said. As Gen Y is buying used cars, “you can still put stuff in all these vehicles, so stop whining that the OEM problem is something you can’t get over today. Start appealing to the youth and change.”

“We have between five and seven years of opportunity yet, and we have to come up with new innovative products, and retailers have to change their merchandising and sales training. The specialist can re-merchandise in 30 days. The big box retailers can’t do this quickly,” Witt said.

He referred to the wine and cheese parties of 10 to 15 years ago to bring enthusiasts into the store to see CD players. “Have a tattoo contest and a demo,” he suggested.