The pandemic has made serious adjustments in the life of the professional community. Our correspondent talks to Sergey Perekhozhykh, the Executive Director of Nexus Automotive Russia, about the vision of the situation with Nexus Group, its development prospects and actions taken.
- How do you assess the current situation in the Russian independent aftermarket for automotive equipment?
– The number of trends has increased significantly in recent years. They often level out or mutually exclude each other. Therefore, it is often impossible to accurately identify their uniqueness and assess their value.
The fleet itself is formed primarily by car sellers - car manufacturers and importers, including importers of new and used cars and even individuals bringing cars from abroad. Unfortunately, the sale of new cars, as you say "brand new", does not please lately, a slightly better dynamics is shown only by premium brands.
Production and assembly in Russia also do not show positive dynamics. At a time when the global market, although slowing down, is growing, in Russia it is shrinking a little bit. This factor has a more positive than negative impact on the aftermarket industry, but in the long term it is a downward trend. Preference to further use of the car instead of buying a new one means more repairs, often more serious. That is, more spare parts will be sold in relative terms.
The determining factor for this and some other trends is the most important factor, which is the decrease in purchasing power of citizens. It affects both the quantitative dynamics of the fleet and the use of spare parts in the price segments from premium to mid-price and further down. This is another trend that moves in the same direction: from more expensive to cheaper products. Although this does not apply to a number of product lines of auto parts and types of work at services, where such solutions are either not justified by the degree of risk, or ultimately do not justify themselves economically, as they promise more frequent repairs or replacements.
But the trend of increasing demand for competition in terms of price accurately determines the behavior of auto parts manufacturers. Following the demand, many of them launch on the local market "eco" (from the word "economical") range of spare parts. This adds to the quantitative share in the struggle for the market, but often takes away from their own premium lines, and therefore the choice is not easy.
A noticeable trend in the aftermarket is an increase in the number of middle and lower-priced brands due to the emergence of private brands, which are owned and operated by spare parts distributors. Here you can find both quite high quality product and absolutely far from being perfect.
I cannot but dwell on the trends of the new reality. The COVID-19 pandemic, more precisely, its consequences - quarantine, restrictions in international tourism, the need to comply with sanitary standards and reduce social contacts - have defined the so-called "new normality". The new normality itself includes factors that affect both the restriction of consumption of services and goods in the aftermarket and the increase of consumption. What prevails? It depends on how much more time we will have to live under the existing restrictions.
- Do you think the pandemic has marked new trends on the Russian market and/or affected the existing ones?
– The pandemic has cast a longer shadow over a number of economic sectors in all countries of the world, including Russia: personal income declined markedly, the number of bankruptcies increased, and many habits and preferences had to be changed. All this had a direct impact on consumption of goods and services. As a result, we have an unsatisfied demand for a whole range of goods due to the lack of spare parts in stock after the production stops, and the increased priority in favour of supplying spare parts to car manufacturers on conveyors where contractual obligations are stricter.
But, as I said, there are also positive aspects, although I don't have the heart to say "positive" in the context of the virus because of the consequences and challenges it has brought us. Still, the time constraints associated with the ban on international tourism encourage people to rest without going abroad, mainly by using vehicles. The same is due to the redistribution of consumption from public transport to car use. The result is traffic jams, more mileage, more moto hours, a growing demand for repairs and maintenance, and the sale of spare parts.
– As you have noted, at the Russian car repair market, the tendency (reinforced by the consequences of the pandemic) of redistribution of demand in favor of mid-price and lower price segments has become more acute. Does it have any prospects? Does it need to be restrained?
– The trend does not need to be restrained - it is counterproductive. It should be taken into account and used to your advantage in the long term, since short-term strategies are more complex to manage and in most cases fail. Although they can be breakthroughs.
Even the most inquisitive and experienced car owner, if they are not professionals in the aftermarket, are not able to make an accurate choice. Yes, the buyer votes with their wallet, but only for the first time. All subsequent ones are based on the experience gained. Errors can cost a lot - time, money, nerves... Therefore, the factor of trust in your service, in your service advisor or mechanical engineer increases significantly.
On the other hand, in the interaction between the car service center and supplier more and more important role starts to play corrosion perforation warranty for parts, information provision, training, technical support, delivery in the shortest possible time, loyalty programs, etc., i.e. strengthening the relationship and mutual responsibility, both for parts and for the level of service between the car service and distributor.
Distributors, in their turn, rely on manufacturers' support.
Only if all three elements are present, this "puzzle" will be done and will work for the benefit of everyone in this chain.
What will win as a result - a desire to save on car service margin or pragmatism in getting service and spare parts in "one place", i.e. trust in specialists? I think that the Russian market will fluctuate between two approaches for a long time, but the preference to get "all services in one place", as it works in Europe, will win.
– What new has the crisis brought to your group activity? What organizational changes have occurred?
– Any crisis, whatever it is caused, is new opportunities and new threats. We are a young group, and a young body is known to recover and adapt more easily. We focus on opportunities.
Due to the adopted restrictions, our head office of Nexus Automotive International immediately rebuilt its work, moving all personnel to project remote work. In this mode, the most acute stages of the pandemic were passed as efficiently as possible - we managed to maintain productive interaction on current projects and even develop new ones. One of them is N! UNITED which is related to providing humanitarian assistance to the victims. And not only from coronavirus. N! UNITED is our long-term initiative focused on providing assistance to victims of any emergency around the world.
Around the same time, the CON!NECT intranet platform was launched. This is an internal information website designed for communication between suppliers and distributors. It hosts contacts of all group members, publishes current news, event announcements, etc.
So, due to the competent implementation of the most up-to-date technologies of online communication, which ensured a closer and more effective communication, the group's activity has become even more open and understandable to other participants.
– What does Nexus Group see as its top-priority task on the Russian market in the current situation?
– The priority task of the group is its development in qualitative and quantitative sense. What do I put into the concept of qualitative development? Increase in the turnover of the group members, all together and individually, with priority and focus on the group suppliers. For this purpose, we can use two mechanisms. The first - the most obvious and preferable - is conclusion of a direct contract between a supplier of Nexus and a member of the Nexus Automotive Russia group. It is obvious, but not executable by 100%, because it does not always coincide with the plans of the supplier in time and on a certain territory to provide such contracts to all interested parties. Either not all participants are ready financially, structurally and by virtue of their specialization in a short period of time to master in their portfolio all Nexus suppliers, which are now more than 80 (almost 50 of whom have an offer for trucks). While working with suppliers to get new direct contracts for the participants, we do not forget about the opportunities that may be more suitable for any group member at the moment, even if for some reason he does not have a direct contract, but is interested in the products of a particular supplier for distribution.
In addition to individual arrangements between group members for the supply of certain goods - and the group philosophy implies a very open relationship between the members - we discuss mechanisms individually with each supplier that allow us to obtain full support from the supplier, including products, through indirect deliveries without a direct contract. In doing so, we are willing to discuss how the requirements of the suppliers will be met by our members on an equal basis with those who have a distribution contract. Quantitative growth means attracting new members to the group. We see great potential for development in the commercial vehicle segment as well, where our international group is the leader in terms of the number of contracts with suppliers, and, of course, in passenger cars. Our doors are open to companies that are willing to share our principles and values - above all, open communications and mutual responsibility - and to fulfill certain group obligations. In return, new and regular members receive support from the group on issues that are relevant to the group. Together with the founding members of Nexus Automotive Russia Group we have different experience that allows us to create conditions for all participants, both comfortable and profitable at the same time.
– Your forecast of the situation in the Russian independent aftermarket for automotive equipment?
– In order not to argue about that chicken-and-egg question, I will say briefly: it is necessary for three elements to be fulfilled: to have people provided with work and received a lucrative compensation, to have conditions for business ensuring its development, and to have everyone in good health! And let there be no war. Then the economy will develop, and our independent aftermarket, regardless of anything, will flourish!