By James Chevrette
In the last five years, many retailers have been investing heavily in boutique or upscale store fronts offering incredible installations and great customer experiences. These enhanced showrooms necessarily come with higher operating costs.
Those costs must be recovered by selling higher margin products with higher labor rates. Many retailers charge $100+ an hour to make things profitable. But at some point, we must ask, are higher prices alienating customers and forcing them into the do-it-yourself, DIY, market? Before anyone gets the wrong idea, I’m not saying don’t offer higher end services. Read on…
Actually, DIY installations aren’t so “by yourself” anymore, with sites like Crutchfield, YouTube, Facebook etc. But what if a person does not want to go the DIY route? Let’s use the example of a 2008 Honda Civic or 2009 Ford Explorer (very common vehicles for the first-time car owner).
If the ‘08 Civic owner wants to upgrade their front speakers, they are quoted $199.99 for speakers and 1.5 hours labor @ $125. This equals $386.50 plus tax and shop supplies, so let’s call it $430. Is the average ‘08 Civic owner going to pay $430 for a speaker upgrade or are they going to turn to the Internet to find something cheaper?
Or, say a customer wants a subwoofer box and amplifier with installation, such as this MTX dual 12 inch amplified sub box shown on Crutchfield.
I spoke to several retailers that said they would charge for 3 hours of labor plus an amplifier wiring kit and shop supplies (10 percent) to install this. This would equal 3 hrs x $125.00 + $99.99 (amp kit) + $37.50 (shop supplies) = $512.49 plus taxes. In this example, the installation is roughly double the cost of the equipment ($279.95) for a total of $792.48.
Let me say, I don’t think this is unreasonable. But I am trying to illustrate the entry level customer experience.
Do you think this customer might try to search YouTube and DIY this package to save double the cost of equipment rather than pay $792.48 plus taxes? This first-time customer wants to put some bass in their vehicle. Are we forcing people to DIY? And what should we do about it?
We can say that is not my customer! However, there are a lot of older Honda Civics, Ford Explorers and Mazda 3s out there. Here is a list from Kelly Blue Book showing the Top 10 used vehicles under $5,000. Maybe offer an all-in-one price including installation for these types of vehicles, to get people hooked on car audio again? With the slowdown in sales since the pandemic, is it time to recapture this market?
According to Statista, R&B and Hip-Hop were the most streamed music genres in 2021 by almost double that of any other genre. That’s a lot of bass lovers out there. How can we get them in your stores?
*For reference, I reached out to a regional chain store and two top 10 retailers for rough estimates for costs and labor rates. These will vary by region.
Photo credit: James Chevrette
James Chevrette has been a territory manager for over 8 years with Trends Electronics in Canada. He has worked in an installation bay, in R&D in manufacturing, and personally trained thousands of people across Canada. Through his dealing with National accounts, regional chain stores, and relationships with brick and mortar independent retailers, he offers a unique perspective about business growth opportunities.
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James,
This is a great article that is getting people to think again. Well done. We were talking about this article in our store and the topic came up of an estimate we wrote to install some inexpensive equipment that would probably lose the sale. I voiced this thought process the other day during that discussion:
A young guy buys an older BMW 3-series or Porsche Boxster for $10k. He surely can’t afford to have a dealer work on his vehicle at their typical $200 per hour rates. So he would try and find a buddy to turn wrenches on it in their garage at the house. Fast forward 15 years to when that same young person buys a new BMW or Porsche as he now makes good money. Is he going to ask his buddy to pull it into his garage and try fixing it with him, even though that is exactly what he did years ago? Probably not. He is going to have the dealer work on it or at the very least, an independent that is known to specialize in that marque.
I started selling 12v at Westminster Speed & Sound in September of 1990. Back then, probably 50% of my sales were over the counter. Nowadays, it is less than 5%. As vehicles get more and more complicated and consumers are working on their cars less and less, I see our installation department as the saving grace to our industry.
I can rebuild a transmission by watching a video on YouTube as well, but I know my limits, so I will gladly pay a professional to do it. It’s the same idea.
I will NEVER discount my labor rates. It is one of the few things that adds value to your business these days. Once you lower it for one person, its expected for anyone they talk to, regardless on the car they come in with. I would rather discount the price of a product (again I won’t but would rather) than discount my labor rate.
The problem with products bought online is that when you install it for someone, you become their tech support. You can explain to them that you cannot warranty this product, or help them after the sale all you want, but the first time their phone doesn’t pair to that android radio that was $50 on amazon, they are coming back to your store. Then you have to stop what you are doing to either help them, or tell them you can’t help them, but either way you are walking away from what you are doing. You need to make up for that “after the install” time somehow. That is with a higher labor rate.
I always try to keep something in the store for any reasonable price point, but as I type this I have had one person call for help because they are trying to put in a radio in their jeep, but can’t get it to work, another person trying to get their factory camera to work with their JoyBring android radio, and someone messaging me on FaceBook sending me link after link asking if XYZ product is a good deal, even after I have told them over and over I have product here, in stock, that is comparable and the same price, and since I am familiar with it and know it’s limits, I can troubleshoot it later on if I need to.
We seem to be slowly becoming an industry of installers, and less of salesman. People can buy anything online, so why would we discount the one thing that actually brings money into the stores?
“We seem to be slowly becoming an industry of installers, and less of salesman. People can buy anything online, so why would we discount the one thing that actually brings money into the stores?”
*this is a very interesting thought, thank you
James,
This isn’t new nor specific to our industry; the customers a company serves will change over time.
Are we driving people to DIY? Nope, the internet did that for us 13 years ago. Our product offerings, cost of doing business and the business climate has forced us to charge what we charge. If that naturally and organically moves us ‘up stream’ to higher-end clientele, than so be it.
Are we missing out on the ’08 Civics and ’09 Explorer customers? Yeah, probably. But I don’t mind stepping over a penny to pick up a dollar. Got to go; I’ve got a brand new X5 and Silverado with tickets over $5K each waiting for me in the parking lot!
-Bash
Car Audio Express, San Jose CA
I agree with you on most points, but it wasn’t solely the internet, it was the manufacturers that allowed it to happen in the first place. I’ve signed so many dealer agreements in my 34+ years in car audio, and abided by all policies, but apparently that never meant squat to them.
Inflation has caused us to increase our rates. Rent has doubled in the last few years. Property taxes have followed suit. Insurance is not cheap. Employees cost us more and more every year. Training is essential, but not free as it costs us to close our stores to travel for training and employees want to be paid for it.
Some national companies erode prices, so we do not make enough profit on the product to stay solvent, so we need to jack our hourly rates and bill for the actual amount of hours that it takes us to provide this high quality service.
Profit is not a dirty word, but bankruptcy is. F*ck around and find out!
Even worse, our own industry is making many of the YouTube videos demonstrating how to do our job often with sponsors that many of us support. How many manufacturers are now selling direct to end users with full detailed videos showing how to perform the installation? Yet some of us still try to sell those products in our stores. We, the industry, has the ability to fix the problems, but we choose not to do it.
Our industry doesn’t protect us from this. Too many manufacturers will give free tech support to consumers for installs, and flashing modules, etc. They would rather chase the selling in bulk model, furthering the race to zero, than support getting their products professionally installed by us, who attend traing, and classes, go to school for advanced electrical and system design knowledge.
This has always been my problem with the MECP. After it’s all said and done, it’s a piece of paper to display on a wall, with absolutley no benefit to the person who does all the studying and testing to get it. Why would an MECP installer need it, why would any customer pay for that person, when any consumer can call and get helped by tech support? I’ve always said, since getting my MECP when it was first introduced, that our manufacturers should double their warranty for MECP installed products. Very simple to implement, adds value to having items professionally installed, lessens products returned to manufacturers as “defects”, and emphasizes the continuing need for training and education.
Your discussion also points out a very important fact, which I tell my customers, mostly car dealerships and service departments, there is no “one price for all makes” anymore. That’s a long dead thing of the past. I treat each car on a quoted estimate basis, pertaining to modules and kits needed, and extra labor, because some of them just take more time. Period. No other auto industry is doing repairs or adding accessories to vehicles that way any more. Exclusions are “most cars, some may require extra parts/labor, etc.” The cheapest labor rates at dealerships in my area are $165/hour for some of the domestic brands, going to $200/hour. European brands are even higher. I have no problem charging what I charge for my work and KNOWLEDGE, above all. That’s why people come to me, and they know I give my best effort every time, and deliver the best outcome for their hard earned dollar. If somone wants to do it themselves, go ahead, mess things up, and “borrow” our tech support people, making wait queues longer for us, and frustrating the tech support guys on the other end.
I’m not hurting, nor missing, those nickel and dime customers who don’t think we are specialists for a reason. If our industry wants to treat them the same as me, then I don’t do business with that company. Being an installer should mean something. Making it a career and life for 34+ years, should lend some credence to our abilities and genuine love, for an industry that doesn’t really care, as long as pallets of product are moving out of the warehouse.
well said!