1. Executive Summary
The report is focused on the United States Automotive Aftermarket industry analysis. The total amount of workers in the aftermarket industry is 3.84 million people in 2010. The aftermarket industry was always considered to be a lower sector of the employment and in the year of 2010, total 24,500 jobs lost with six-tenths of one-percent (-0.6 percent). Although the industry has limited amount of jobs, the 2010 employment trend was a huge step forward as compared to 2009's with audited loss of 388,200 workplaces.
(Referring to Appendix A – Aftermarket Employment Trend)
The aftermarket industry is extremely diversified in various channels which include Motor Vehicle Parts Manufactures, Motor Vehicles and Parts Wholesalers, Automobile Dealers, Automotive Parts and Accessories Stores, Tire Dealers, Gasoline Stations, and Automotive Repair and Maintenance.
The main goal of this report is to find the way to solve Winplus existing problem and catch out the solution. Winplus is facing a challenge as they are first to get in the Valvoline brand product and need to broaden their business in windshield wiper area.
Winplus company goal is to expand their wiper blades market share through their current distribution channels. In order not to restrain ourselves, except broadening the business through the automotive retailers, possible expand to mass retailers and wholesale clubs.
This report focuses on selecting the category of Windshield Wiper Blade and analyze with current situation, competitor landscape, and strategic analysis. It has exhibited the uses of internal data collection method meanwhile the analytical method is according to the industry analysis which included:
- Windshield wiper market structure analysis
- The Five force framework analysis
- Supply and demand analysis
- Market concentration analysis.
The report also focuses on giving strategic recommendation from managerial perspective to the company that focuses on product licensing, so as to expand the DIFM market and capture the DIY consumer market.
2. Company Background
Winplus is a worldwide team that focuses on adding novelty and style to automotive accessory products. Winplus is a member of the global market, manufacturer and wholesaler of quality product including; air fresheners, seat covers, floor mats, steering wheel covers, travel mugs, interior accessories, comfort cushions, Bluetooth handsfree, and windshield wipers blades. The assortment is constantly broadening to offer a variety of choice for the most discerning of motorists. Winplus continues to create vehicle environment that intrigue, inspire, entertain, and flatter so that there is always a new way for consumers to express themselves.
The company was founded in 1998, it is positioned at the top by differentiate with other competitors in quality, design, efficient product development, innovation and creativity. Winplus in-house brand including Type-S® and Yada® . Beside building up in-house brand, Winplus also has licensed the Air Wick® brand and Looney Tune from Warner Brothers.
In 2010, Winplus has added a completely different category into their development plan in order to strengthen the product range and business. The windshield wiper blade categoryt includes beam blade, conventional blade and hybrid blade. The blade market exists in competitive market environment. Reposition the product offer from traditional impales buying products to necessity automotive products, which have huge potential to generate additional revenue and profit for the company. With the acquisition of ScanTop North America who is specialist on windshield wiper blade distribution in United States and the Valvoline® brand Licensee for automotive windshield wiper blade, Winplus has now aligned the Valvoline® brand into their assortment and will leverage their current distribution network among the mass and auto retail customers in US, Canada, and Mexico.
2.1. Distribution Channels
The acquisition of ScanTop North America has helped Winplus to add supplementary distribution channels including Kmart, Sears, Big Lots, and Valvoline Instant Oil Change Center.
Sears Holding Company Inc. – Kmart and Sears are under the same parent company, however, all the details of their business are separate. Total combined approximate 2,000 stores across United States.
Valvoline Instant Oil Change Centers (VIOC) – Corporately owned or franchised, these are oil change centers that have agreements to use Valvoline products in return receiving the benefits of the Valvoline brand. They pay franchise fees. Total combined 640 stores and near half of them are corporately owned.
The Valvoline® wiper blades are sold widely through above distribution channels. In 2010, there was totally 2 million units sold across these stores and approximate US 8 million wholesale dollars.
(Referring to Appendix B – Total Valvoline Wiper Blades sold in 2010)
There is an important opportunity for Winplus to leverage from their existing distribution and double the wiper blade business for the next year. Winplus existing distribution channels for their automotive accessories business are automotive retailers, mass retailers and warehouse clubs. The main focus for the wiper business will be targeting to the following retailers within each of the distribution sectors.
The opportunity for each of the potential retailer is considered as a great quantity of business for Winplus. According to the market data, each distribution channel unit sold as follow:
3. Problem & Challenge
It is very difficult to enter the United States major retailer market, Winplus has our first step in the category with Valvoline brand, but Valvoline is a popular brand in automotive commercial side, but not a famous brand in consumer side as the Valvoline’s original product is oil lubricant. Because of the limited space in the retail stores and all other competitors are very famous brand or low price product from China, the becoming the major retailers is not easy at all.
4. Industry Analysis – Wiper Blade Market
In the year of 2010, the automotive aftermarket parts, accessories, tires and service for light vehicles were sold directly to end consumer through 42 channels within the automotive industry. These 42 channels which include the do-it-for-me (DIFM) repair shops, that ensure professional service repairs and maintenance service to consumer and the do-it-yourself (DIY) channels. The DIY channels are the automotive retail stores that sold product directly to consumer. The total automotive aftermarket industry channels experience a 4.2% increase in 2010 over 2009.
The National Purchase Diary (NPD) report recorded a 7.6% increase in the year of 2011, within the Automotive Aftermarket industry channels under the wiper blade category. In retailer dollar sales, it increased from US 667 million dollars from 2010 to US 718 million dollars in 2011. The growth was mostly from the Beam Blades, which recorded from US 198 million dollars (2010) to US 268 million dollars (2011), total of 35% increase.
(Referring to Appendix E – NPD’s Automotive Aftermarket Industry- Wiper Category)
(Referring to Appendix F – Aftermarket Sales to End Users by Distribution Channel)
(Referring to Appendix G – Wiper Blade Market Share Distribution)
5. Industry Analysis – Porter’s Five Forces Analysis
The threat of entry to the wiper blade distribution business level is very high. This is due to the fact that the wiper blade is a low cost and low tech product. There major types of wiper blade are conventional blade, beam blade and hybrid blade. The conventional blade is the easiest type to be manufactured because of the standardized design, long history and no patent right. Although the wiper blade is easy to manufacture, it is difficult to sell in United States market as the major retailer distributions are dominated by a few major brands, which captures over 80% of market shares. The Beam Blade is difficult to entry due to the intellectual property from Borsch. In the market, there are just few brands which currently offer the Beam Blade through the major retailers due to the patents from Borsch. In order to enter the main distribution channels, the retailers are not only looking for the best price, reputation of your brand and company, but also extra monetary benefit eg. program fees or shelving fees. There is no much space in the retail stores, so that in order to kick off existing brand from the shelve, the new comer needs to guarantee that their product will be able to generate the same annual income. Besides, the new product may need to buy back all the old supplier’s inventories including all transaction cost from their distribution center to the final destination.
5.2. Power of Input Suppliers
The suppliers don't have much power because the distributors like Winplus can easily switch the production to other factory as wiper blade is low tech product. There are a few major factories in China, Korea, and Taiwan who produced the wiper blade at the same quality. The cost of switching to a different factory is low as compared to the annual turnover business. Also, being a famous brand or licensed brand will have a much greater negotiation power with the factory. Due to the fact that the top few factories are always trying to get the opportunity to produce the major brand especially for any United States business to increase their annual volume and factory reputation. The key to manufacturer's business is to generate the volume to get lower cost per unit. The production processes are all automation and continuous production running will help factory to reduce their overhead cost. Also, the factory can have a much greater negotiation power over their raw material supplier, because of having greater production volume. The price driven at the raw material size will be all depends on the annual volume purchasing.
5.3. Power of Buyers
In the category of the wiper blade, among the distribution channels through the major retailers, the power of the consumer is very high. There will be intensive price competition from each brand and the buyer frequent switching their supplier due to the low switching cost and the benefit of the negotiation deal. In the category of the wiper blade, the retail price suggested for each Conventional Blade, Beam Blade, and Winter Blade are set at the market price from the buyer. It will be very difficult to increase the retail price just because you have whatever brand or features unless your product is completely differently engineered with great differences from your existing suppliers. Within each buyer assortment of the wiper business, they will usually separate their assortment into low, medium, and high quality price point by brand. The cheaper products are usually their house-brand product, which the retailers are purchasing directly through the China manufacturer. The remaining medium or high quality portions will be usually divided up into few brands only. The one who gives the best deal within the negotiation terms with the best brand reputation that can help the retailer to generate the best revenue gets the business.
5.4. Industry Rivalry
Referring to the market share data below, the windshield wiper market is very concentrated with four-firm concentration ratio over 0.8. The market is dominated by a few large companies.
Moreover, about 10% of market share comes from Others (retailer who is currently buying directly from China and the brand usually labeled to the retailer’s name or brand) which offers lower price with worse quality which poses great price competitive advantages.
As the windshield wiper is not a proprietary product, buyer can choose another brand with no costs. Further, there is low degree of product differentiation in wiper as there are only 3 types of wipers in the market with different appearance but same functionality.
5.5. Substitutes & Complements
Nowadays, there is no substitute and complement for windshield wiper. As the major driven will be the major car manufacturers, not wiper blade distributors like Winplus or wiper blade manufacturers. The wipers blade in the last ten years are basically the same, only changes in different design like the new Beam Blade, but they all have the same functionality. There are some companies who tried to convince driver not to use wiper blade during the rainy day by applying a special chemical coating onto the windshield or changed the entire windshield glass with heat sensor built-in the windshield that will help evaporate the water, but none of them have been successfully proved that their product is able to replace the traditional wiper blade in the market. Most of them can only enhance the visibility while driving in foggy weather, but not much in rainy weather.
Focus on product licensing
Trying to sustain the business, Winplus has entered the licensing business with the Valvoline brand. All products bear the name of Valvoline. The benefit of licensing a well-known brand is the brand recognition. The product can be easily recognized by the retailers and the consumers.
Valvoline wiper blade successfully expanded on the Do-it-for-me (DIFM) market. Winplus is now distributing Valvoline wiper blade to half of its Valvoline Instant Oil Change Centre (VIOC). For consumer market, also known as the Do-it-Yourself (DIY) market, Valvoline wiper blade is not as successful as the DIFM market.
Winplus is wants to expand the DIFM market and capture the DIY consumer market.
(1) Expansion of Valvoline wiper blade market
The licensing agreement gives the Winplus wiper blade products an opportunity to be carried by all VIOC centers. At present, Winplus wiper blade products are distributing to 320 stores out of its 640 stores owned by corporate. It is Winplus’s strategy to gradually distribute the products to all of its stores.
The opportunity of distributing the wiper blades to Kmart and Sears came with the acquisition of ScanTop North America. Winplus will further cooperate with both big retailers to market the products at their stores.
If Winplus succeeds in selling the products with the help of expansion of distribution channel to the other half of VIOC centers owned by individual franchise owner, Kmart and Sears, we foresee the unit of products sold will be double to 4 million units.
(2) Capture the DIY consumer market
Winplus is going to become a partner of another well-known household glass cleaning product – Windex by entering into the licensing agreement with SC Johnson. There is a strong association and brand awareness of Windex brand for household glass cleaning product. The Windex brand is captured over 60% of market share in glass cleaning product.
Demand shift due to an increase in advertising
Besides, in order to leverage the brand recognition by consumer, Winplus will invest in advertising dollars to promote the Windex wiper blade to consumers, mainly on print advertising. The influence of advertising moves the demand curve to the right, leading to either increase demand or increase price of the wiper blade. Advertising provides information about the product and arouse the attention of the target audience, sothat making them perceive that Windex glass cleaner and Windex wiper blade are good combination to clean the windshield. Through product licensing, Windex wiper blade will also be able to acquire the consumer market through giant distribution channels of Costco, Autozone, and Wal-Mart.