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SECTION 3.0 INDUSTRY & MARKET ASSESSMENT Section 3.1 Industry Definition The following section will provide comprehensive facts regarding the automotive detailing Industry in Canada. MotoTrend AutoSports will belong to and operate within what is defined as Canada's Automotive and Repair Services industry. Under the North American Industry Classification System (NAICS), there are two definitions for both industries as follows: 1. 441310 Automotive Parts and Accessories Stores This Canadian industry comprises establishments primarily engaged in retailing new, rebuilt and used automotive parts and accessories; both retailing automotive parts and accessories and repairing automobiles; and retailing automotive accessories that generally require installation. (NAICS 441310 Statistics Canada) 2. 441320 Tire Dealers This Canadian industry comprises establishments primarily engaged in retailing tires and tubes. These establishments also typically provide complementary services, such as tire mounting and wheel balancing and aligning. (NAICS 441320 Statistics Canada) 3.2 Industry Overview The automotive parts/accessories and tire industry is a stable industrial sector comprised of companies and organizations that provide products and services in the following areas: • Retailing and repairing tires • Tire stores selling primarily to other businesses but also selling to household consumers • Tires (new or used), retail • Air-conditioning equipment, automobile, sale and installation, retail • Automobile accessory dealers, retail • Automotive accessories and parts, second-hand, retail store • Automotive parts and accessories stores selling primarily to other businesses but open to the public • Battery dealers, automobile, retail • Sound systems, motor vehicle, retail • Speed shops, retail • Used automotive parts, retail The following information was gathered and published by Statistics Canada regarding the automotive parts/accessories and tire services industry in Canada. Industry Structure and Growth The information contained in this sub-section was gathered and published by Statistics Canada regarding the landscaping services industry in Canada. • Within Canada, approximately 78% of all automotive parts, accessories and tire store establishments are profitable. On average, these businesses (profitable) generated net profits of $57,800. Gross margins for the automotive parts, accessories and tire stores industry group was 36.1% in 2010 while cost of sales was approximately 63.9% of sales. The bulk of the costs are made up of purchases, materials and sub-contracts. • Overall revenues for automotive parts, accessories and tire stores sector have increased 3.8% per year, on average for years 2002 to 2012. As of 2002, industry revenues have increased from $5.3 billion to $7.4 billion representing a 3.8% increase. Between November 2012 and November 2013 there has been an increase in overall revenue by 10.5%. Based on this data, there is a clear indication that consumer spending trends in this industry is continuing to build. • Revenue data ranges between $30K (low end) to $5 M at the high end. • Within Canada, average gross sales are between $30K $375K at the low end and $375K - $5 M at the high end. In Ontario, average gross sales are between $30K - $275K at the low and $275 - $5 M at the high end • A key characteristic of businesses within this industry is that the companies within the lower half of the industry or those that generated between $30k and $275k in sales annually generated the highest margins (52%). At the high end (275K 5 M) generated 32% in gross margins. Simply put, the larger the company the lower the profit margins. A key reason for this is that management and equipment costs are fixed and therefore, the profitability of individual companies is dependent on demand volume and operations' efficiency. Therefore, smaller companies can easily compete with larger ones, except when providing services to larger clients. • Ontario is home to the largest automotive aftermarket valued at 6.39 billion dollars. According to the Automotive Industries Association of Canada, the aftermarket potential in Ontario is valued at $11.57 billion dollars. In addition, untapped potential for Canada in the aftermarket automotive market grew from $11.91 billion dollars in 2010 to $14.03 billion dollars representing an in increase of 17.8%. (www.aiacanada.com). • According to the Automotive Industries Association of Canada, the average Canadian underspent $207 on each of 3 annual service visits in 2012. In addition, there were 11.68 million neglected service jobs in 2012. According to an automotive study completed by AutoFile, the average Canadian spent $800 per year on automobile maintenance. The actual potential for automotive servicing is $1,007 per year. (Source: www.autofile.ca/News/373/Canadians-spend-about-$800-year-on-vehicle-maintenance) • The growth of the automotive aftermarket in Canada is expected to increase annually by 3.5% annually ( www.aiacanada.com ) • It's important to note that used vehicle sales represent 65.6% of all vehicles sold in Canada in 2011. • Canada's automotive parts, accessories and tire stores industry in 2012, represented over 6,046 companies with Ontario accounting for just over 1,500 Companies. Firms in this industry remain relatively small. Of the 6,046 companies in this sector, 65% had fewer than 100 employees while 35% had fewer than 5 employees. The automotive part, accessories and tire store establishments employs a skilled workforce with the majority of workers between the ages of 25 and 44 years of age. According to a report entitled The 2013 Canadian Automotive After Market Demand Study by the Automotive Industries Association of Canada, it concluded that: This examination of the current and potential states of the automotive aftermarket in Canada reveals that several billions of dollars in untapped revenue are available within the Canadian market, and that this amount has grown in recent years. The key to unlocking this extra revenue for the aftermarket supply chain lies with the street level automotive service providers, who deal with Canadian car owners on a day-to-day basis. Being aware of the neglected maintenance areas and being able to effectively communicate the benefits of maintaining these vehicle parts/systems to the consumer will go a long way in helping the industry to achieve its full potential. Whether it is through targeted advertisement on behalf of the parts manufacturers or face-to-face communication with customers in a service bay, it is through conversation and education that additional market revenue will be realized and a safer fleet of vehicles in Canada will be achieved. Given the fact that overall revenues for the automotive parts/accessories and tire industry services sectors continue to rapidly grow, there is a rather large potential for future growth opportunities. Barrier to entry for retail companies are relatively low considering the size of the average automotive parts/accessories and tired company in Canada (Under 10 employees). 3.3 Target Market MotoTrend AutoSports have identified their target market area as the city of Anytown and surrounding areas. More specifically, Mr. Bernie Spotman's company will target one key segment of this market area, which is: • Residential Automotive Market within Anytown and Surrounding Area Primary Market Contained below are summaries of the aforementioned target market of the company. • Residential Automotive Market within Anytown and Surrounding Area Primary Market The City of Anytown The customer's range for the products and services being offered are specific to, but not limited to: • Between the ages of 18 65 • Enthusiasts • General automotive clients • Bargain hunters Anytown is located approximately 294 kilometers northwest of Sudstown, Ontario. Anytown covers a land mass that is approximately 2,979 square kilometers. As of 2011 the registered population was 43,165 with approximately 17,811 private dwellings occupied by usual residents in Anytown in 2011. Of these members 21,420 are male and the remaining 21,745 are female. Statistics Canada reports that the median age of the male population is 40.7 years with approximately 29,740 between the ages of 18 to 65. Approximately 23,825 individuals are employed or just over 55% of the total population. The average personal income per household is $42,865 with a combined average income of $81,099. According to statistics Canada (www.Anytownedc.com), Anytown has the second lowest mortgage costs of 8 major metropolitan areas of Ontario at $7,629. In addition, Anytown also has third largest after mortgage net incomes of 8 major metropolitan areas in Ontario. Anytown has an average after mortgage net income of $46,061 representing the third largest after mortgage net income areas of Ontario. The Ministry of Natural Resources (oee.nrcan.gc.ca) reports that the number of average vehicles owned per household in Ontario is 1.45. The average number of households in Anytown is approximately 17,811. Given the available data, there are roughly 25,825 privately owned residential vehicles in Anytown. Ideally, Mr. Bernie Spotman will target those families who: • Own one plus vehicles per household • Are employed and have a medium levels of disposable income • Between the ages of 18 and 65 • Take pride in maintaining their vehicles The potential market size is approximately 25,825 vehicles in the city of Anytown. Surrounding Communities Mr. Bernie Spotman will target 6 surrounding communities which as follows: • Capote • Matthewson • Rocky Falls • Commanda • Kirks Lake • Kaputsang The following information has been complied using data from Statistics Canada:
The Ministry of Natural Resources (oee.nrcan.gc.ca) reports that the number of average vehicles owned per household in Ontario is 1.45. The average number of households in the surrounding communities is approximately 14,763. Given the available data, there are roughly 21,406 privately owned residential vehicles in the surrounding areas of Anytown. Total size of the potential residential market size: 47,231 vehicles 3.4 Market Summary and Calculation This sub-section will combine the data presented in the previous sub-section with expenditure data from Statistics Canada along with conservative assumptions to calculate the overall size of the automotive parts, accessories and tire store establishments market within Anytown (And surrounding areas) by market segment. In particular: • 30% of the market in Anytown and surrounding areas will require automotive parts, accessories and tire products and services. • The average Canadian spends $332 ( www.statscan.ca ) on automotive parts, accessories and tire. • The actual market size for the automotive parts, accessories and tire store industry for Anytown and surrounding areas is 47,231 ($332) x .30 = $4,704,208. The table below summarizes the size of each market segment in units, expenditure on landscaping and property maintenance services per year and the overall size of each segment in dollars.
As identified in the table above, the market for the automotive parts, accessories and tire store market for Anytown and the surrounding area is $4,704,208.00.This calculation is very conservative and does not take into account the service demand stemming from other services such as towing. Within the first year of operation, it is estimated that MotoTrend AutoSports will generate approximately $392,011 in sales. This represents a market capture of 8%. If Mr. Bernie Spotman operates 7 days a week for 50 weeks each year this represents a daily sales figure of $1,568 for 300 days. 3.5 Competitive Environment Within the automotive parts, accessories and tire industry in Ontario, the competitive environment is moderate with a few large competitors is garnering a rather large market share. However, MotoTrend AutoSports is proposing to enter a market that segments its products and services to specialized auto shops. The main advantage that MotoTrend AutoSports has over its competition is its unique wholeness. That is, no other automotive service companies in Anytown and the surrounding communities offer a one stop shop that is comparable to MotoTrend AutoSports. In the vicinity of the proposed location, there are several repair and tire shops with only one aftermarket specific shop that is remotely going after the market. This mentioned aftermarket shop is currently booked four to six weeks in advance to get work done and currently only have three suppliers for their products. The shop struggled at first, largely due to their location, as they tried to find their niche in the market place but since focusing more on truck caps, they have gotten busier. There are eight source of potential replacement parts competition located in Anytown; Action Van and Truck World, Innovation Audio and Clean Ride; Benson Auto Parts; Maslack Supply; Carquest Auto parts; Uptown Auto Parts; Napa Auto parts. Competitive Summary The following companies are considered MotoTrend AutoSports main competitors. Action Plus Strengths: • An existing company with an established track record and clientele • Nice website template • Are developing social media Weaknesses: • They only have 3 suppliers compared to our 145 suppliers • Our company has better products • Our supplies are more competitively priced • They have no real on-site marketing strategies or specials • They are in a bad location • It takes them too much time to receive products and fill special orders • Their shop only has one bay causing many customers to go out of town for service • No optimized mobile website Into It Audio Strengths: • Strong market presence is the regional market leader' for audio and 12 volt accessory • An existing company with an established base and clientele Weaknesses: • This company small and is run and operated solely by the owner • They are in a poor location with no parking available • They offer no on-site marketing or specials • No optimized mobile website Clean and Cool Ride Strengths: • Specializes in automotive detailing • They have an excellent clientele base • They have a nice website Weaknesses: • Very un-impressive store look & location • They are a very small business • They have limited space and have long waiting list • No optimized mobile website Bens Auto Sports Parts Strengths: • Specializes in automotive Replacement parts • They have an good clientele base • They are well established Weaknesses: • Very un-impressive store look & location • They stock a lower quality product • They are poorly located • No optimized mobile website Maclacky Auto Supply Ltd Strengths: • Specializes in automotive Replacement parts • They have a good clientele base • Well established • Recognized name and reputation Weaknesses: • They stock amid grade product • Small business geared only to replacement parts • Costs of products are above average • No optimized mobile website Sir Carsalot Auto parts Strengths: • Specializes in automotive Replacement parts • They have a good clientele base • They have a nice looking store • They are well located Weaknesses: • They only sell stock replacement parts • Their store is small • They have an above average waiting for service • No optimized mobile website Uppity Town Auto Parts Strengths: • Specializes in automotive Replacement parts • They have a good clientele base • Well established Weaknesses: • Store look is outdated • They are poorly located in comparison to other dealers • They stock a lower end product • No optimized mobile website No Problemo Auto parts Strengths: • Specializes in automotive Replacement parts • Well established and well known in other locations • They have a fair clientele base • Optimized mobile website Weaknesses: • Small store with unimpressive interior • They have poor service • They are extremely poorly located • They have poor marketing strategies The competition in Anytown and surrounding area is dominated by one player: Action Plus. The fact that the other two competitors listed have been in business for a number of years, is confirmation that the market does exist, is healthy and capable of sustaining a well-run business. Out of the three major players, not one business encompasses all aspects of MotoTrend AutoSports business. One business specializes in audiotronics; one specializes in detailing, while the other business has limited access to specialty products. MotoTrend AutoSports will capitalize on the lack of service from current automotive garages because no local shops compete directly with the core concepts of MotoTrend AutoSports.
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Business PlanningBusiness ResourcesPlan Quick TipRemember, when completing your executive summary, stick to the facts, get to the point, and keep the fluff out!
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