Online Parts Market Launches Dynamic Pricing
by Blake Desaulniers
In November 2014, General Motors stirred up a hornets’ nest at the SEMA show in Las Vegas. That’s where they announced the launch of MyPriceLink.com, an automated real-time pricing program for Genuine GM collision repair parts.
GM billed the site as a “new, aggressive and game-changing initiative.” The website provides competitive pricing up front, at the time of estimate, to give buyers timely pricing information.
After the announcement, people scrambled from the meeting room in Las Vegas to call home. So furious was industry feedback, that only weeks later GM announced they would put the brakes on releasing MyPriceLink.com.
Two major concerns came to the fore. First, how would the new system impact workflow? Would this create more pain for dealers and shops? How would MyPriceLink integrate with SMS and estimating systems? Second, was this really a cover for General Motors going for a round of price hikes? What would happen to margins?
Rather than abandon ship, GM went to back to work with industry partners, including OE Connection, the primary technology provider in the mix. As the automotive industry’s largest OE parts marketplace, OEC connects more than 60,000 North American buyers and sellers to seamlessly market, manage, and move an average of over 6 million original equipment parts transactions monthly. OE Connection, for those who don’t already know, is owned jointly by GM and Ford.
Forward to May of 2015, four months ago, and GM comes back with another announcement. They’ve been listening to the GM dealer network, information providers, dealer management systems, independent shops, collision associations, and insurers who have all provided feedback.
So GM was then prepared to announce a US market test to take place over the summer of 2015, prior to an expected US national rollout in the fourth quarter of 2015. In July, at NACE, GM also held a panel discussion to further explain MyPriceLink and discuss its pending launch.
It should have been clear to everybody who attended that NACE discussion that GM had been hard at work. OE Connect had written software interfaces for Auda Explore, Mitchell, CCC, and Web-Est, along with a large and growing range of shop management systems, and engaged at least five of the top ten insurers in the US.
Over the summer GM has been working with the major estimating systems to ensure that end users can write estimates in a seamless, transparent manner. The test will confirm the technology and data flow is performing as designed, confirm estimates can be written with minimal disruption to current daily workflow, and confirm that estimates are displaying the correct pricing.
The market test will also engage GM dealers and DMS companies, making sure a dealer can fulfill an order with MPL pricing and DMS invoice integration.
While reports have the system performing as expected, not everybody is happy to see GM advancing with real time prices.
“We feel it’s a direct attack against the aftermarket,” says Ed Salamy, executive director of the Automotive Body Parts Association, which represents aftermarket parts manufacturers and distributors in the US. “One can only speculate that this is a tool to drive out the aftermarket.”
While on the face of it, it’s easy to point the finger at GM, it’s just as easy to argue that the move to a real-time dynamic parts pricing system is inevitable, both on the OEM and aftermarket sides. There are obvious efficiencies to be gained throughout the sector by tying together vehicle data, estimating, shop management, and insurance functions on a unified electronic platform. Parts acquisition has to be included. While MyPriceLink is not the whole solution, it is an important step toward that goal. It should push aftermarket sellers to find a competitive solution of their own.
There is, however, a lot more to the story than price competition and market efficiency. The software link between the estimate and a live market provides a channel that can carry all kinds of information back and forth, in all kinds of formats, for any OEM. For example, up to date repair procedures can be made available when parts are bought. The shop can get integrated and current technical information to ensure the right part is installed the right way, increasing customer satisfaction and eliminating costly call backs. Simple factors such as more accurate VIN decoding inherent in MyPrice Link, can ensure the right part arrives.
“Our goal with MyPriceLink is to streamline the overall process,” says GM’s Chris Mayer.
One of the major concerns the industry brought forward, dynamic pricing, will continue to be a major issue for the foreseeable future.
Dynamic pricing is simply pricing that changes based on supply and demand. When a dynamic pricing model is used along with a real-time parts acquisition system, markets get more efficient. The New York Stock Exchange, among others, is an example of a dynamic market in action. In a dynamically priced collision repair parts market, suppliers can better manage inventory, and change pricing to ensure optimal stock and order flow, and buyers get pricing that best reflects current supply and demand conditions. In an ideal, real time system, buyers can also select from parts and suppliers that best meet their needs at the time of estimate, knowing price, stock status, and delivery schedules more reliably.
An open, real-time dynamic-pricing parts market can also cut cycle time by giving shops the ability to send out a request for quotes to multiple suppliers simultaneously, and select from their preferred options, submit and track orders, and generate customer and insurer-friendly reporting with minimal time commitment, so it can have a real impact on cutting cycle time. The further these systems go toward talking with the vehicle and all other systems in the chain, the better. Still, for the time being, the most obvious impact is that systems such as MyPriceLink portend an unstoppable move toward dynamic pricing.
According to Mitchell’s Jesse Herrera, “dynamic real time pricing is a natural evolution.”
MyPriceLink, however, is currently dedicated only to GM parts. There are no other users lined up for the system at this time. However, the system has been built to accommodate more suppliers going forward and, after all, Ford is an owner along with GM in OE Connection, the technology facilitator. So it’s fair to guess that Ford won’t be far behind. Others will surely follow.
According to GM, there is no cause for alarm. Practically speaking, shops will see no real difference in their work flow. If fact, the new system will eliminate the need to go back to GM for competitive or Conquest pricing after the estimate has been written.
“We’re talking about seven to eight thousand highly competitive parts on the system,” says Mayer. “We have 92,000 parts in stock, but we are offering mainly parts that are already positioned in the Conquest program, so overall we don’t expect to see a great deal of change in cost or margins in any case. We do expect that this will have an impact on cycle time.”
Mayer also points out that he expects a 30 to 90 day period to populate any price adjustments across the system, so volatility in the system should not present a serious problem. Prices, he implies, simply will not change on a moment to moment, day to day, or week to week basis.
Beyond the the introduction and establishment of MyPriceLink with GM in the US, there is the larger trend to consider. The API, the software that links GM to estimating systems, allows for real time connectivity between the repair value chain and suppliers. Combined with telematics systems such as OnStar, there are a range of value-added features, services and data that can run both ways along the channel. It is something that GM and Mayer are absolutely aware of. “We definitely see opportunities in telematics. I think it’s a very exciting area,” Mayers says.
There has been no formal announcement of plans to introduce MyPriceLInk outside of the US market, as yet. However, it’s fair to speculate that it’s only a matter of time until more OEMs get on board, and until rollouts into Canada become inevitable.
The big question is: how will aftermarket suppliers respond? While online order system do exist, none truly offer the kind of open market, real time competitive features to bolster aftermarket offerings.
Recent efforts to provide facilities for aftermarket buyers and suppliers that might compete against MyPriceLink have proved less than hugely successful. The industry has been resistant to change, and initiatives offering such open market facilities have had difficulties getting off the ground. Efforts such as PartsTrader in partnership with State Farm have been a lighting rod for criticism, outrage and fierce debate in the US, seen to be an attempt by insurance companies to control the collision repair parts market, parts pricing and margins. Shops have gone so far as to launch class action lawsuits against the partnership.
Still, the trend toward online, real time dynamic pricing looks to be unstoppable.
There is little doubt that growing integration from vehicle through shop, through suppliers and insurers will continue to spread, if for no other reason than insurers stand to save billions. That means the model of list and discount so familiar to many in collision repair is on its way to being a memory, to be replaced by online, real-time integrated systems that will make the workflow faster, make parts ordering easier and more reliable, save insurers big money, and provide vehicle owners with better quality repairs in less time than ever before.
This article appears in Collision Quarterly Magazine