Ask Mike: How Disruptive Will the Future Actually Be?
This month, we “ASK MIKE” for his thoughts on future disruptions that could drastically change the industry. We at Hammer & Dolly hope you find the following exchange useful, and we encourage you to reach out to us if you have a question for Mike on this or any industry-related matter that he can answer in a future issue.
Hammer & Dolly: The collision industry is in a state of constant change. What are some future disruptions you expect to impact the collision repair world, and what can shops do in advance of these changes to prepare for them and ultimately take advantage of them?
Mike Anderson: There are good and bad things that could happen. Number one: there are a lot of non-DRP shops that are profitable because of storage and teardown fees on total losses. Whether we like it or not, I truly believe that we are going to see artificial intelligence identify total losses. When that happens, that vehicle will not go to the shop; it’s going straight to auction. Those shops that are profitable only because they’re being paid a lot for storage and teardown are going to see that money go away. They’re really going to be in a bad position, because they’ll have to figure out how to make that money back. I’m not saying it’s wrong to make money off storage and teardown, but losing that revenue could be destructive to a business if it can’t make enough money from regular body work. Shops need to make sure their business models of profitability are not 100 percent based on total losses and storage. We have to be cognizant of that.
Whenever I’m talking to someone during training we do, I say, ‘There are 400 pages of OEM repair procedures to replace this quarter panel. How come you didn’t pull all of that?’ People usually tell me they didn’t have enough time to do it or didn’t know about it. We have to figure out, as collision repairers, how to embrace technology to give our employees more time back. We need to ask ourselves how we give our employees more time back and what they could do with that time. They could spend more time looking up OEM repair procedures or following up on receivables. When a new technology or new software program rolls out, we always talk about what it won’t do. We need to say, ‘Okay, it’s not perfect today, but what could this lead to in the future? How could it benefit us?’
Customer expectations are going to continue to evolve. For example, a $7 prescription from CVS can be delivered to their house for free. I get groceries delivered to my house for free. When we do a $4,000 repair, someone has to leave work early to get their car. It’s just a matter of time before consumers demand white glove concierge service in collision repair. The customer experience is going to continue to be shaped by other industries – Amazon Prime, Uber and companies like that.
More and more shops that have been DRPs forever are coming to the conclusion that they have to charge the customer the difference for what it takes to properly repair a vehicle. You’re going to see more customers having to pay out of pocket – not just for their deductibles, but for additional funds as well. That’s just the nature of the beast.
H&D: Many people in this industry talk about the future bringing new challenges and technologies that shops will need to adapt to in order to survive. None of us have a crystal ball, but do you see things coming down the road that could make life easier for a body shop?
MA: Everything ebbs and flows. Vehicles are already complex, but as they continue to become more complex, you’re going to see the required skill sets of technicians increase. With that, you’re going to see wages get adjusted accordingly. We’re going to have to do something to attract the right people. We’ve already seen that; some of the major MSOs are saying, ‘Hey, we’re going to have to raise our prices because we can’t afford to pay people.’ Our industry will get back to where we were. My dad used to tell me that the labor rate for body work was always higher than mechanical work. Then, it went the other way. But as we see fewer parts that need to be repaired and more parts that need to be replaced, that will need to be offset by additional labor operations or even rates in general. The industry is going to have to shift back the other way. It’s just inevitable. It’s the only way shops will be able to survive.
H&D: Of course, insurers will need to make that change right along with the shops.
MA: Yes. Insurers are going to need to get smarter and re-think ways to determine premiums by involving OEMs and the right collision repairers and say, ‘Okay, what’s it going to take to fix this vehicle?’ They will become a little more realistic about what needs to happen. I also believe those days of attempting to control severity to reduce the amount they pay out on a claim are over; the insurers need to look inside their own operations for cost or expense savings and how to become more efficient – just as shops have had to do over the years.
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