$30 Billion Customizing Business Is Up for Grabs

A 2013 Mustang rolls through the city as pedestrians picture it decked out to match their personalities. In the final scene of the recent Ford Motor Co. TV spot, a shy little girl in a pink ballerina costume imagines it as a vicious black Cobra with a growling throttle.

"Everyone has an inner Mustang," the commercial cajoles. "Unleash yours."

Consumers have signed onto Ford's online Mustang customizer Web site, ford.com/cars/mustang/customizer, and created more than 4 million versions of the car since last year. But in the real world, the business of customizing or personalizing vehicles -- estimated by the Specialty Equipment Market Association to be worth $30 billion a year in the United States -- is up for grabs.

Manufacturers from Audi to Subaru want to capture the consumer spirit for personalization. The aftermarket is booming with business for custom wheels, tinted windows, electronics, lighting and interiors.

But the natural link between the two -- the new-vehicle dealer -- isn't quite so zealous about it.

"The Mustang is one of the most customized cars on the planet," says Jim Owens, the car's marketing manager. "But a lot of the work gets done by 'I know a guy.' The owner knows somebody at a local shop. They know somebody down the street.

"It's a huge business for the aftermarket."

Where are the dealers? In most retail sales, salespeople never pitch personalization.

A recent survey of more than 7,800 new-vehicle buyers around the country found that 65 percent of their purchases occurred without any mention of accessories. That is higher than a year ago, when 61 percent of the sales occurred without a mention of customization, according to the report by Foresight Research in suburban Detroit.

The survey found that nearly 60 percent of the dealers involved did not have an accessorized vehicle on display, says Ron Hein, Foresight executive vice president. That's despite Foresight's finding that buyers spend $1,662 on average to accessorize vehicles. Apparently consumers are getting the work done somewhere other than the dealership.

"It's a little puzzling," Hein says. "We're in this new age of individualization. And most of the accessorizing and customization work gets done within two years of the vehicle purchase -- which ought to be the dealer's domain. But car dealers are stepping away from it."

Galpin strikes gold

Not all dealers. Some are striking gold in the customizing market. Beau Boeckmann, president of Galpin Auto Sports in Van Nuys, Calif., has become a rock star of vehicle customizing over the past six years. His custom shop is the setting for the MTV show "Pimp My Ride," which itself has helped fan the flames of consumer accessorizing. Boeckmann's shop will do about $4 million worth of business this year, up 25 percent from two years ago.

The 2009 recession temporarily took the wind out of the dealer accessory trade, Boeckmann says, and his business suffered.

"Customers still wanted accessories, but they were more focused on what they needed than what they wanted," he says. "The banks also got a little funny about accessories. If you added special wheels onto the purchase, a customer might suddenly be in a new credit tier where he no longer qualified for financing.

"And a lot of dealers just didn't want to do anything to risk messing up their sale. You're still seeing that today -- salespeople will walk around the accessories to avoid blowing the deal."

On the other side of the United States, Southeast Toyota Distributors is trying to convince its 175 Toyota dealers in five states that custom vehicle packages and accessories can boost dealership revenues by 5 to 15 percent.

Some dealers are onboard -- and in fact, the independent Toyota distributor is seeing a boom in accessory operations at its Jacksonville, Fla., port, according to Andy Eccher, general manager of its Westlake vehicle accessory center, also in Jacksonville.

Southeast Toyota has begun studying expansion plans for Westlake, as well as for a second inland operation in Columbus, Ga.

One measure of the growth of Southeast Toyota's accessory business: Three years ago, the Westlake center cross-trained accessory employees to assist with vehicle logistics when accessory work was slow. But now, Eccher says, "we can't afford to let any of them leave the accessory area. There's too much work."

Still, some of his dealers aren't so gung-ho, Eccher acknowledges.

"We'll create a customized vehicle package here. We'll ship one to the dealers and it will sell like that," he says, snapping his fingers. "But then they won't order a second one."

Why? One big reason is that the dealer must floorplan the more expensive customized vehicle. A retailer may be comfortable in knowing how many days it will take to sell a base model Toyota Tundra pickup. But how long will it take to sell one adorned with extreme body cladding and expensive wheels?

"Our feeling is that we need to do a better job of providing the data to support their merchandising, and we're working on that," Eccher says.

Rivals turn up the heat

Eccher, youthful and casual in blue jeans in his office, blinks hard and shifts in his chair before bringing up the gorilla in the room. Back in the 1980s, Southeast Toyota endured a revolt by some of its dealers who accused the exclusive distributor of overaccessorizing Toyota vehicles.

Some dealers sued the distributor and its founder, retail industry giant Jim Moran, alleging that accessorized vehicles were being forced onto the stores. The conflict landed Southeast Toyota in trouble with state motor vehicle regulatory agencies.

Today, Eccher and other Southeast Toyota executives repeatedly emphasize that nothing is required of its dealers when it comes to custom packages or accessories.

"It's completely voluntary," Eccher repeats. "We show them what's available. If they like it, they can order it. If they don't want it, they don't take it."

Southeast Toyota maintains a new-product committee with its dealers and a host of others -- such as market research people, parts makers, legal and regulatory representatives and service technical managers who ensure that an accessory that looks cool on the car won't interfere with a vehicle system, or negate a warranty.

Chris Tripp, Southeast Toyota's director of product development, raises another challenge: Aftermarket shops -- retailers' No. 1 competitors -- are constantly getting better.

"We design and develop our own wheels," Tripp says, pointing out a new Camry on a lift that is having its pretty-nice factory wheels removed and exceptionally nice custom wheels put on in their place. "But it's really hard to stay ahead in wheels. We get better -- the aftermarket guys get better."

Southeast Toyota now plans to bring its port customization work into the dealerships across Florida, Georgia, Alabama and the Carolinas.

The wholesaler hopes to launch fleets of "mobile accessorization trucks" in its major markets -- including Charlotte, N.C.; Atlanta and Savannah, Ga.; Charleston, S.C.; Orlando, Miami and Tampa, Fla.; and Birmingham, Ala. -- to bring accessory work to the dealer shop in the coming year. The program has been piloted in metro Atlanta and Jacksonville since last year.

The system will work like this: When a customer in the Southeast buys a Toyota and orders special equipment, wheels or appearance features, the dealership will summon a mobile unit. A Tundra fitted with a top over its cargo bed and pulling a trailer of parts will come to the dealership, and two Southeast Toyota employees will refit the new vehicle.

Southeast Toyota can market the custom packages through its regional advertising, and even create specific factory incentives to sell them -- if the dealers participate, that is.

One Toyota dealer says he has done well by running his own custom shop.

"It is tricky," says Keith Pierson, owner of Keith Pierson Toyota across town from the Southeast Toyota operations in Jacksonville. "I've known several guys who have ended up with a bunch of loaded-up cars they couldn't sell. Some of them have lost their jobs over it.

"But I don't have that problem."

Pierson testifies to the potential of the accessory and custom trade. Down the road from his dealership, he operates his accessorizing business, where three technicians add tinted windows, security alarms, pinstripes, body sealant, leather interior trim and other features to 100 percent of his incoming inventory, including dealer trades.

"I don't let the vehicles onto my sales lot until the work is done," he says. "Otherwise my sales guys would rush over to sell the less expensive cars before they get the content."

The sales staff is trained to talk up accessories and to explain their value and benefits. He bills the predelivery installation work to his dealership and expects to make between $700,000 and $1 million from it this year, he says. Thanks to the vehicle enhancements, his dealership shows an 8.8 percent net profit as a percentage of sales -- compared with other dealers in his area running at 3 percent or less, he says, referring to competitive data he receives.

"You can't rely on the factory to do this work for you," he says. "And you shouldn't let the aftermarket shops do it. Send somebody down the street to get the wheels they want, and that's where they'll go to get their repair work done. And pretty soon, the customer will be getting his oil changed there, too."

Fashion-forward

Capturing the business is an ongoing chore for the traditional auto industry, both factory and franchised dealer. One reason, says Peter MacGillivray, vice president of the Specialty Equipment Market Association, is that it requires quick responses to trends.

"It's the fashion business," MacGillivray says. "And just like fashions in clothes, vehicle accessory fashion changes rapidly and unpredictably."

MacGillivray adds: "We want more car dealers involved in accessories. That would be good for our members. But it's not so easy.

"Dealers really need to have designated accessory people, and lately, given the economy and the efforts by retailers to control costs, it's just one of those things that a lot of them have let slide."

SEMA, a trade group representing 6,000 aftermarket manufacturers and retailers, is trying to make it easier for car dealers to participate in its massive annual show. SEMA has expanded its "Dealer Day" to a week, and now hosts seminars and special presentations for dealers.

SEMA is also stepping up efforts to get automakers to provide it with specs for future models. The goal is that aftermarket accessories can be ready when a new model reaches showrooms, helping dealers promote model-specific accessories.

But like much else in the accessory trade, the idea is getting a mixed reception. Some automakers have eagerly embraced the concept, MacGillivray notes. Some are still thinking it over.