Sales Strategy & Channel Execution – (Topic #4) - What I Would Change If I Were Running an Automotive Aftermarket Company Tomorrow
Having a Product on the Shelf Is Not the Same as Having a Sales Strategy
In Topic #1 of this series, I discussed product development and why I believe great aftermarket companies should focus on solving real customer problems instead of simply improving someone else's gadget.
In Topic #2, I moved into Pricing & Channel Pricing, and understanding your brand value, building enough margin into the product, and making sure everyone involved in selling it has a reason to participate.
Topic #3 was Inventory Management, because you can develop the perfect product and price it correctly, but none of that matters if it isn’t available when the customer is ready to buy.
That brings me to Topic #4:
Sales Strategy & Channel Execution.
Having inventory sitting on a shelf does not mean you have a sales strategy.
Having salespeople does not mean you have a sales strategy.
And having a long list of customers does not necessarily mean you have a healthy route to market.
A real sales strategy starts with understanding where your products belong, what each channel costs, what each channel needs to succeed, and how those channels work together without destroying each other.
One of the biggest mistakes I see companies make is assuming they should sell through every possible channel.
OEM.
Distribution.
Big box.
Jobbers.
Amazon and other 3P Retailers.
E-commerce retailers.
D2C.
More channels must mean more sales, right?
Not necessarily.
Every channel has different margin requirements, service expectations, freight costs, staffing needs, risks, and customer behaviors.
The goal shouldn't be to sell everywhere.
The goal should be to build the right mix of channels for your products and your business model.
OEM — Tier 1 & Tier 2
OEM business can be incredibly attractive.
You typically have volume, forecasting, purchase orders, planned production, and a level of consistency that can be difficult to achieve in the traditional aftermarket.
But OEM business is not automatically good business.
One of the biggest challenges is margin.
Depending on how the program is structured, the product can move through multiple layers before it reaches the final customer. When four- or five-step pricing structures are involved, there needs to be enough room for everyone in the process.
That can require significant discounting from your normal aftermarket retail price.
This is where companies need to be careful.
If you are selling into a category that already operates on thin margins, you can quickly price yourself out of profitability just to say you landed an OEM account.
That is not a win.
Pursue OEM with a full financial plan.
You need to understand expected volume, forecast consistency, tooling requirements, quality systems, packaging, freight, warranty exposure, engineering support, payment terms, and the margin left at the end.
The volume can be fantastic.
The credibility can be fantastic.
The long-term relationship can be fantastic.
But only if the economics work.
I would never recommend chasing OEM business simply for the logo on the customer list.
Revenue without sustainable margin is just expensive activity.
Distribution — Still One of the Best Channels in the Aftermarket
If the pricing structure is built correctly, I still believe distribution can be one of the best growth channels in the automotive aftermarket.
Yes, you give up margin compared with selling directly.
But you also gain leverage.
A good distributor puts your products closer to thousands of jobbers, installers, retailers, and specialty shops.
Instead of shipping one box at a time to hundreds of individual businesses, you may be shipping pallets or larger consolidated orders to a smaller number of distribution centers.
That reduces internal order processing.
It can reduce freight complexity.
It can reduce the amount of inside-sales support required.
And most importantly, a strong distributor can help your product reach a customer in one or two days without you having to warehouse inventory everywhere yourself.
But there is an important catch.
Distribution works best when the manufacturer creates pull-through.
Simply getting your product into a distributor's warehouse does not mean it will sell.
The manufacturer still needs to create demand.
Marketing needs to make the consumer want it.
Sales needs to make the jobber understand it.
Product data needs to be accurate.
Pricing needs to be protected.
And your sales team still needs to maintain relationships throughout the channel.
Distribution is not a place to dump inventory.
It is a partner that gives you reach.
Used correctly, I think it is still one of the most scalable channels in our industry.
Big Box Retail — Great for the Right Product
Big-box retail can create tremendous volume, but I would be selective about what products I put into this channel.
Hard parts, maintenance products, accessories with broad applications, and commodity-driven products often make sense.
Highly specialized fitment products can become much more difficult.
The more vehicle-specific, technical, or installation-sensitive the product becomes, the more challenges you can create at retail.
Returns can increase.
Warranty questions can increase.
Consumers may buy the wrong application.
Packaging gets damaged.
Products can be returned because the customer changed their mind, couldn't install them, or simply purchased the wrong item.
That doesn't mean specific-fit products cannot work in big box.
It means you need to understand whether the product fits the channel.
Again, I wouldn't chase a customer simply because they have thousands of stores.
I would ask whether your product is right for their customer and whether their business model is right for our product.
Those are different questions.
Direct to Jobbers — Where Many Companies Begin
Direct-to-jobber sales are where many smaller aftermarket manufacturers start.
And it makes sense.
You develop the product.
You find specialty retailers, installers, and shops.
You sell directly to them.
You keep more of the margin.
You build relationships.
And you learn the market quickly.
There is a lot of value in that.
The problem comes when the company designs its pricing structure around direct sales and never thinks about what happens if distribution becomes part of the strategy later.
Then the company grows.
A distributor becomes interested.
Suddenly management realizes there isn’t enough margin in the product to insert another layer.
Now you either raise retail pricing, reduce your own margin, squeeze the jobber, or create inconsistent programs.
None of those are ideal.
Even if you are selling directly to jobbers today, I believe you should price with tomorrow in mind.
Build the potential distribution layer into the pricing architecture before you need it.
You may decide never to use distribution.
That’s fine.
But at least you gave yourself the option.
Direct-to-jobber sales also have costs that aren’t always obvious on the spreadsheet.
You need inside salespeople.
You need credit management.
You have smaller orders.
You have more invoices.
You have more shipments.
You have more customer-service interactions.
And freight can become expensive very quickly.
Direct business can provide stronger gross margin, but gross margin and net profit are not the same thing.
You need to understand the cost to serve the account.
Amazon and Other Third-Party Marketplaces
Amazon and other third-party marketplaces can be extremely effective for the right product.
But I don't believe they should automatically be part of every manufacturer’s or supplier's strategy.
This channel tends to work well for commodity-driven products, lower-cost items, products that are easy to understand, and products consumers are comfortable purchasing without much technical support.
As prices rise and products become more technical, sales can become more difficult.
And the economics change quickly.
Marketplace fees can take a meaningful percentage of the sale. Depending on the platform and category, you may face sales fees in the general range of 10% to 14%, plus other costs.
Then there is freight.
Fulfillment expectations.
Returns.
Warranty claims.
Customer-service questions.
Fraud.
Damaged products.
And sometimes some very interesting reasons for why a customer decided to return something.
You need people to manage all of that.
That is why I would look at Amazon and 3P marketplaces as a product-specific channel, not necessarily a company-wide strategy.
Some products fit perfectly.
Others don’t.
There is nothing wrong with deciding that a product shouldn’t be on Amazon.
You don't need to be everywhere. But Amazon is the world's largest product search engine, so having some presence isn’t a bad idea. Amazon can also be used as a great marketing tool. More on that in the next article.
You need to be where it makes business sense.
E-Commerce Retail Accounts
Independent e-commerce retailers differ from marketplaces because they actively run their own businesses and often invest heavily to acquire customers.
They have website expenses.
Advertising expenses.
Freight costs.
Customer service.
Payment processing.
Returns.
Warehousing.
Content development.
And all the other costs required to run an online retail operation.
That needs to be reflected in your pricing.
If an e-commerce retailer is expected to cover outbound freight, advertise your product, support customers, and handle returns, they need enough margin to do that.
This is why I believe manufacturers sometimes underestimate the discount required for a healthy e-commerce relationship.
The retailer must make money too.
And operationally, they also need speed.
They need accurate inventory feeds.
They need reliable product data.
They need fast shipping.
If they are using you to drop ship, I would want the organization capable of getting those orders out within 24 hours whenever possible.
But there is another option I think companies sometimes overlook.
If you already have strong distribution and your distributors can service those e-commerce retailers quickly, it may make more sense to push some of those accounts through distribution.
You lose some direct margin.
But you may gain operational efficiency.
That only works if you have strong price protection and an authorized dealer program.
Without pricing discipline, e-commerce can become a race to the bottom.
One retailer drops the price.
Another retailer matches it.
Then another drops it further.
Soon the entire market is competing on price rather than value.
And eventually the consumer starts believing your discounted price is what the product is actually worth.
That damages more than margin.
It damages the brand.
D2C — The Channel Everyone Thinks Has the Best Margin
Direct-to-consumer is one of the most misunderstood channels in my opinion.
On paper, it looks fantastic.
Why sell a product to distribution at a discount when you can sell it directly to the consumer at full retail?
You keep all that margin.
Right?
Not exactly.
You may keep more gross margin, but now you own everything that happens between the advertisement and the customer’s driveway.
The website costs money.
Depending on the platform and transaction structure, payment and platform fees may run several percentage points.
Shipping can easily consume 10% to 25% of the transaction on certain aftermarket products depending on size, weight, location, and how the freight program is structured.
Then you need website management.
Digital marketing.
Customer service.
Order processing.
Fraud prevention.
Returns.
Warranty support.
Technical questions.
Chargebacks.
Lost packages.
Damaged shipments.
And everything else that happens when you become the retailer.
There is also another cost that is difficult to put into a spreadsheet:
Your reputation becomes very public.
When something goes wrong with a distributor transaction, the distributor may manage the customer relationship.
When something goes wrong D2C, your brand speaks directly to that consumer.
If you handle it well, that can be extremely powerful.
If handled poorly, the customer can be on Facebook, Instagram, Google, Reddit, or an enthusiast forum talking about the experience before your customer-service team finishes lunch.
D2C can absolutely be a great channel.
I believe strongly in it.
But companies need to stop looking at MSRP minus product cost and assuming that difference is profit.
It isn't.
There is a substantial cost to acquiring, fulfilling, and supporting that customer.
Sales Strategy Means Managing the Mix
After working across different parts of the aftermarket, one thing I’ve learned is that sales strategy isn’t simply about maximizing sales through one channel.
It is about creating a healthy mix.
You need strong pricing.
You need inventory in stock.
You need reliable fulfillment.
And you need enough different customers for the business to keep functioning when one of them slows down.
I watch customer concentration very closely.
Personally, I don’t like seeing a single customer represent much more than approximately 8% of total company revenue when it can reasonably be avoided.
There are obviously exceptions.
OEM suppliers may operate under completely different concentration models.
Certain industries naturally have larger strategic accounts.
And sometimes a massive customer opportunity is simply too good to turn away.
But if one account represents 25%, 30%, or 40% of your business, leadership needs to understand what that means.
What happens if their buyer changes?
What happens if they change suppliers?
What happens if their inventory is too high and they stop ordering for 60 days?
What happens if they get acquired?
What happens if their business slows?
What happens if they simply decide to push a competing brand?
Replacing a large percentage of your revenue overnight is extremely difficult.
Not impossible.
But difficult.
That is why I would rather build a broader foundation of strong customers than depend on a few accounts to carry the company.
Salespeople Shouldn't Just Take Orders
This is another area where I would challenge the traditional view of sales.
A salesperson's job should not simply be to get a purchase order.
The best salespeople are collecting market intelligence.
What products are customers asking for?
What products aren't moving?
What competitors are gaining traction?
Where is pricing becoming a problem?
What applications are missing?
What products are constantly out of stock?
What are installers complaining about?
What does the retailer wish we would develop next?
Sales should be bringing that information back into the business.
That intelligence should feed product development.
Pricing.
Inventory.
Marketing.
Forecasting.
And leadership decisions.
That creates a loop.
Product creates something the market needs.
Pricing creates the right economics.
Inventory keeps it available.
Sales brings it into the channel.
And then sales brings information from the channel back into the company.
That is what a healthy sales organization looks like to me.
Push and Pull Have to Work Together
Marketing is another major part of channel execution.
I believe manufacturers need both push and pull strategies.
The push side is your sales organization.
Get distribution to stock the product.
Train their salespeople.
Educate jobbers.
Build relationships.
Create promotions.
Make sure the product is available throughout the channel.
But at the same time, marketing needs to create pull.
The consumer needs to see the product.
Want the product.
Search for the product.
Ask their local retailer about the product.
Show up at an installer and say: “I want this brand.”
That is pull-through.
And it is incredibly powerful.
When marketing only focuses on D2C sales, your wholesale partners can start wondering why they are carrying inventory for you.
When sales pushes products into distribution without consumer marketing behind them, the distributor eventually sits on inventory that isn't moving.
You need both.
A strong marketing campaign should be broad enough to help your distributor, retailer, e-commerce partners, jobbers, installers, and D2C operation.
Different channels may need different tools, but the brand message should support everyone.
Channel Conflict Needs to Be Managed Before It Starts
The more channels you add, the more disciplined you have to become.
Distribution wants margin.
Jobbers want margin.
E-commerce retailers want margin.
Your D2C team wants sales.
Amazon wants competitive pricing.
Consumers want deals.
And your finance team wants profitability.
Without a strategy, those interests eventually collide.
That is why channel policies matter.
Authorized dealer programs matter.
Price protection matters.
Consistent promotional windows matter.
Clear account classifications matter.
And communication matters.
You should know why each channel exists and what role it plays.
Don't let your D2C team run a 20% off promotion every month while your distributors are sitting on inventory they purchased from you.
Don't give one online account special pricing that makes every other dealer uncompetitive.
Don't create one-off programs so complicated that nobody knows what the real price of the product is anymore.
Every exception eventually becomes somebody else's expectation.
Channel strategy requires discipline.
Not Every Customer Needs to Be Your Customer
This may be one of the hardest things for a young company to accept.
You don't need every piece of direct business.
Sometimes a customer asks for so much margin, marketing money, freight support, rebates, terms, and special treatment that there simply isn't enough left for you.
It can be difficult to walk away from revenue.
But sales shouldn't be measured only by revenue.
I want profitable revenue.
Sustainable revenue.
Strategic revenue.
Revenue that helps build the business instead of creating another problem for operations and finance to solve.
The biggest account isn't always the best account.
And the smallest account isn't always the least valuable.
A small specialty retailer that loves your brand, educates customers, installs your products correctly, posts them on social media, and recommends you every day may create more long-term value than their purchase volume initially suggests.
You have to understand the entire relationship.
What I Would Change Tomorrow
If I were running an automotive aftermarket company tomorrow, I would stop asking: “How do we sell more?”
And start asking: “Where should we sell?”
I would examine every sales channel individually.
What does it cost us?
What margin does it require?
What support does it require?
What products belong there?
What customer does it reach?
What risk does it create?
And how does it support the rest of our business?
OEM can provide tremendous volume and predictability.
Distribution can provide scale, reach, and efficiency.
Big box can move large quantities of the right products.
Direct jobber relationships can create strong margins and valuable market feedback.
Amazon and 3P marketplaces can be powerful for the right product and great brand marketing tools.
E-commerce retailers can create tremendous digital reach.
D2C can provide margin, customer data, and a direct relationship with the consumer.
But none of those channels is automatically the answer.
The strategy is how they work together.
I would build a diversified customer base, watch account concentration, protect channel margin, maintain pricing discipline, keep inventory available, build strong relationships, and create marketing programs that generate both push and pull.
Because having a product sitting on the shelf is not a sales strategy.
Having a distributor isn't a sales strategy.
Having an Amazon account isn't a sales strategy.
And having a website isn't a sales strategy.
Sales strategy is intentionally building the path that takes your product from your warehouse to the right customer—profitably, consistently, and without damaging the channels that helped you get there.
My Website: www.michaeltimmonsgg.com
My LinkedIn Page: www.linkedin.com/in/miketimmons
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