Tugging Back at the Big 4’s Pull

Shop owners wrestling with the large MSOs tell how they’re surviving and thriving despite the competition.

Almost-weekly announcements of new acquisitions and growth by the “Big 4” collision industry consolidators might seem scary for single-location or smaller multi-shop operations (MSOs). Given the marketing strength, insurer contacts and other potential advantages large MSOs bring to the table, their concerns about whether an independent shop can compete when the large companies set up operations nearby is understandable.
The Big 4 – Caliber Collision, Service King, ABRA Auto Body & Glass and The Boyd Group, which operates under the trade name of Gerber Collision & Glass – each currently have between 300 and 400 shops.

“You wouldn’t be a smart business person if you didn’t have some concern when you’ve got someone with that much buying power potentially coming into your market,” says Rocky Champion, the third-generation owner of Barrett Collision in Abilene, Texas.

But Champion and other collision shop owners cite a number of reasons they’re not letting reasonable concerns about consolidators grow into paralyzing fears and unduly affecting their business decisions.

Not every market a target

Ben Steinman, AAM, says the simple reason he’s not overly concerned about the consolidators is that many shops like his around the country are not in a market the Big 4 likely will target anytime soon. Ben’s Auto Body does almost $2 million a year in sales, but it’s located in Mexico, Mo., a town of 12,000 people some distance from either St. Louis or Kansas City, Mo.

“People may drive for an hour or two just to get to our shop,” says Steinman. “So our overall market is about 30,000 people, but you’re not going to see a Home Depot or other big-box store in this size market.”

The Big 4 consolidators have, for the most part, kept their focus on the 50 largest markets in the United States, gobbling up shops in the Los Angeles, Chicago, Philadelphia and the Dallas-Fort Worth areas, for example. It takes an urban area of about 1 million people to crack into the Top 50 list, so unless your shop is in a city at least the size of Jacksonville, Fla., (No. 50 on the list), you’re unlikely to see a Big 4 consolidator up the street from you anytime soon.

Still, Steinman says he’s thought about what often sets independent shops like his apart and what could allow them to compete with large MSOs. First, he says, he’s built a reputation and name recognition within his community.

Someone he knows within a large MSO recently told him that the MSOs are often reluctant to take the old name off some of the shops they acquire because they’ve found they lose as much as 40 percent of their business when an unknown national brand replaces a locally recognized company name.

Steinman says he also has heard from a vendor doing sublet work at his shop that a large MSO can be slow to pay. He believes this sort of thing, if true, will give businesses such as his an edge in receiving priority service from the best vendors. “And I just feel like the independents have a better handle on quality control compared to an MSO location manager running a factory,” Steinman says.

Although he personally hasn’t experienced competition from a Big 4 MSO, Steinman’s involvement in ASA has led him to talk to shop owners who have. What they’ve told him might be surprising – and heartening to those facing similar prospects.

“I talked to one shop owner in a big city who was scared to death because two different MSOs moved in on both sides of his business,” Steinman says. “He thought there was no way he could survive in that kind of a market and that he was going to go bankrupt. But his business has flourished. He was shocked.”

Emphasize the ‘local’

Pam Counts doesn’t have a consolidator on each side of her business, A&D Auto Body, but all of the Big 4 compete in the Phoenix area. And one of A&D’s two locations shares a driveway with a shop belonging to a national chain.

According to Counts, her company competes by playing up the fact that it’s a local business. “A big part of it is promoting ourselves as family owned-and-operated,” Counts says. “You’ll see signs all over the front of our buildings: ‘Shop Local.’ We promote keeping it local, educating our customers in terms of what shopping local means for the local economy.”

Counts says that she’s also done something the bigger chains are less likely to do: get involved in the community. “We do a lot with all the chambers of commerce that touch both of our shops, and we’re involved with local businesses and local schools,” she says.

Own your customers

At Barrett Collision, Rocky Champion is determined to make sure his business remains strong well into the future. His 25-year-old son is now working at the shop as the fourth generation of the family to do so.

Like Steinman, Champion says his location is a couple hours away from a major market. But a seven-shop chain does have a location in his town, so he has some experience competing with an MSO. He says he’s not overly concerned, in part because his 15-employee business relies very little on the direct repair work on which the consolidators largely depend.

“My customers are my customers,” Champion says. “We have a great reputation in town and a lot of repeat and customer-referral business. We like to think we do things right. Customer service is a big thing. That’s why I’m not really worried about someone coming in here.”

Champion believes that the OEM certifications his company has earned are a good differentiator and that in the coming years automakers will play an increasing role in helping consumers choose qualified shops.

He also says that although he’s careful to not bash insurance companies, he runs advertising (tinyurl.com/BarrettAd) to remind vehicle owners that despite pressure from their insurer, they are always free to choose a locally owned business like his.

An owner on the premises

Unlike Champion and Steinman, Kurt Johnson has first-hand knowledge of directly competing with large MSOs. Three of the Big 4 consolidators have shops within a 15-minute drive of Johnson’s shop: Cornforth-Campbell CARSTAR in Puyallup, Wash.
Johnson offers at least three reasons why he’s not sweating it. “Perhaps the most important is our history,” he says. “We have been in operation for nearly 80 years in downtown Puyallup. Our reputation, I believe, is a huge advantage over the new-to-town national chains.”

Johnson is also among shop owners who have joined some organization that they believe helps give their relatively small business – Cornforth-Campbell CARSTAR has 15 employees and $3.4 million in annual sales – some of the benefits of larger players in the industry.

In Johnson’s case, his company became a CARSTAR franchise. “Our decision six years ago to partner with CARSTAR allows us many of the advantages of scale while maintaining our hometown identity,” he says.

The third advantage Johnson considers his company has in competing with Big 4 consolidators is one that’s shared by virtually any single-location shop. “The term ‘skin in the game’ is often used to describe it,” Johnson says. “A hands-on owner, involved with every aspect of the operation, is often better able to create a thriving culture and really own a market.”

The right people and processes

Sheryl Driggers shares one thing with the Big 4 consolidators: Her business is an MSO. She operates two Universal Collision Centers in Tallahassee, Fla., with combined sales of about $7 million. But it’s not this scale that gives Driggers the confidence to know she can compete against even larger players, including the one Big 4 consolidator that’s already in her market.

“We just don’t see them as any different from our other competition,” Driggers says, expressing a sentiment that should come as comfort to any well-run shop. “Yes, competition makes us sharper, so we’re not oblivious to them. It’s just that we’re confident in our processes and culture, and, most importantly, in our people. So we believe we’ll continue to stay at the forefront of our market.”