It seems that every single week now, one of the major multiple-shop collision operators has acquired yet another store. Just today, Service King Collision Repair Centers announced the purchase of Express Autobody, a collision repair center headquartered in Georgetown, Texas. Express Autobody becomes Service King’s 50th location in Texas, and its sixth collision center in the Austin marketplace.
Even with this record level of consolidation, the majority of collision repair shops are single-store, single operator. But in the opinion of the team at BoothFilterStore.com, insurers are the single largest driving force (no pun intended) behind the consolidation trend. Why? Doing business with multiple-shop operators (MSOs) is substantially easier: single point of contact, consistency of product, strong KPI measuring systems, implementation of EDI cost savings, etc.
Consolidation is not unique to the collision repair industry. Other industries, such as funeral homes, have also been industries having experienced waves of consolidation. With current growth slowing and projected growth to be flat, overcapacity is developing which in turns can lead to declining profit margins. Moreover, the single-operator represents nearly 9 out of 10 operators, so the industry is highly fragmented providing excellent opportunities for the best operators to gain share and further marginalize the bottom performers. In the classic sense, the collision repair industry is in “survival of the fittest” mode and scale can help survive.
But all is not lost for the single-shop, single-operator model. Business leaders have generally concluded that industries are fragmented (non-consolidated) for five general reasons:
- Low barriers to entry
- Lack of power advantages between buyers, suppliers and/or customers
- No economies of scale
- Regional issues: transportation costs, diverse markets, etc.
- Regulatory issues
So the logic becomes, “Can I eliminate one of more of these industry dynamics to consolidate what otherwise appears to be unconsolidateable?” Many folks have tried with fragmented industries in the past, such as funeral parlors, dry cleaners and lawn care. The success has been mixed, at best. Just because you have scale doesn’t mean you will achieve economies of scale or gain power over your suppliers. And in today’s work where technology costs continue to decrease as does the cost to reach customers, a single-location collision repair shop should be able to uniquely define its business and target customers accordingly.
So will consolidation work out for consolidators? It remains to be seen, but we at BoothFilterStore.com certainly do not believe the well operated, single-location collision repair shop will become a thing of the past.