By Michael Rukov, AAP, Western U.S. sales manager for Continental Corp., VDO
Editor’s Note: As an aftermarket professional, trying to make industry connections in a country where you don’t speak the language or know much about the culture can be an intimidating challenge. However, as the participants of the University of the Aftermarket’s (UotA) inaugural Leadership 3.0 program held in Shanghai this past June found out, the process also can be very unifying. Today, we bring you one man’s perspective after participating in this global aftermarket executive education experience.
How can I describe the experience that cannot be described, the emotions that cannot be put to paper, the forward thinking that can only be felt on the ground? Conventional wisdom does not apply to this unordinary world of Shanghai. What I experienced, thanks to Northwood University’s UotA and UotA Director Brian Cruickshank, is something out of this world. It may sound cliché, but some words I would use to describe this experience include love, friendship, relationships, grief, networking, opportunities, a city that never sleeps, size, socialism, development, progress, change, and, finally, forward-thinking or thinking forward.
As I was sitting on a plane in the Shanghai airport that was grounded for several hours due to weather, I had some time to reflect back and gather my thoughts about the past nine days, which have changed my understanding of the global aftermarket business forever.
Let’s first define the scope
The first Leadership 3.0 class took place in Shanghai in June of 2017. Shanghai is an amazing city that keeps changing every day and its aftermarket is a part of that change. The rate of change here can be felt while walking the streets, talking to businessmen and businesswomen that are seen on every corner. In the past 20 years, this city has grown to become a major metropolis that can fight for bragging rights among the most developed cities in the world. And yet, China is still a country that is considered a developing world.
Let’s consider the size of this city: it has 24.5 million people, not including tourists. It takes quite a few hours to drive from one side to the other. In comparison, Moscow, where I was born and raised, only claims 12.18 million in population. The entire state of Wisconsin has 5.7 million; Los Angeles only has 3.9 million, and Monterrey, Mexico, has 1.17 million. Imagine servicing all of these people in Shanghai let alone China with its total population of 1.37 billion – with a B, people.
Talking about Global Aftermarket
Why were we all in this amazing city? Stealing a phrase commonly used by Bill Maggs of the National Pronto Association, this class was designed to take “like-minded individuals” and allow them to learn about what this developing market of China is and how it can become a part of our normal business in the future. Through learning, discussions and local visits, we were able to scratch the surface of this giant economy.
For instance, did you know that by 2030 China might be the leading global power, surpassing the USA? Did you realize that average age of vehicle in China is 5.5 years and growing? Did you realize that in a few years China will have more vehicles on the road then the entire United States? There is much more we have learned during our week in China, but also about ourselves.
The Chinese aftermarket is like an open book with many blank pages waiting for someone to write them. Many western companies like NAPA, for example, tried to write in that book and failed due to vast differences in culture and business dynamics. Yet, there are some that have succeeded.
Understanding the art of doing business in China is the key to your success.
Another interesting difference that I have learned about China is its humility and patience. As an example, I can tell you that I have driven in many countries in my life but I have never seen so much patience and humility from people on and off the road. Even though there are no clear rules on the road, yet people somehow are able to get from point A to point B. They do not yell at each other, they just go. I think the entire scheme of China is simple in that it moves quickly and chaotically and yet with some specific order.
Speaking of organized chaos
There is plenty of that in China. From first sight you feel like everyone is mad. People walking everywhere, motorcycles and bicycles ride together on sidewalks without regard to any conventional road wisdom, left turning lanes are in the middle of the road while straight lanes can be found on either side of the turning lanes. It seems like everything is in chaos. And yet, if you pay close attention, you start realizing how much organization there actually is. People know what they are doing and where they are going, they are not worried that something might change tomorrow in their day-to-day life. They follow the rules of today until the new rules are established as the country becomes more developed. They don’t cry wolf if something is changing, they embrace the change and are more prone to it because of that.
Thus, organized chaos is perfect for the Chinese environment at the moment as it fosters creativity.
Visiting a Parts City was one of the first true encounters we had with the Chinese aftermarket. Imagine walking into an open mall with many small boutique stores selling their unique products over the phone or over the counter. Each specializes in some small and specific – say just VWs, or just lighting. That is what you see when you enter the Parts City. There are more than 500 of these little mom and pop stores and each has small inventory in their shop and a bigger warehouse somewhere outside of the city to fill the needs of their customers. Small tricycles, sometimes made by hand, ride around with parts to deliver gawking and taking pictures of our western group. In fact, we were as much a spectacle for them as this city was for us.
These stores service thousands of professional workshops in the area. All of the stores are privately owned, with no one big player yet, with perhaps one exception a company called CarZone (sound familiar?), which has more than 300 stores around China.
Then there are the WDs
We with our Western thinking will probably consider them more of a traditional warehouse distributor with larger size inventory, but they are truly different than what we are used to. Traditional Western understanding has to be left at home when you go to China. It is not the same.
WDs here have their similarities of course but you can feel that it is not the same as you walk the rows of shelves. Can I truly describe how they are different? Well, they service shops, they sell parts to “4S” outlets (described below), they sell parts to warehouses like themselves, and they do it all. But the true difference comes when you find out how they get their parts and what they are buying. Contrary to Western beliefs, the bigger the manufacturer they buy from, the less chance they have to get terms and/or credit on their orders. In fact most are CODs. They also have agreements and exclusivities in place that are not to be found anywhere else in developed world.
Because China is still in its infancy when it comes to developing its aftermarket, their dealerships – or 4Ss as they call them – are a dominant factor. These institutions are not the same as what we are used to in a traditional dealership sense. They sell cars yes, and they service cars as well but they also take care of only the cars that they sell during their lifetime. They get OEM parts with a rebate and that is how they make their money. They sell cars for cash and there is no financing. They offer services similar to what we are used to but they also have a much larger customer retention rate.
Relationships and other ambiguous words I used in the beginning
Imagine being put on an island with only a few select people from the automotive industry that are smart, witty, each with a different set of values and or level of experience, and don’t forget that this island has many unique and interesting bars and restaurants. What do you think would happen? In our case, something beautiful materialized. We had amazing discussions, coming up with strategies and solutions to the challenges of the Chinese aftermarket and global market in general; we also had many thought-provoking talks that were led by our fearless leader Brian Cruickshank and our knowledge bank, Professor Frank Morgan. But most of all, we created forever friendships with bonds that will outlast the changes that are coming toward us. And I cannot forget our Chinese business owners and friends who came to our class to show us how they operate and why China is a force to reckon with in the future. They were eager to share their expertise and knowledge.
Forward Thinking or Thinking Forward
Finally, we can talk about the name of this article. Why did I name it so and is there a difference between the two statements? In China, I felt that people in general are thinking forward. They are looking at the world of tomorrow and waiting eagerly for the changes that are coming their way. They are looking at the world through a prism that is clear as water.
On the other hand, we, the aftermarket leaders and professionals, are forward thinking. We were applying our muddied prism with our own predispositions and ideas.
In my opinion we have to Think Forward and completely forgo of our principles when it comes to China and global aftermarket in general. The key lesson that I am taking away with me is that creativity can happen if only we can detach ourselves from our current worldviews, and something beautiful just might come out of it. China is “Thinking Forward” and is ready to become the world leader; however, they are in need of the advice and abilities of the developed world. We can’t shy away from offering that advice or we would be left behind.
About the Author
Michael Rukov, AAP, known to friends and colleagues, as the “little Russian” is the self-proclaimed “Oldest Millennial.” A native of Russia, he currently serves as Western U.S. sales manager for Continental Corp., VDO, and is an active member of the Young Auto Care Network.