Difficulties Of Starting Up Your Own Dismantling Shop
Starting a new business is the quintessential American dream. Charting the course into the unknown – full of uncertainties, challenges, and competition – is a thrilling adventure that drives a large section of the American populace. In particular, if you are planning to start a dismantling shop, you couldn’t have chosen a better time or place.
There are two reasons that make vehicle dismantling business a highly lucrative and rapidly growing opportunity for entrepreneurs – the size of the industry, and a growing sense of responsibility among the consumers towards the environment.
The automotive recycling industry clocks in over $32 billion in sales per year. Recycling auto parts saves tremendous amounts of resources, energy, and time for everyone, from consumers to businesses. It is good for the environment as well as the economy. What’s more, recycled auto parts cost only a fraction of what the new parts do. For this reason, and many others, an estimated 90% of the vehicles in junkyards get recycled. Indeed, this has been the experience of Rancho Cordova Dismantlers so far too.
A dismantling shop will be an integral element of a clean, sustainable, and highly efficient economy in the future. However, that doesn’t mean that it’s an easy industry to get into. It comes with its own set of challenges. So, if you are planning to start a dismantling shop, take note of these difficulties you’ll be eventually dealing with.
1. It’s Big, But Not Big Enough
Most local communities are not big enough to support a thriving vehicle dismantling business. Only a handful of economic hubs have enough “aging” cars to create a sustainable supply of recycled parts for the customers that depend on them. In some cases, the towns and cities do not even have enough consumers or businesses that need recycled parts. Naturally, dismantling shops must venture beyond their local communities. That doesn’t mean you need to have a national level presence. Perhaps a few cities, counties, or even nearby states can support a thriving dismantling shop.
At the same time, you might also want to ponder on whether you wish to specialize or not. You can focus on any one segment of vehicles (cars, buses, heavy trucks), or serve all categories of vehicles. Take Rancho Cordova Dismantlers for instance. We deal exclusively in used car parts – used Nissan auto parts, used Ford auto parts, used Honda auto parts, and more. Whatever you choose to do, make sure that there’s enough demand-supply system in your market to sustain your business.
2. Going Big Might Turn Into an Invitation for War
Dismantling businesses are territorial. It’s a highly competitive business, where both the demand as well as the supply sides are not in control of the business. Naturally, any attempts by a dismantling shop to expand into another geography can rile up other dismantling shops in that geography. If the expansion is aggressive, it can lead to a price war, which can decimate the entire industry in the region.
Expanding your shop without disrupting the industry is like walking on a tight rope. One way of doing this would be by investing in a highly SEO-friendly website, instead of relying on inorganic methods like ads.
3. Finding Quality Talent is a Never-ending Game
As with any other highly competitive industry, skilled talent is always in demand in the automotive recycling parts industry. Dismantling shops are often ready to pay a premium for good skills. Yet, there’s a dire shortage of expert and experienced labor. Therefore, most dismantling shops spend many months, even years, training newbies in the art and science of dismantling and recycling of auto parts. Rancho Cordova Dismantlers invests heavily in training our employees in the latest equipment, industry best-practices, and industry guidelines.
Once they become competent in their field, the shops face a new challenge – retaining them and warding off the poachers from the competitors.
4. Estimating the Startup Costs
Once you have decided on your market, it’s time to make an accurate estimation of your startup costs. It’s nearly impossible to factor in all the costs ahead of time, as there will always be some unexpected costs. However, many cost centers are easy to predict – the location of the shop, building costs, equipment costs, insurance costs, and more. The more detailed and accurate your estimation, the better you will be able to prepare for the inevitable financial challenges you will face in your business.
5. Emerging Competition
Technology can be a powerful enabler, but at the same time, it can be a disruptive force that upturns an industry on its head. For instance, digital platforms like Craigslist and eBay allow dismantling shops to advertise their salvaged parts to potential customers in a vast variety of geographies. On top of it, they also help dismantling shops find junk vehicles.
However, the same platforms are also home to individual vehicle owners, dealers, and other dismantling shops. They are looking to buy low-priced used cars too. This increases the competition for reasonably priced junk vehicles for salvaging. Above all, when a person or a dealer searches for recycled parts – say, used Nissan auto parts – they get results from not just dismantlers but also individuals from a variety of geographies. In some instances, the individual sellers just want to get rid of the part as it’s beyond salvage and are ready to sell it at an insanely low price. Unsuspecting buyers often fall prey to their tactics. Such factors drastically increase the competition for someone like Rancho Cordova Dismantlers.
6. It’s More Than Just Parts
The customers and suppliers of dismantling shops are typically price-sensitive or environmentally responsible or likely both. In other words, they are seeking emotional satisfaction from their business transaction. The “experience” of it forms a big part of the transaction for them. Therefore, it is imperative on the part of the dismantling shops to give their buyers and sellers a fantastic experience.
Excellent customer service can bring them more business from their customers. Sellers can spread the word and even introduce your business to their friends, family, and colleagues. However, it’s a herculean task to create a smooth, satisfying, and emotionally rewarding experience for customers throughout their journey with your shop.
A successful dismantling shop stands on two pillars – defining the right target market and delighting the customers with a flawless service. Getting these two ingredients right will help an auto parts shop overcome the multitude of challenges in the industry.
Rancho Cordova Dismantlers has established itself as the go-to shop for all your recycled auto part needs, whether you need used Nissan auto parts, used Toyota auto parts, used GM auto parts, or other vehicle parts.