Third-party Suppliers vs. OEM: Outperforming the Competition in Spare Parts Sales

Published: 2023-09-14 Updated: 2023-11-15

The spare parts business promises high margins and stable sales for machine manufacturers. However, third-party suppliers are increasingly also profiting from it. In this article, you will learn how to reduce sales risks arising from gray market sales of non-original spare parts and what role an online store plays in this process.

Spare parts sales: The status quo in mechanical and plant engineering

Business with new machines has been declining for years. For this reason, machine and plant manufacturers are increasingly pinning their sales hopes on spare parts sales, which promise higher margins than primary business.  

However, the focus on this lucrative source of revenue is increasing the pressure on aftersales teams. After all, offsetting the decline in sales in other areas is not the only task service experts currently face. They also face other challenges, such as 

  • scarce resources,  
  • the consequences of the shortage of skilled workers,  
  • the increasing complexity of spare parts information,   
  • increasingly demanding customers,  
  • and the growing sales risks from trading in spare parts on the gray market. 

To counter these developments and boost aftermarket business, aftersales teams need to be strategic. In particular, the threats posed by the aftermarket and third-party suppliers require well thought-out and in-depth measures.

This is why the gray market threatens the spare parts business

On the gray market, operators of machines and plants find spare parts that do not come directly from the original manufacturers. For machine builders, their partners, and their customers, this parallel market poses various dangers. 

  • Customer loyalty: If customers receive better conditions from third-party suppliers than from the original manufacturer, the bond between the manufacturer and the customer suffers. 
  • Quality: Manufacturers have no influence on the quality of spare parts for their machines sold on the gray market.  
  • Safety: On the other hand, customers run the risk of receiving inferior spare parts that can harm their machines and the safety of their equipment. 
  • Reputation: If third-party dealers use the reputation of manufacturers to sell non-original spare parts, this can damage the integrity of the manufacturer's reputation and the trust of its customers in the long term. 
  • Fairness: Dealers who adhere to the rules of fair competition and use authorized distribution channels are the ones who suffer most from gray market deals. 

Added to this is the sales risk: Aftersales revenues generated in the gray market reduce the sales opportunities of machine manufacturers. There are no official figures on this yet. One thing is certain, however: As spare parts become an increasingly important source of revenue for machine builders, the builders should not underestimate their gray market competitors. 

Short excursus: Types of spare parts and important terms 

  • OEM is the abbreviation for the Original Equipment Manufacturer of the original product, who sells original spare parts. 
  • Original spare parts are usually manufactured or purchased and distributed by OEMs.  
  • IAM stands for Independent Aftermarket. IAM refers to the sale of original spare parts downstream of original equipment. The term is used primarily in the automotive industry, which has been affected by the gray market problem for years.  
  • Identical parts are identical in design and function to original spare parts, but are sold under a different name — this is similar to generic drugs in pharmaceutical production.  

Causal research: Why do customers buy in the gray market?

In order not to leave the field to third-party suppliers, OEMs need to understand why their customers prefer alternative offers instead of buying original parts from them. One might assume that price is the decisive factor. In reality, however, other factors play a role: 

Better solution orientation 

Machine damage and downtime are associated with sensitive costs for operators. That's why what counts more for them when it comes to service is that their problems are solved quickly. The price of the spare part they are looking for is secondary.  

Those who position themselves as fast problem solvers have an advantage over OEMs — even if the latter offer more attractive prices. 

High visibility 

Many third-party suppliers sell their spare parts online. They occupy the top positions in the search results on Google, Bing, and similar platforms. The gray market offering is therefore perceived by many customers as easier to access and quicker to use than, for example, ordering spare parts via an OEM's analog spare parts catalogs.   

Fast availability 

Many machine manufacturers are currently optimizing their spare parts management in order to shorten delivery times. However, the above-mentioned challenges in the aftersales area are slowing them down. As a result, non-original spare parts from gray market suppliers are often available more quickly than original parts from OEMs. 

How do you manage the gray market risk?

There is no patent remedy against the gray market risk. However, the goal should always be to become better than the gray market.  

The technology group Apple, which is also affected by revenue losses due to the sale of non-original spare parts via third-party suppliers, for example, began to supply independent workshops with original spare parts in 2020. The company collects removed components that are replaced with original parts in order to "dry up" the gray market for spare parts.  

On the other hand, other companies focus on raising awareness, for example by informing customers about damage caused by counterfeit products as part of their corporate communications. Or they resort to technical protection measures such as holograms, security labels or RFID to make their original parts easier to identify. Such measures are particularly effective in the area of product piracy. 

The solution for mechanical engineering: Strengthen online spare parts sales

What can be done by machine and plant builders who want to leave third-party suppliers behind? The best solution is to strengthen their aftersales departments and offer their customers real added value — for example, with an online store for spare parts sales.  

With a B2B store for spare parts, you make ordering spare parts as easy as possible for your customers. If this store is connected to a digital spare parts catalog, you can sell spare parts online via the store and thus offer your customers all the benefits that they also find on the gray market —  supplemented by the secure feeling of receiving quality and the best service.  

After all, price is not (only) the decisive factor in gaining an edge over gray market competitors. In the B2B environment, it is also important 

A digital store plays a central role as a one-stop store for all aftersales orders. 

Competitive advantages of a spare parts store for manufacturers and operators

Technicians and service staff can use the store to find the right spare parts information quickly, easily, and around the clock. In contrast to third-party providers, the entire order history and the documentation for machines and spare parts are available to them centrally. On the one hand, this relieves the burden on your aftersales team, and on the other hand, it delights machine and spare parts buyers.  

With an online store, you also increase the visibility of your offer in search engines and use the trust of your customers to your advantage. If your store appears in the search results next to a third-party supplier, customers are more likely to trust the original manufacturer than third parties. As a machine builder, you know your customers' machines best and are therefore in a position to offer them the best solution.  

In addition, there is less risk for customers when they buy original spare parts. If you also offer better payment terms than the gray market competition, you have as good as won the battle for clicks to your spare parts store. 

Launching your online store: Here's how to proceed

A prerequisite for the successful implementation of an online store is, on the one hand, an understanding of what your customers want and, on the other hand, knowing what your competitors are doing better in the gray market. The goal is to provide even better solutions and holistic services that really help your customers.  

To be able to sell original spare parts via a B2B store, you also need the right technical solution. Rely on providers who specialize in mechanical and plant engineering and know the challenges of aftersales — providers like Quanos.  

Connect Quanos InfoTwin with your shop system and get started immediately

Your aftersales team has its hands full. Therefore, the shop implementation should not cause any additional work. The fastest way to have your own B2B shop for spare parts is via Quanos InfoTwin. This modular cloud solution networks product documentation with spare parts and service information and offers integrations for shop systems. 

The platform includes a connection to the GÉNIE e-commerce system from FDI Digital Business. This enables manufacturers who do not yet have their own online shop system to quickly enter the world of e-commerce.  

With GÉNIE for InfoTwin, internal and external users can, among other things: 

  • select spare parts and materials in Quanos InfoTwin and order them via GÉNIE for InfoTwin — without having to change the system 
  • access current prices and specific offers at any time 
  • download PDF quotes on selected items and pass them on to the purchasing department 
  • transfer orders directly to the company's internal ERP or PLM via an interface 
  • receive transparent information about stock levels 

In return, you have an established shop system at your disposal without your own IT effort, hosting, and maintenance costs, which is ready for use in your corporate design within a few days