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Market Feasibility Analysis for an Automotive Repair Cooperative

The market situation in regard to automotive repair services in South Shore and surrounding communities is competitive, with aggregate supply and demand in approximate balance. However, with many small shops competing and no single shop holding more than a 5% market share the barriers to entry for a new shop are low. In addition, there is considerable consumer interest in a concept with greater promise of delivering high quality service at a reasonable price. Therefore, we conclude that a cooperative auto repair shop located on Stony Island Avenue around 79th Street is feasible. The format would require members to pay a one-time membership fee of $25 as their equity share. Subsequently, a monthly fee of approximately $9.00 per car would be paid through automatic deduction from an account each member would establish at the South Shore Bank or the South Shore Community Credit Union. Initially people might be asked to join for at least half a year, with annual renewals thereafter. Repair charges would be based on the direct labor costs of the mechanics employed by the shop, approximately $11.00 per hour. Parts would be charged at wholesale prices. Services offered will essentially be a general repair capability, while an extension into specialized electrical work should be considered. Non-members would be accommodated at labor rates of around $25/hour, with parts at a 66% mark-up.

The steady-state business volume is projected at 1440 member/cars, serviced by 3.5 mechanics, for gross sales (including monthly fee) of $310,000. This steady-state model should be achieved after one to one-and-a-half years of business. After that time, the business should be able to maintain its market share and partake in the expected growth in automotive repair expenditures. Further growth may be achieved by expanding the range of services offered.

Crucial to achieving the required market share of around 3% will be a concerted marketing effort in South Shore, Avalon Park, northern South Chicago and, to a lesser extent, Woodlawn and Hyde Park. As is clear from the survey responses, the idea of a cooperative as such evokes neither great passion nor opposition. People care about quality and price, and are willing to believe that a cooperative might do better on that score than other shops. Thus, a person-to-person marketing effort appears to be required. To ask people for a $25.00 membership fee and a monthly $9.00 fee is to require a substantial commitment. Abundant use of trial memberships, bonuses, and reduced-fee first visits will encourage people to give the business a try.

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