In this segment of "Industry Focus" on Motley Fool Live, recorded on Dec. 2, Fool analysts Nick Sciple and Auri Hughes discuss how XPEL (XPEL -0.35%) can compete with and outperform 3M (MMM -0.53%).
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Nick Sciple: One question, I think a lot of folks have and you mentioned earlier 3M also a player in the paint protection film industry. Why isn't this a commodity or how do you think about potential risks from competition facing XPEL, and how do you think they may be able to fend those off?
Auri Hughes: Yeah, I think just being the premier provider. Because they actually got sued by 3M at one point in their history, which was devastating for the stock, but they overcame that, and it makes sense if you are a bigger competitor, you've got more resources and someone's doing something similar, you could probably throw money at it.
But I think the way a company like XPEL wins when you're going up against a massive company like 3M, that's doing a lot of things in paint protection is just one of them, is be the best. Be the premier provider. Have the mind-share, serve your customers super well and they will come to you first.
I think that's what we've seen because I think no textbook is going to be like, yeah, this small company can compete with 3M, but I think if you're known for that product, you serve that market well then it's possible and I think that's what they've continued to do and they've won. They've made it a big point to go after those installers and have really great relationships with them. I think that's one of the things that also have helped them to compete, even though you've got two other players.
Sciple: Yeah, when you think about how folks go about buying these products, you may buy a high-end vehicle, but you're going to go to your body shopper, your dealership and that's the type of person who's probably going provide you some advice on the types of things you need to install.
I think in these types of markets where the person who is actually buying the car that's getting the film product is taking advice from an expert, that type of middleman situation, really winning the distributor, the person who's making that sale to the customer.
The thing is really the key customer to when we talked earlier about the DAP software and how that's really user-friendly for the installers, makes it really easy to reduce waste, install things quickly. Also, XPEL has strategically acquired some of its distributors to try to get closer to the installers.
When you look here, I think the real key constituency to when is the installer base, and to the extent, you can make those folks happy then they're going to sell through to their customers, and so far, it appears like XPEL has had some success there.