I bought a new car last year – off the Internet. Not that I’m in the market for one, but I’m pretty sure you can buy a tank online, too. But hold on, I’m getting ahead of myself.
The era I grew up in was a tad different when it came to what you could buy and when you could buy it. You couldn’t even find a store of any kind that was open on Sundays. And when it came to purchasing automotive parts, well, that was another story unto itself. In my infinite high school wisdom, I bought a used 1963 Corvair even though I had read Ralph Nader’s “Unsafe at Any Speed” condemning it. Turns out mine was safe most of the time because it wouldn’t run most of the time. But I was determined that it would look good whether it was running or not so I went down to the what I thought was a logical place to buy some automotive accessories — the local auto parts store. The greeting I got was, “What’d ya want?” (Well, sorry, I thought, I didn’t see the “Beware of the Counterman” sign outside.) Being caught off guard by his terse and cantankerous manner, I sputtered, “Uhh…I need some floor mats, a compass (my dad said the only direction I needed was “to get rid of that piece of junk”) and some mud flaps.”
Noticeably exasperated by my request and almost unwilling to reply, the counterman groaned and grunted,“ Ya don’t get it do you? You need to go next door to the dealer or one of those discount houses. And then he added, “Or Western Auto.” Judging from his sarcastic tone, I, think he was implying that I, the young whippersnapper, would be better off going there because they sold bikes that I should be riding rather than driving a car.
Well, it was clear that I didn’t know the secret handshake to shop at this auto parts store, which can only be described as filthy and the last place on earth where I wanted to be, so I skedaddled. Seemed odd to me to be belittled by someone in the business of selling auto parts. What I didn’t understand at the time was that the auto parts stores at that time were strictly wholesale operations that did not want every Tom, Dick or Larry coming in off the street asking for vehicle accessories. These guys – jobbers – serviced the needs of professional mechanics. They didn’t have the time, inclination or inventory to be involved in the nonsense of retailing automotive parts and accessories.
The closed wholesale system in the aftermarket worked well, or more accurately, ruled, for decades, but it was probably inevitable that some upstart, namely Auto Shack (now AutoZone) – would come along and change the parts paradigm. The Shack and other imitators actually wanted to sell mirrors, floor mats and fuzzy dice to the walk-in trade. They didn’t want their businesses exposed to the risk of carrying professional shop accounts that might or might not pay on time. Cash ’n Carry was the name of the new game.
Meanwhile the jobbers were pretty content with being jobbers; however, a small, but determined group thought it was silly not to cater to both professionals and do-it-yourselfers (DIYers). Why not get some of this low hanging fruit? Professionals would still be their main focus, but adding some fast moving, high margin parts was too attractive to pass up. So, they moved their counters back from the front door and added a retail area. And the term “jobber/retailer” was coined to explain this new phenomenon. Combined with warehouse consolidation and the advent of program groups to fight the marketing and buying prowess of Auto Shack and its compatriots, the aftermarket had its first full-fledged paradigm shift in decades.
In today’s aftermarket, most stores sell to both professionals and DIYers because there’s no sense in leaving dollars on the table. Still, it is important to note that the commercial market is much more lucrative and even though each kind of distributor is moving in the other’s direction, it is the auto parts retailers who are moving toward the commercial side faster and harder. The main reason for this is the rise in the do-it-for-me (DIFM) market due to an older population and the complexity of vehicles.
The rumbling that everyone in the aftermarket is feeling these days is the next paradigm shift, which is directed at delivering products online. In a few short years, we’ve gone from “it’s crazy to try to sell parts online” to “how do we sell more parts online?” A 2012 Automotive Aftermarket Suppliers Association “Special Report” underscores the importance and ubiquitous presence of the Internet: “Nearly 80 percent of all automotive sales start with some type of research online – from detailed searches for product and pricing information to simple searches for dealer location and phone number.” Every manufacturer – and seemingly every retailer – has a Website and conducts more customer interaction online every day, the AASA report says.
Indeed, every bit of research, be it general or specific to the aftermarket, indicates that the trend of selling products online will continue to increase. According to Frost & Sullivan (F&S), automotive parts e-Tailing will cross the $16 billion mark by 2018 and will account for nearly 10 percent of total aftermarket sales by 2020. Another aftermarket research firm – Hedges and Company – is a bit more conservative but concurs with F&S on continued growth: “Online sales of auto parts and accessories hit $4.3 billion in 2013. Recent years have shown increases in online sales of between 12 percent and 16 percent. Hedges & Company is forecasting annual increases of between 13 percent and 14 percent for the next several years and we’ll reach $6.5 billion in 2016.”
In my opinion, even the higher numbers predicted by F&S are conservative. The objections of buying online have faded fast with available apps, online tech support, free shipping and free return policies. For those customers who can’t quite cut the cord with the brick and mortar store, they can have their parts sent to a nearby store so they can get some installation advice.
How about shops – will they continue to buy from jobbers, auto parts retailers or from two-step warehouses? The answer is “yes” for the short term. However, looking down the road, they all will be faced with leaner, meaner, keener, more linear logistics that can only be described as disintermediation. Their e-Tailing efforts will become more prominent, as will their e-Tailing competitors – Amazon and eBay. Who will ultimately win will be those who can provide the expected level of service to consumers – and shops – at the lowest cost. Moreover, an increase in buying directly by both consumers and shops from manufacturers is not out of the question. In fact, it is inevitable as more manufacturers will turn to third party logistic partners to manage their products. Key to all these efforts will be the ability of the distributors to provide the needed product data, three-dimensional photos and illustrations so that potential customers are confident they are buying the right products for the right applications.
OK, you’re probably thinking that’s all well and good for consumers who can wait a few days to work on their projects, but shops don’t have the luxury of waiting for parts. Customers expect a one-day or less turnaround for most maintenance and repairs. The only way this could be guaranteed in the past is for shops to buy from local and regional suppliers that had access to huge inventories. What is often lost in the discussion is why consumers have chosen independent repairers in the first place. Simply, it’s because they trust the independents to not only provide quality work but to do it for a lower cost. To get these things, they understand that they may have to wait a day or two extra so they make other transportation arrangements. (Shops can really be heroes if they offer loaner cars.) That being the case, shops can acquire needed parts form the e-Tailers or direct from the manufacturers with no problem because shops can get parts the next day if needed, plus they will get the parts cheaper.
Ultimately, the independent shop’s turnaround time dilemma could be solved by telematics. In fact, if the aftermarket is going to survive, telematics has to become an integral part of this business. If regular maintenance, as well as diagnostic information could be fed to shops, the needed parts and supplies for maintenance and repair would be ordered automatically and sent to a customer’s shop. The independents are several steps behind the dealers right now with regard to telematics. They need to close this distance as fast as possible before the dealers lock in their customers for life. Note that this doesn’t mean e-Tailers or manufacturers will be nixed from the delivery mix; they will just have to become that much more savvy to work within the telematics realm.
I’ll stop well short of predicting the demise of the aftermarket distribution system; there is no need for automotive distributors and retailers to panic. However, there are huge changes in store for every entity in the distribution channel, which will require them to adopt more sophisticated and efficient supply chain logistics and technologies. In effect, WDs, jobbers and auto parts retailers will need to reinvent themselves to stay viable for both DIY and independent shop customers.
So let’s go back where I started: You can buy almost anything online. Who is eliminated from the process of how products are sold and distributed is the question the aftermarket will have to answer.
Subscribe to Aftermarket Business World and receive articles like this every month….absolutely free. Click here.
