Aftermarket e-tailing market to double by 2018, Auto Care Association study says

Nov. 25, 2014
E-tailing is the fastest growing retail sector in the automotive aftermarket, and is poised to become a significant revenue generator in the auto parts market.

E-tailing is the fastest growing retail sector in the automotive aftermarket, and is poised to become a significant revenue generator in the auto parts market. The Auto Care Association has released what it is touting as the most comprehensive study of e-tailing in the automotive aftermarket ever conducted. The message for suppliers and retailers: be prepared for online sales growth or get left behind.

The study indicates that the e-tailing market will double in size by 2018, growing at roughly five times the current projected total aftermarket growth rate of 3.5 percent.

"That represents a significant shift in purchasing behavior by both consumers and professional installers," says Behzad Rassuli, vice president of market intelligence at the Auto Care Association.

The report, “E-Tailing in the Automotive Aftermarket,” provides market size and growth data, repair shop/installer survey results, and consumer/vehicle owner survey results. It covers the purchase of parts by consumers and professional installers using publicly available websites (not business-to-business e-commerce sites). The study also excluded online tire sales. The Auto Care Association worked in conjunction with IMR Inc. and The Martec Group to conduct the research.

“Very little solid data existed on the size and makeup of the e-tailing channel, until now,” says Kathleen Schmatz, president and CEO, Auto Care Association. “This first-of-its-kind study, produced by the market intelligence team of committee volunteers and staff, provides unprecedented insight into e-tailing purchase behaviors across multiple industry sectors, and the impact of these trends on the entire auto care industry.”

E-tailing now represents about 6 percent of the total aftermarket. "When you look at the growth projections we have in our study, the e-tailing segment will double in the next five years, and double again after that," Rassuli says. "And these are very conservative estimates that don't consider any advancements in technology or increased purchasing behavior by millennials."

This will mark a major channel shift, so if organizations are not prepared to adapt, they could see their businesses suffer. "The same thing will happen that happened in the book and video rental space," Rassuli says. "It's a dramatic trend."

Installers turn to online sales

In terms of dollars spent on replacement parts online, three categories represented half of the dollar volume in 2013: braking systems (pads and shoes); ignition and engine (fuel pumps, alternators, ignition coils, etc.); and glass, mirrors and lamps.

The biggest surprise in the data, at least in terms of contradicting conventional wisdom, was that professional technicians make up the largest portion of the online purchasing sector.

"More than half of the market is professional installers going outside of their B2B systems and ordering parts off of public sites," Rassuli says. "Often this starts because they are researching parts and looking for better prices, availability, warranty information and specifications. If they find a better price from a different suppliers, they'll buy it right then."

Technicians also purchase a different product mix than the DIY segment, which results in a total higher dollar volume in purchases.

Frost & Sullivan previously issued market projections for automotive parts e-tailing, indicating that the market expanded from $4.6 billion in 2012 to $5.1 billion in 2013. Online parts sales represented about 4 percent of the market in 2013, according to that research, and were expected to expand to 10 percent of the market by 2020.

Data from the Automotive Aftermarket Suppliers Association (AASA) and Booz & Co. examined the existing e-tailing market as well, and indicated that pure-play auto e-tailers held about 50 percent to 60 percent of the current market, followed by "bricks and clicks" retailers like AutoZone with 20 percent to 25 percent of the market, and online marketplace platforms (Amazon, eBay) with 10 percent to 15 percent.

The Auto Care Association study indicates that e-tailing is growing at a slightly faster clip, which Rassuli says surprised the research team. "We're looking at 17 percent annually, and it may be greater than that," he says. "The market will go from 6 percent to 11 percent by 2018, and then to 20 percent by 2023."

The researchers based the study on data from 100,000 households (representing roughly 170,000 vehicles), along with in-depth research with 500 installers and 800 vehicle owners, industry expert interviews and other information. "This is the most comprehensive study of its type, and by putting that all together we have a strong, validated look at what the market is going to do," Rassuli says.

That growth will come at the expense of other channels, so suppliers and distributors should be prepared.

"You need to take a hard look at your e-tailing strategy, if you even have one, and provide the services the market is demanding," Rassuli says. "You have to provide the initial research components (like price and warranty information) that consumers and installers are looking for. I think the current distribution process in the aftermarket is well positioned, because it can deliver parts in rapid fashion, but those companies are often overlooked because they don't have an e-tailing strategy in place."

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