Digital commerce is big, and business-to-business (B2B) e-commerce is also growing rapidly. According to Digital Commerce 360’s 2019 B2B Manufacturer 300 Report, just 60 percent of manufacturers have a B2B e-commerce site, but sales have increased 22.5 percent (from $291 billion to $356.4 billion) over the past year.
Amazon, of course, is the 800-pound gorilla of e-commerce, and last year Wells Fargo noted that unique visitors to Amazon represent 74 percent of all Internet users in the U.S.
However, while Amazon dominates online sales, e-commerce still represents less than 10% of retail sales, according to Wells Fargo. The Digital Commerce 360 repot indicates that e-commerce in 2018 accounted for just six percent of all sales from manufacturers, although that was an increase of the 5.2 percent of sales in 2017.
Wells Fargo also noted that while Amazon was taking a larger share of categories like cosmetics and shoes, they had actually declined in auto parts sales.
Wells Fargo declined to comment on why that decline occurred, but there could be several contributors. There is increased competition online from the likes of eBay, new aftermarket e-commerce specialists, and a growing e-commerce presence from companies up and down the supply chain in the existing aftermarket. In addition, existing aftermarket distributors and retailers have an advantage in value-added service (assistance with diagnosing the problem and selecting the right part).
And unlike other segments that have been affected by e-commerce, the automotive aftermarket already had a highly effective logistics operation in place when it comes to delivery speed and parts availability. Both of those advantages rely on a heavy brick-and-mortar presence for both retail outlets and distribution centers.
“The supply chain structure in the aftermarket is very sophisticated,” says Barry Neal, partner at Roland Berger. “Its designed around four-times-per-day delivery and 95 percent availability. That’s a level of fulfillment capability that Amazon can’t match, and doesn’t even necessarily want to match.”
“There was a brief moment a few years ago where there was panic in the aftermarket. The storyline was that we were dinosaurs, and this e-commerce asteroid was headed toward earth,” says Paul McCarthy, president and COO of the Automotive Aftermarket Suppliers Association (AASA). “Since then, we’ve fond that the story is a little more complicated. There is value in both the established and new channels. The aftermarket is a lot more complicated than Borders Books. There are a lot of different customer needs, and the lines between channels are becoming more blurred.”
In addition, players like Amazon, Alibaba, and eBay have evolved from what were initially seen as a threat to the aftermarket into more of an augmented channel. “Players like Amazon or Alibaba bring a brand to the market that customers trust,” Neal says. “There is also an integration with service, and an opportunity to attack a set of parts outside of what was a shrinking DIY space, and to attack the larger do-it-for-me (DIFM) space as well.”
There are also emerging models like Tire Rack, Openbay or Amazon Home Services where purchase of parts and service online are an integrated process.
“Amazon has also evolved into a more significant B2B play,” Neal says. “They provide a channel where you can control who is actually able to see your offers.”
“This is really a revolution in convenience, and technology is just an enabler,” McCarthy says. “It can affect all of the different channels and create opportunities to enhance the value proposition.”
The push for greater e-commerce has created a number of opportunities in the aftermarket, Neal says. “There are some players that have found success with a fulfillment role for companies like Rock Auto. Some WDs are taking this as an opportunity to expand become more of a fulfillment service, where they take a lower margin but see a higher volume of work. They see it as a way to get out of the loop they’ve been in, in terms of competing against the Big Four.”
Research by AASA and Roland Berger found that e-commerce sites are often used to gather information in the aftermarket. The technology affects purchase intent across channels in both the commercial and traditional aftermarket sales. “It’s an information tool and influencer, and it is seen as away to handle parts proliferation,” McCarthy says. “Those long-tail SKUs have a place. There are some consumers that never set foot in a shop anymore. It’s a messy market.”
Neal says that auto parts retailers in general are enhancing their online offerings, and are trying to achieve a level of information and digital marketing management that is closer to a mainstream e-commerce channel. “They are moving beyond ACES and PIES to something that is designed for a consumer to understand,” Neal says.
“In the long run, whatever approach makes things more convenient for the customer to get their repair and get he parts they need will be good for the aftermarket,” McCarthy says. “This is just another tool in the toolbox, not a replacement for the aftermarket.”
McCarthy also points out that although there have been a lot of assumptions about how e-commerce and e-tailing might disrupt traditional parts distribution, the real opportunity has been in connecting with consumers. “That is an area that is ripe for disruption, and where there is a lot of potential for creating trust among consumers and better managing those relationships,” McCarthy says. “That may be an area that sees much greater disruption, and really trickles down to the distribution base.”