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Digital Disruption – Here and Now

Tuesday, January 8, 2019 - 08:00
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It’s common for self-proclaimed experts and pundits to write about future trends or events that will impact their readers. By the time that future arrives the readers can’t recall what was predicted and fact-checking rarely proves the expert wrong. 

My favorite thing about writing about the present is that you don’t need to do anything other than open your eyes and look around. In all aspects of our world, digital disruption is not some futuristic technological development that will impact our lives. It’s hard to think of an activity or process that has not undergone profound change due to the impact of internet connectivity and artificial intelligence. And it is irresponsible of business leaders to think the aftermarket is in any way immune to the disruptive and transformative effects of digital technology.

When I pause to reflect on the trends and topics that I wrote about in the past 12 months, it feels a bit like pushing a rope. In many cases, I found myself trying to educate and persuade the reader that change in one form or another was coming (or, in fact, here). But, the meetings and discussions I had at this most recent AAPEX and AWDA are evidence that executives have wrapped their heads around all of the connectivity and commerce opportunities that are in flight, and they are implementing changes to keep their businesses relevant in the midst of digital disruption.

Digital disruption refers to more than just the level of online commerce done in automotive categories, although over $10 billion in sales this year in a channel that didn’t exist a decade ago is pretty disruptive. The programming and cloud computing power is available and affordable to have a serious impact on eProcurement, virtual inventory availability and unlimited supply chain visibility. Digital disruption includes a mash-up of other technologies that have emerged from the labs and are production-ready, including artificial intelligence, autonomous delivery and 3D printing.

The forces that are driving this disruptive change are:​

  1. the online behavior and influence of millennials
  2. unrelenting SKU proliferation and an accelerating growth in the long tail of the demand curve and
  3. continuous pursuit of improvements in efficiency and profits at all level of the value chain.

This is the most challenging and exciting time to be a leader in the auto care industry.

In recent conversations I’ve heard executives talk about specific plans and targets to grow the portion of their business done online – both B2B and B2C. A common phrase is, “I want to deliver that Amazon-like experience that my customers demand” and “through connectivity and virtual inventories, I can offer an infinite assortment of products that I do not have in stock”. And it’s not just talk. Look no further than Advance Auto Parts announcing their store within an online store at Walmart.com and AutoZone offering next day home delivery in many markets for purchases made at their online store. Distributors and retailers are taking bold steps to make infinite aisles of product available to customers in the time and manner they want – at the store or outside their door.

A colleague of mine was an ecommerce operator and more recently the developer of ecommerce fulfillment software. He recently gave a talk at a company gathering (the inspiration for this column) and described the degrees of change that were needed to survive digital disruption. At a minimum, for a business to survive in this challenging environment, they must adopt an approach of continuous improvement. If you’re doing business exactly the same way this year as you did last year, you’re doing it wrong. Small changes in process and strategy can have a profound impact over time. Take for example, the impact on unit sales in the brake rotor category attributed to thinner rotors (in pursuit of weight reductions) that have to be replaced instead of turned – often after going through a single set of brake pads. That continuous improvement is having a double digit impact on rotor sales.

The next degree of change (and the most common today) is transformation. They say about the change that follows digital disruption that you can do it to yourself or have it done to you. AutoZone and Advance are only the most obvious examples of nationwide retailers boldly shaking up their business model. Based on the conversations we had in Las Vegas this fall, there are some bold and innovative strategies being developed by legacy brick and mortar businesses. Omni-Channel commerce solutions that take advantage of real-time connectivity, virtual supply chain visibility and comprehensive web commerce platforms integrated with robust fulfillment solutions – what kind of traditional aftermarket executive talks like that? Today, it’s a lot of them.

The third degree of change is reinvention. I don’t think we’re there yet. But, the technology exists to support an industry that carries a lot less product in stock and fabricates the slow moving, long tail product upon demand. Imagine if being an automotive WD meant having a library of 3D or CAD files. That’s the great thing about reinvention. I’m hard pressed to predict what it will look like. But, I’ll know it when I see it. 

These are exciting times, full of digital disruption in the aftermarket. And, those who embrace change, and have the courage to transform their business, will emerge successfully.

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