We recently hosted an automotive aftermarket Q&A panel discussion in New York, focused on big-picture trends and industry developments with management from companies spanning the entire aftermarket supply chain. Our expert panel consisted of Larry Sills, chairman and CEO of Standard Motor Products; Richard Roy, president and CEO of Uni-Select; Ray Arthur, executive vice president and chief financial officer of Pep Boys; Shane Evangelist, CEO of US Auto Parts; and Phil Daniele, vice president of merchandising and Brian Campbell, vice president, treasurer, internal revenue and tax, both of AutoZone.
Overall, we think aftermarket trends remain solid and the early start to summer (and extreme heat across much of the country) should keep the momentum from a strong March/April continuing into the fall. Below, we provide our top takeaways from the panel discussion.
More than just a one-year wonder
One thing all the panelists agreed upon was that the strength seen in 2009 and to date in 2010 is unlikely to prove short-lived. High unemployment, depressed new vehicle sales, an aging vehicle fleet and improving miles driven should continue to provide a solid underlying footing for aftermarket fundamentals well beyond 2010.
Extremes are good
The very strong trends in March and in April were a result of many factors, but the harsh winter was certainly a significant contributor. The early spring demand for parts repair provided a solid boost for both DIY and DIFM segments. The extreme summer temperature in many areas, particularly the East Coast and Southeast, have spurred demand and should give a lift to many parts categories (most notably in temperature control).
Books, electronics, and auto parts?
Yes, the on-line channel for the aftermarket should continue to grow. While online penetration of the aftermarket is only approximately 2 percent today, it does appear that aftermarket participants are placing a greater emphasis on expanding the online parts channel. The DIY segment makes up the majority of part sales with an emphasis on collision parts, larger mechanical items, performance parts and, accessories. A big difference between the traditional “brick and mortar” aftermarket and the online parts channel is the average ticket, and this is key. We think the average ticket for a traditional retailer such as AutoZone may be only $20-25 whereas the average ticket for an online auto parts purchase likely exceeds $100. While the time-sensitive nature of automotive repair and average ticket hurdles (shipping, etc) may place a governor on the long term market potential for online transactions, we do believe that additional expansion is likely.