Performance

Parameters
 According to data from the Auto Care
Association’s 2017 Fact Book cited in an
AutoZone investor presentation, the retail auto
parts industry generated $54 billion in revenue
during 2016, with a 5-year CAGR (Compound
Annual Growth Rate) of +3.9%.

 The Automotive Aftermarket Suppliers

Association (AASA) puts the market at $267
billion; however, this is dominated by “do it for
me,” or DIFM, and includes labor costs. DIFM
parts accounted for 25% more than DIY parts,
and the remainder is labor costs.

 There were approximately 260 million light duty

vehicles on the road in the US during 2017,
serviced by 35,000 parts stores. Competing for
the DIY market are general retailers, such as
Sears and Wal-Mart/Sam’s Club. Amazon is
also entering the market.
Plenty of Older Cars
Being Driven Trillions
of Miles
 Vehicle owners whose vehicles are older
than 5 years are the target market for auto
parts retailers, since most manufacturers’
warranties have expired. There are
approximately 88 million vehicles in this
category.

 Because of improved vehicular quality, car

owners keep their cars longer and are more
willing to invest in repairs and replacement
of parts. In addition, the warranties on the
large number of vehicles sold during 2012–
2013 are about to expire.

 The increasing numbers of miles driven

causes more wear and tear on vehicles. As
of August 2016, US miles driven was a
record 3.2 trillion.
It’s Good to Be the
Kings of the Roads
 For the third consecutive year, AutoZone was
the largest auto chain in North America, as
ranked by number of company-owned stores.
It expanded from 5,644 stores during 2016 to
5,806 during 2017, an increase of 2.9%.

 The #2 auto chain, Advance Auto Parts, also

maintained its position in the list. It has 5,189
company-owned stores, but it also serves
1,250 Carquest locations, for a total of more
than 6,400.

 The remaining top-5 auto parts chains were

O’Reilly Automotive, 4,829 stores; Genuine
Parts Company, 1,368 stores; and Icahn
Automotive (Pep Boys and Auto Plus),
1,228 stores.
The Challenges of a
Changing Automotive
Market
 Contrary to popular opinion, sales of new cars
do not negatively affect the aftermarket.
Increasing new car sales reveals broad
economic growth and consumer confidence,
which are both good for auto parts retailers.

 AASA predicts that from 2017 through 2026,

independent, non-chain retailers will lose
market share to auto dealers, tire dealers and
independent chains. A significant factor is more
complex parts, which will increase the cost of
doing business.

 According to a study by IHS Markit, by 2040,

the number of new vehicles purchased will
decrease, but the number of miles driven will
increase. It predicts that 30% of vehicles will be
electric. Ride-hailing services will own fleets of
self-driving cars.
Amazon Dominates
Online Parts Purchases
 Hedges & Company forecasts online auto
parts retail sales will total $8.89 billion during
2017, a 16% increase over 2016, with sales
exceeding $10 billion during 2018.

 Amazon is the auto aftermarket’s biggest

online retailer, which doesn’t even include the
approximately 33% of Amazon’s third-party
sales. According to an article in Barron’s,
Amazon’s auto parts prices were 22% less
than chains’.

 Almost half of all online auto parts ($4 billion)

were purchased on mobile devices. According
to Google, 59% of searches for car batteries,
61% of off-road parts, 57% of truck parts and
70% of parts & accessories to modify
appearance were via mobile.
Unfamiliar Road Signs
 Although the current market for DIY auto parts
is strong, as parts become more complex and
computerized, vehicle owners who would
otherwise fix their vehicles will require
technicians to make more repairs.

 Farther into the future, companies, such as

Uber, will be disrupting transportation and
transforming it into mobility as a service, or
MaaS. They are likely to own fleets of cars
and will service them in-house or in
partnership with a large auto repair company.

 Many auto parts retailers are scrambling to

improve their online experience to capture the
Millennial market. Retailers without an easy-
to-use, well-designed Website with
customization capabilities are likely to have a
small share of this market.
Advertising Strategies
 To attract Millennials and new car owners,
advertise products that will enhance their car’s
appearance.

 Highlight your employees’ expertise and

willingness to consult with customers to find
the right part.

 Feature windshield wiper blades and other

items that people need to replace
immediately.
New Media Strategies
 Ask customers to share their stories in videos
of how specific auto parts extended the life of
their vehicles and the parts they purchased to
enhance the appearance of their vehicles, and
then post their videos to the stores’ social
media sites.

 Answer prospective customers’ questions

about auto parts on social media and IM them
coupons on discussed products.

 Promote an auto-parts-renewal system with

customers for various disposable products,
such as car wash solution, tire cleaner and
scent, with discounted prices for a one-year
“subscription.”