Market expansion, consolidation key themes for auto parts e-retailing in 2013, Frost & Sullivan says
E-retailing for automotive parts and service has been on a steady growth curve since 2008-2009.
While the initial market expansion happened on the shoulders of pure-play online retailers, such as Amazon and US Auto Parts Network, 2013 was the year of the traditional parts retailers.
Overall, the market for online parts expanded from $4.6 billion in 2012 to $5.1 billion last year, representing a year-over-year growth of nearly 11 percent. The amount of online share of parts sold held steady at around 4 percent for 2013 as well.
Frost & Sullivan’s prediction for the market remains upbeat. Online parts sales are expected to nearly reach 10 percent penetration by 2020, surpassing $16 billion in revenue.
Of all market participants, traditional automotive retailers experienced the most phenomenal growth.
AutoZone’s e-commerce business grew by 60 percent thanks mainly to its acquisition of online retailer AutoAnything.com in late 2012. The addition of the company, which surprisingly continues to operate under its own banner, brought in an estimated $200 million in online sales. AutoZone’s 2013 online revenue accounted for more than 3 percent of its total sales, up from less than 2 percent in 2012.
Pep Boys also expanded its online footprint, growing its e-business by almost 100 percent. The company expects further short-term growth as it bolsters its electronic platforms and fulfillment models.
While Frost & Sullivan does not account for business-to-business (B2B) sales in our data, Advance Auto Parts’ acquisition of CARQUEST and WORLDPAC, particularly the latter, means that it will now focus on aggressively developing its online B2B footprint. The company is likely to bring its B2C successes and customer strategies to create a more comprehensive e-strategy for its commercial clients, allowing it to potentially become the biggest e-commerce player in the North American automotive aftermarket.
While established aftermarket participants thrived, the online market proved to be more of a mixed bag for pure-play e-commerce entities.
Revenue and profitability for US Auto Parts Network – North America’s biggest online parts retailer – continued to fall in 2013, by as much as 10 percent to 15 percent every quarter. The company’s plummeting sales, but relatively strong brand equity and customer base, still make it a very strong candidate for an acquisition in the short and medium terms.
Other online parts stalwarts such as jegs.com and Summit Racing may be up for grabs as well, as traditional aftermarket participants look for new ways to expand their online footprint.
Though not a pure aftermarket player, Amazon.com continued to expand its automotive category, not only in terms of products, but also geographically. The website introduced a dedicated automotive portal to the Canadian market, posing a serious challenge to established competitors, such as Canadian Tire, which has been actively pursuing digital expansion.
Overall, Frost & Sullivan believes that these trends above will continue for the next four to five years, particularly the growth of digital revenues by traditional suppliers.
Companies, such as AutoZone, will represent nearly a quarter of the total online parts market by 2020. Market share for automotive parts e-retailers, on the other hand, will shrink 45 percent to less than 20 percent by the end of the decade.
Moreover, going forward, market shares in the digital world will not be determined by price position – the key driver behind the growth in online e-retailing of components.
Rather, market winners will separate themselves from the losers through customer convenience factors, such as delivery times, shipping costs, flexible fulfillment models and service packaging.
Since the above require significant investment in supply chain optimization and advanced logistics, the market will favor bigger competitors with deeper pockets – another reason why some of the smaller online sellers will either disappear or get acquired.
Editor's Note: Kumar Saha is an Industry Principal for Frost & Sullivan’s Automotive & Transportation Global Aftermarket research practice. He focuses on monitoring and analyzing emerging trends, technologies, and market behavior in the global automotive aftermarket.
