When it comes to aftermarket parts, it was a long tradition to have your motor factors in physical stores and garages that supplied the parts when fitting – usually delivered by those same factors. But with the advent of the internet, this model has undergone a slow but incremental shift to online.
This is now blurring the lines between product cost, and profit margins for independents. And with the global automotive e-commerce market projected to hit $213 billion by 2029 with a CGR of 16.02% that incremental shift is becoming a surge as customer behaviour changes.
Modern customers and digital expectations
Everyone these days is used to online shopping, millennials especially. We all expect convenience, transparent pricing and a wide selection of products to cover all budgets. This translates to a need for a seamless online buying experience when purchasing car parts. Research indicates that 70 to 80% of North American customers research online before purchasing parts – far fewer DIYers are rocking up to GSF or Euro’s and being given whatever they’ve got in stock.
This digital age has also given consumers the power to easily compare prices to find the best deal, which has led to ever more competitive pricing. Low overheads from online shops, and even manufacturers themselves opening up direct-to-consumer stores on sites like eBay can mean slim margins for those in the physical realm.
The impact on business models
e-Commerce has long been a disruptor of bricks and mortar, but with more and more of the aftermarket segment going online, it’s forcing OEM’s, distributors and retailers to adapt.
Online channels account for nearly $40 billion in the EU and U.S. combined, but with it, prices have decreased as providers fight it out for an ever-decreasing market share. Which ultimately ends up causing issues for independents.
Long gone are the days when healthy markups could be made on parts. It only takes seconds to Google a part number and find the best price online, quickly leading to questions on invoice pricing. This has meant that many garages have had to increase their hourly rate to cover some of the shortfall; others stick by the markup, or, depending on volume, can negotiate higher discount margins with factors.
However, online marketplaces and the ‘race to the bottom’ in terms of pricing, coupled with the current cost of living crisis, lead to customers sourcing their parts and asking them to be fitted at local garages.
The problem of BYOP – Bring your own parts
Some garages allow it, simply charging their hourly rate to fit whatever the customer turns up with – if it’s correct that is. Others, flat out refuse it.
The issue with fitting customer-supplied parts is that you don’t know the origin. And with the amount of fake car parts now seemingly flooding the market, from critical safety items like airbags, to cheaply made drop links and poorly cast suspension components, a failure of one of those parts resulting in a crash, serious injury, or even death could end up with the mechanic or owner potentially facing criminal charges.
It’s a murky area and another issue that independents must navigate with tact.
The future of automotive e-commerce
With the current penetration of AI into ‘everything’, it’s quite easy to see that chatbots and personalised AI recommendations using predictive analytics will likely reshape the e-commerce world of the aftermarket over the next few years.
These technologies can offer an even more personalised shopping experience, even upselling better-performing products. They’ll also be used at the back end to ensure stock levels are correct, and algorithms will be used to see patterns in purchasing behaviours dependent on make, model, or even time of year.
Online platforms like eBay and Amazon have become big players in the aftermarket, catering to both the DIYer, professional mechanics and workshops, and through all their evils, they can provide a source for those hard-to-find parts or even give your garage a competitive edge on pricing compared to what factors might even offer.
And yet, while e-commerce can offer all those great things, the authenticity of parts is the bigger question. Can you really trust what you’re buying?
With the market set to grow from 30% to around 70% by 2035, it’s only a matter of time before some of the big motor factors move to an online-only platform with local warehouses and minimal front-of-house staff.
Let’s see who does it first.
