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.”