the future of automotive parts retailing in north america: are you prepared for digitalization?
TRANSCRIPT
The Future of Automotive Parts Retailingin North America
Are You Prepared for Digitalization?
Kumar Saha, Senior Industry AnalystAutomotive & Transportation
September 19, 2013
© 2012 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
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Today’s Presenter
• Automotive analyst with key focus on both passenger and commercial vehicle aftermarket, emerging digital and channel strategies in the automotive industry
• Strong experience working closely with OEMs, Tier-1 suppliers and aftermarket distributors on strategic consulting projects
• Often cited by and published in key trade journals and mainstream media, such as Toronto Star, Aftermarket Business World, and Truck Parts Service
Kumar Saha, Senior Industry AnalystAutomotive & Transportation, Frost & Sullivan
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Focus Points
Key Trends in eRetailing for Automotive Parts Overview of the Automotive Digital Ecosystem Market Size and Key Category Analysis for Online Parts Sales Competitive Analysis Business Model Analysis Future of Digitalization in Automotive Aftermarket and Overall
Impact on Parts eRetailing
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Five Key Trends in Automotive Parts eRetailing
Online parts sales represent 9-10%
of total DIY parts revenue,
compared to just 4% for total aftermarket
revenue
Amazon, eBay drive nearly 80 percent of total automotive parts and accessories
merchandize value
Traditional parts retailers creating
aggressive strategies, acquiring
eRetailers to increase share
Online parts pricing (20%-40%
cheaper) key success driver;
shipping times, cost will
determine next wave of
competition
What does this mean for industry participants?
Diversification of digital channels (apps,
dedicated portals, product videos) for DIY customers
Partnerships with current aggregators / eRetailers and
emerging ones such as Google, Wal-Mart
‘Bricks and clicks’ strategy with emphasis on fulfilment (delivery times, options)
Increasing focus on selling to
smaller, regional installers through online channels
The DIY Choice
MarketplaceWinning
Parts RetailersRamping Up B2C to B2B All About
Pricing1 2 3 4 5
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Digitization Expansion in Auto Parts and ServiceGrowth in personal, in-vehicle and service shop connectivity is creating new customer touch points
Automotive Parts e-Retailing Market: Digitization Opportunities in Automotive Aftermarket, North America, 2012-2020
Pre-2009
2009-2012
2013-2016
2016-2020
• Virtual service monitoring (e.g. AudiCam)
• Mobile parts shopping
• Online service pre-sale with parts purchase• Rich media service advice and tutorials • Service and maintenance apps• Web and app-enabled service scheduling• Electronic parts and service promotions
• Web-based parts and accessories sales• Online dealer and service shop locator• Online parts catalogs; comparison tools
• Remote repair, assisted repair
• Remote diagnostics, predictive analytics
• In-vehicle parts purchases • Location-based parts and
service purchase
Source: Frost & Sullivan analysis.
Full digital integration of the automotive service and parts
value chain maximizes revenue generation
opportunities by increasing touch points for
parts e-sales as well as other related products
Indicates direct revenue generation opportunities
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The Parts eRetailing Strategic EcosystemCustomized fulfillment, big data gaining importance for success in eRetailing
Parts eRetailing Strategic
Ecosystem
Platforms Channels
Customer Competitive
Current• Websites• Apps• Mobile• Social
Media
Current • Customized fulfillment• Multimedia DIY content
Future• In-vehicle• Pop-up
stores• Express
stores
Future• Location-based services• Augmented Reality• Remote services
Current• Marketplace
(Amazon, eBay)
• Direct
Future• Service
aggregators (AutoMD)
Current• SEO• Web
Analytics• Big data
Future• Telematics
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Automotive E-Retailing Value ChainThe automotive e-retailing value chain is rapidly expanding, providing emerging opportunities for auxillary participants such logistics providers, service aggregators and IT solution providers
Source: Frost & Sullivan analysis.
Automotive Parts e-Retailing Market: Automotive E-Retailing Value Chain, North America, 2012
Auto Parts Suppliers
Delphi, Federal Mogul, Affinia,
TRW
Traditional Retailers/
DistributorsNAPA,
AutoZone
Mass MerchantWal-Mart,
Sears, Costco
Internet Mass Merchant/
AggregatorAmazon, eBay,
Ahwooga
OESFord, GM,
Honda, Nissan, other OEMs
DealersAutoNation,
Penske
Automotive E-tailer
US Auto Parts Network,
Summit Racing
Diagnostic Data
ProvidersAllData,
Mitchell1, MotoLogic
Logistics Providers
FedEx, UPS, Bufferbox,
Amazon Locker
PaymentProviders
PayPal, Credit Cards, Bill Me Later, Google
Checkout
IT Solution ProvidersSAP, IBM, Channel
Advisor, WHI
Service Aggregators
AutoMD, RepairPal
App Developers
Frooition, Tweddle Group
Telematics Providers
OEMs, Delphi, Verizon
CORE PARTICIPANTS AUXILLARY PARTICIPANTS
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Online Parts vs. Total Aftermarket Parts Revenue – North AmericaOnline parts sales is estimated tol account for about 10% of aftermarket revenue by 2020
$131.5 B
$4.6 B
$167.3 B
$16.6 B
Automotive Parts and Service eRetailing Market: Online Parts vs. Total Aftermarket, North America, 2012, 2016 and 2020
2012 2020
Note: All figures are rounded. The base year is 2012. Source: Frost & Sullivan
Note: Total aftermarket sales figures are measured at retail level and does not include revenue generated from service labour. Only retail revenue measured to avoid double counting revenue for auctions and B2B
2016
$8.2 B
$149.6 B
~4 % of total aftermarket
~6 % of total aftermarket
~10 % of total
aftermarket
2X
4X
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Percent Revenue Forecast by Competitor TypeIndependent automotive eRetailers likely to lose market share as other participants ramp up their eRetailing efforts
Automotive Parts and Service eRetailing Market: Revenue Forecast by Business Type, North America, 2009–2020
Note: All figures are rounded. The base year is 2012. Source: Frost & Sullivan
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Automotive E-Retailing by Product Category
Source: Frost & Sullivan analysis.
Automotive Parts e-Retailing Market: Product Category Revenue Analysis, North America, 2012 and 2020
CategoriesRevenue
(2012; Approx; Billions)
Revenue (2020;
Approx; Billions)
% Share (2012)
% Share (2020) CAGR Online
Value Position
Exterior $0.8 $3.1 17% 19% 19.0% Prices lower by 25-30%; appeals to DIY segment, small installers; body parts, lighting key parts
Brakes $0.6 $2.2 13% 13% 17.4% Prices lower by 10-20%; appeals to DIY segment, small installers; friction materials key parts
Performance $0.5 $2.2 11% 13% 19.8% Primary appeal to enthusiasts on eBay
Powertrain $0.4 $1.3 10% 8% 14.1% Low volume; higher cost drives revenue
Filtration $0.4 $1.2 9% 7% 13.7% High volume; lower average price drives down revenue
Interior $0.4 $1.5 8% 9% 19.1%Strong growth segment as lower cost and ease of
installation will appeal to both DIYand DIFM customers
Electrical $0.3 $0.7 6% 4% 11.6% DIFM product will see limited growth
Tires $0.2 $1.5 4% 9% 29.9% Strongest growth expected
Others $1.0 $3.0 22% 18% 14.5% Tools, wipers will drive growth
NOTE: Exterior parts include lights, fenders, bumpers, grilles, side mirrors, hoods, door handles and other accessoriesPowertrain parts include engines, transmissions and other related partsFiltration includes oil, air, fuel and cabin air filtersInterior parts include mirrors, floor mats, seat covers, interior door handles and other accessoriesElectricals include starters, alternators, spark plugs and wire setsOthers include chassis parts, exhaust, HVAC, infotainment, tools and wipers
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Automotive Parts GMV by Business Model TypeParticipants with high brand equity (AutoZone, automakers, Wal-Mart) will drive higher growth for the direct channel, while smaller automotive eTailers will increasingly favor the marketplace model
Automotive Parts and Service eRetailing Market: Automotive GMV by Business Model Type, North America, 2012 and 2020
Direct
Marketplace
Direct
Marketplace
Marketplace Direct
2012 2020
$4.6 B
$16.7 B
Source: Annual reports; Frost & Sullivan NOTE: GMV figures for eBay and Amazon are estimates only.
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Business Model Analysis by Participant TypeM
arke
tpla
ce
Direct0%
100%
100%
2012: Participants with low brand equity prefer marketplace
2020: Auto eRetailers and parts suppliers will move towards more direct, dealers will expand marketplace presence
2012: Established participants predominantly sell directly
2020: OEMs will have increased preference for marketplace; other traditional “bricks” competitors will likely become 100% direct
Indicates future business model preference NOTE: Bubble size represents 2012 estimated revenue share
Highly polarized market in business model
preference
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Why the Marketplace Model Dominates Parts eRetailing
Sells automotive parts and accessoriesMarketplace does not sell automotive
parts and accessories currently; likely to extend into category in the near term
Benefits to Aggregator
Benefits to Seller
Benefits to Buyer
• Greater selection increases Web traffic
• Revenue through partners with core expertise in categories
• Drop-shipping options put less pressure on warehouses
• Scalability allows provider to add more services and create new revenue streams
• Exposure to wider customer base• Increase brand equity through
association with established aggregator
• Access marketplace aggregators’ advanced digital platforms and fulfillment options
• One-stop shopping for a variety of products
• Access to different sellers, wider selection and pricing
• Greater trust in unknown vendors because of continuous peer –driven vetting of products and services
Key Marketplace Aggregators
Logos for representation only. Source: Frost & Sullivan
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eBay More Attractive than Amazon for Third-Party Sellers (OEMs, Suppliers)
Automotive % of Total GMV 1-2% approx 8% approx. (includes vehicle and parts sales)
Shipping/Fulfillment
• Sellers primarily use Amazon fulfillment options
• Free shipping available• Piloting same-day delivery, locker boxes
•Sellers primarily do their own fulfillment•Currently, piloting same-day delivery for sellers
Social Media Integration
• Close integration with Facebook, Twitter • Exploring own social media channel
• Integration with Facebook, Twitter • Introduced own social media concepts, such as
Group Gifts and eBay Go Together
Mobile Integration • Limited for automotive parts• Leader in mobile commerce• eBay Motors app has integrated advanced features,
such as augmented reality, ability to shop for parts
DIY Support • No video tutorials for DIY repair • Video-sharing driven by users
Enthusiast Appeal • No dedicated community, blogs or social media avenue for automotive enthusiasts
• eBay Garage features more than 100,000 automotive enthusiast profiles
• Allows image sharing, profile following
Seller Perception • Fee structure considered prohibitive• Competes with own sellers
• Fee structure perceived as prohibitive • Regarded as collaborative as eBay does not sell own
products
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Customized Fulfillment Will Emerge as Key DifferentiatorMarketplace providers will dominate in delivery times and cost; traditional participants must develop capabilities to compete
Ship
ping
Stra
tegi
es
Same-Day Delivery
Source: Frost & Sullivan analysis.
LockerBoxes
FreeShipping
CrowdsourcedDelivery
Cus
tom
erO
ptio
ns
Click ‘n’ Post Click ‘n’ Collect Click ‘n’ Fit
Stra
tegi
c Va
lue
Opportunity to reach global customers and out-of-reach installers without
expanding physical presence
Convenience value for DIY customers,
local installers; opportunity to draw
customer into service shop and store
Convenience value for DIFM customers, opportunity to draw
customer into service shop and store
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Current Value Proposition • Navigation (directions, POI, traffic alerts)• Safety and security• Roadside assistance• Vehicle diagnostics
Current Value Chain
• Telematics providers• OEMs• Insurance providers• Roadside assistance providers
Telematics: Future Wave of Repair DigitizationTelematics and accompanying HMI could potentially transform the vehicle into a dynamic mobile store and a platform for advanced customer management
Expansion in value proposition to include new features• Vehicle prognostics, remote repair• Location-based parts shopping, promotions• In-vehicle maintenance package and parts
purchases
Future Value Chain
Expansion in value chain to include new participants• Parts suppliers• Independent service shops • Parts distributors and retailers
Future Value Proposition
Current Revenue Models
• Consumers—Subscription fees• Business—Usage fees
Future Revenue Models• Consumers—Subscription fees, parts and service
revenue, remote repair revenue• Business—Usage fees, revenue sharing,
advertising revenue
Preventive maintenance through diagnostics reports value proposition for aftermarket
Vehicle HMI becomes a new touch point for parts and service sales
Source: Frost & Sullivan
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Aftermarket DIY Telematics SolutionsAftermarket vendors are responding with expensive DIY options to combat threat from OEMs; possible deployment in partnership with parts distributors, retailers and service shops
Delphi OBDII Audivox Car Connection Automatic Link
Device Cost $250 $170 $70 (not yet in the market)
Installation Fee
$35 $19.95 None
Free Trial 2 Years None None
Connectivity Embedded- Verizon Tethered- User Data Plan Tethered- User Data Plan
Subscription $5/Month $9.99/Month or $89.95/Year No Subscription Fee
Apps Android/Apple App Apple/Android App Apple Only
Driving Behavior Analysis
Eco-driving Scores
Automatic Crash Assistance
Remote Vehicle Access, e.g. Lock/
UnlockTeen Tracking Features, e.g. Geo-fencing
Vehicle Health Reports,
periodically
Auto Diagnostics Fault Detection
and Actions
Distracted Driving Minimization
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Five Big Predictions for Automotive Parts eRetailing
2Direct eRetailing (sales through own Website) will grow from the current 20% to 25% of all automotive eSales by 2020. Marketplace merchandise volume (sales through aggregator websites such as Amazon and eBay) will drop from 75% in 2012 to about 70% in 2020.
3 Independent automotive eRetailers will lose their dominance because of weak brand equity. Biggest gainers will be traditional automotive parts retailers and OES participants.
1 Automotive parts eRetailing will cross the $16 billion mark by 2018 and will account for nearly 10% of total aftermarket sales by 2020.
Source: Frost & Sullivan
4 The largely untapped DIFM segment will be targeted through digital sales of minor maintenance packages in the medium and long terms.
5Growing penetration of connectivity and telematics in vehicles will necessitate multi-channel digital strategies and will facilitate the emergence of new revenue streams such as location-based parts sales and remote repair, which will ultimately boost parts eRetailing.
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For Additional Information
Jeannette GarciaCorporate CommunicationsAutomotive & Transportation(210) [email protected]
Kumar SahaSenior Industry AnalystAutomotive & Transportation(416) [email protected]
Stephen SpiveyProgram LeaderAutomotive & Transportation(210) [email protected]
Brian DrakeVice President, SalesAutomotive & Transportation(248) [email protected]