what does the future hold for parts and service retailing?

What Does the Future Hold for Parts and Service Retailing?

Outlook and Scenarios for 2025

Kumar Saha, Industry Principal

Automotive & Transportation

Alex Rose, Marketing DirectorWhoCanFixMyCar.com

October 30, 2014

© 2014 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

• Senior automotive analyst with key focus on both passenger and commercial vehicle

aftersales, 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, Industry Principal

Automotive & Transportation,

Frost & Sullivan

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Today’s Presenter

• Prior to his current role as Marketing Director of WhoCanFixMyCar.com, Alex spent

four years as Google UK's Automotive Industry Manager, advising OEMs, dealer

groups, automotive classified sites and aftersales providers on their digital strategies.

• A lifelong car enthusiast, Alex trained as a graduate with BMW (UK) Ltd and

continues to maintain a classic BMW, providing plenty of opportunities to

mystery-shop WhoCanFixMyCar.com for himself.

Alex Rose,

Marketing Director,

WhoCanFixMyCar.com

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Presentation Focus Points

� Mega Trends, Retailing Shifts and Impact on Aftermarket

� Impact Area: Geography

� Impact Area: Customers

� Impact Area: Technology

� Impact Area: Channels

� Future Retailing Concepts for Aftermarket

� Service Aggregation: Why, How and What It Means for the Aftermarket

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Poll Question 1

• Which of these mega trends, according to you, will have the most important impact on the aftermarket by 2025?

• Urbanization

• Connectivity

• Demographic Changes (Women, Gen Y)

• Bricks and Clicks

• Others

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Mega Trends Driving The Future of Aftermarket RetailFrom Linear to Dynamic; Multiple Touchpoints with Customers

Creation of New Retail Formats. Location

Expansion & Smart Distribution Networks

Connectivity will create new touchpoints for both DIY and DIFM; make the service experience more predictive, customized

OEMs, retailers will experiment with new business strategies

amalgamating online and offline to create an

omnichannel experience

Women, Gen Y increasingly important customer groups with

different needs, requirements

Connectivity and Convergence

Urbanization Bricks & Clicks Social Trends1 2 3 4

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Top Transformational Shifts Shape the Future of RetailingKey Focus Will be on Customer Convenience and Experience

Future StoresSmaller, Ephemeral,

and Urban

Omnichannel Retailing‘Bricks and Clicks’ Models

New Business ModelsSocial Commerce, and new

retail models

Last Mile RetailingFuture of retail supply

chain

Engaging RetailingEra of customized targeting

Big Data RetailingFrom selling products to

selling information

Connected Retailing‘on-the-go’ seamless

shopping

Women EmpowermentEmerging Retail Models for

Women

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Geography

• Urban Store Presence

• Warehousing Locations

• BRIC markets

1

Products

• Electronics/sensors

• Repair solutions

• Private Labels

• Product Adjacencies

5 Service

• Subscription

• Customized

• Remote

• Mobile/express

• Participatory

Technology

• Telematics (prognostics)

• 3D Printing

• Augmented Reality

• Big Data

• In-store display

• Apps

Customers

• Women Drivers

• Gen Y

2 Channels

• e-commerce

• Marketplaces

• Aggregators

• Direct Selling

• In-Vehicle Sales

3

6 7

Competition

• Dynamic Pricing

• Non-traditional players

Formats

• Express/PopUp Stores

• Mega Service Centers

• Delivery/Fulfilment

4

8

Aftermarket Retail Evolution 2025: Key Impact Areas

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Geography: Urban Store Locations Future ScenarioMega Trends Provide Opportunity to Attract New Customers; Product Footprint

Presence of National Parts & Service Brand in NYC (Current) Presence of National Parts & Service Brand in NYC (Future)

No locations

in Manhattan

Existing Locations Possible Future Locations

• Mostly suburban locations

• Limited access to core urban population

• Not very convenient for customers

• Strictly automotive parts focus

• New core urban locations – express; click ‘n’ collect; vehicle drop-off/pick-up service for repair

• Full access to core urban population (Gen Y; affluent customers)

• Adjacent products – bike/cycle accessories/parts; rideshare-carshare points

Mega Trends & Influencers

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Consumers: Influence of Female ShoppersNorth American Drivers are 50% Female; High Growth in Other Developed Countries

Lic

en

se

Ho

lde

rs (

% o

f th

e t

ota

l)

Driving License Holders by Gender, Selected Countries, 2012

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Consumers Case Study: Lady Parts Automotive ServicesA More Inclusive Experience than Traditional Service Outlets

� Free Wi-Fi

� Choice of Beverages Available

� TV, Entertainment zone

� Decorated Customer Lounge

� Large Comfy Couch

� Clean Restrooms

� Kids Reading and Play Area

Key Service Center Highlights� The company prides itself to be created with

‘women in mind’.

� A ‘Virtual Vehicle MD’ video tutorial is provided on the website which educates the customer on how different parts work

� The dealership has been actively engaged incommunity outreach programs.

� Even though the target customer are female, men constitute about 40% of the customer base

� Demographic profile of the automotive aftermarket customers has changed significantly over the last decade with resulting increase in female drivers.

� In the future, concentration of female customers will further increase which will require retail services customized for them.

Need Analysis

Location: Redwood City, CA, United States

Lady Parts Automotive Services

Operating Features

Source: Company website, Frost & Sullivan Analysis

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Digital Demand

Warranty Costs Reduction, Predictive Maintenance

Store & Service Shop Satisfaction

Internet Aggregators& Pricing Transparency

Adjacent Services, Products

Product Performance Analysis, Production and Supply Chain

Images and logos are only for representation Source: Frost & Sullivan analysis.

Technology: Big DataPredictive Analytics, Targeted Marketing Key Benefits for Aftermarket Retail

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Market Challenge:

To target deals based on the geographical locations of stores, the aftermarket giant wanted to understand

customer purchase decisions and preferences.

Solution

AutoZone used NuoDB’s cloud-based data

management system and was able to adjust its

inventory across stores based on information from

various databases, e.g., the type of cars driven by

people living around these stores.

Partnerships to work on in-store digital signs to

display promotions and to package dynamically.

Impact

AutoZone achieved high-volume retail

transactions based on geographical location and

user preferences.

AutoZone’s major achievement is that it has created

a store capacity with related inventory such that

the probability of a customer walking out of the store

empty-handed is very low.

Recommendation: Frost & Sullivan believes that by incorporating customer analytics, retailers/dealers will be able to study and understand customer purchasing habits; this will enable the building of newer retail chains/dealer points and ensure higher rates of returning customers.

Big Data Case Study: AutoZone Store OptimizationCloud-based System Essential to Parts Retail Giant’s No Customer Left Behind Approach

Source: Frost & Sullivan

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Technology: In-Store Digitization in AftermarketDigital Information Aids Can Assist Store Staff, Make Selling More Consultative than Directive

� Autozone in partnership with Osram Sylvania have installed iPads in select stores in the US and ‘Headlight for iPad app’ is installed.

� App includes how to videos, product features and even comparisons with other automotive light bulbs for vehicles as old as 1958 make.

� Such dedicated in-store interactive equipment could make way for more companies to follow suit in marketing their products even more effectively

� This is an innovative self service equipment aimed at revolutionizing the way drivers buy vehicle coverage.

� The company has installed the kiosks in 15 different convenient locations in United States and the information of their location is made on their website.

� Total transaction time estimated at about 5 minutes, this technology could well find way in more of the futuristic stores.

� 3M Virtual Presenter is a futuristic technology and holds potential to replace the in-store salesperson of the physical world

� Customers who walk in to the store can be assisted by the installed virtual assistant.

� It can be programed to provide information on part pricing, installation, offers and stock availability along with range of other options.

‘Insurance Store in a Box’ Direct General Auto Insurance

iPads on the ShelfAutozone

Virtual Sales Staff 3M

Source: Frost & Sullivan Analysis

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Technology/Channels: Telematics and In-vehicle SalesTelematics Can Turn Vehicle into Direct Sales Channel/Platform

DIY OBD II module installed in post MY96 cars

Data is shared over a wireless network for interpretation

In-vehicle Information relay to the potential customers

Retailers, Repair Shops, Backend

services

Range of integrated service offerings could include Oil Change, Batteries. General Repair, Service Appointments

Note: Frost & Sullivan Analysis

Installers/Independent Garage

Parts Aggregators

Dealers

Parts Retailers/Wholesalers

Service Aggregators

Telematics Provider

Insurance Providers

Effective targeting, increased visibility for service providers

Price discounts, best deals on replacement parts, ads

Customer retention, in-vehicle specials, feedback

Fleet management, DIY customer retention

Deals on service shops based on customer need, location

Vehicle data analysis, platform solutions

Track driving behavior, premium calculations

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Channels: Part and Service AggregatorsComparative Shopping Trend Trickling Down to Aftermarket

Serv

ice A

gg

reg

ato

rs

Customers select type of repair and diagnosis needed

Customers select type of repair and diagnosis needed

Customers receive real-time quotes for auto shops

Customers receive real-time quotes for auto shops

Website acts as an interface between selected repair shop and customer to negotiate and

discuss

Website acts as an interface between selected repair shop and customer to negotiate and

discuss

Once job order is received, garage pays a 3% to 4% commission fee to the company

Once job order is received, garage pays a 3% to 4% commission fee to the company

Customer feedback on the service experience closes the loop and provides easy rating scale

for other customers searching for a garage

Customer feedback on the service experience closes the loop and provides easy rating scale

for other customers searching for a garage

Customers search for parts neededCustomers search for parts needed

Customers receive quote from different sellersCustomers receive quote from different sellers

Comparison of different quotes is provided to customer for further perusal

Comparison of different quotes is provided to customer for further perusal

While the aggregator does not charge any more from neither the seller or the buyer, its gets access to the

data pertaining to customer preferences

While the aggregator does not charge any more from neither the seller or the buyer, its gets access to the

data pertaining to customer preferences

Aggregator generates revenue from selling this data. With data analytics of customer clicks, preferences are analyzed and products are targeted effectively

Aggregator generates revenue from selling this data. With data analytics of customer clicks, preferences are analyzed and products are targeted effectively

Part

s A

gg

reg

ato

rs

Source: Company Website, Frost & Sullivan AnalysisNote: junglee.com is owned by Amazon and operates in India

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Channels: Parts e-Retailing Across the Globee-Retailing Could Account for Over 10 Percent ($40B) of Sales in North America, Europe by 2020

Note: All figures are rounded. The base year is 2013. Source: Frost & Sullivan

10-20%

20-40%

>40%

2014-2015 Growth Outlook

Growth drivers: e-commerce strategies of traditional players, platform/delivery improvements

Players to Watch: Advance Auto, AutoZone, Amazon, Google

Growth drivers: Tire websites, fragmented aftermarket, geographic proximity

Players to Watch: Blackcircles, Oscaro, MicksGarage, Euro Car Parts, Delticom, Amazon, Allopneus

Growth drivers: High connectivity, fragmented market, slowing economy

Players to Watch: ConnectParts, MercadoLibre

Growth drivers: Domestic VIO growth, demand from Eastern Europe

Players to Watch: Exist.ru,eBay

Growth drivers: Global demand, slowing economy, growing domestic VIO

Players to Watch: Alibaba, TMall

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Channels: BRIC Parts e-Retail Case StudyIndian Parts/Accessories e-Retailer Has Seen 250% YoY Growth Between 2011 and 2013

Opportunity In India

� A growing automotive base, with vehicles on road expected to double by end of 2020, aftermarket trade

holds significant potential.

� A highly un-organized sector, along with growing e-commerce space and increasing smartphone penetration, together offer a favorable environment for aftermarket e-Retailing

Started in 2011, selling car and bike accessories

online

Current employee strength: 49

SKUs: 13,000

Inventory-led model with Just In time (JIT) ordering

for most parts

Sourcing partners include both local and

international brands

Future plans include investments in brick and

mortar stores

Company reported revenue growth of 250% YOY for last two years

(Targeting DIFM customers)

(Helps the company to

monitor quality of parts sold)

� Company also has private label, ‘Speedwav’, an umbrella brand with close to 1,000 SKUs offerings alreadySource: Frost & Sullivan Analysis

Successful Market Participant Profile, India

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Digital Purchasing Pathways in Omnichannel EnvironmentBlended Offline/Online Shopping Experience with High Levels of Digitization in Future

Customer

Attract

Entertain

Engage

Transact

Reward

Plan Arrive & Navigate Browse & Select Purchase Aftersales

Electronic LabelsLocation Based Advertising (In-store sensors) and Digital SignageWebsite/mobile site

GamificationVideo Display on walls, Touch ScreensAugmented Reality (eg. eBay)Online/in-app videosRepair tutorials

Virtual Solution ProvidersShelf Tablets, Digital direction boardsMobile Apps

Self Ordering KioskMobile POSSmartphone Ordering, Online Ordering

Loyalty PointsMobile App Promotional discounts

Easier Returns and RefundsDIY Support, Shopper Insights and Feedback

Re

taile

r


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The Connected Parts and Service Store: Vision 2025


Customized order fulfillment options with details available both online and in-store

Conveniently dedicated pick up space for Click and Collect customers

Relaxed space for women customers, single mothers, particularly at service centers

Secure payment options, Self check out, pay-by-phone

Electronic Display of Parts/Virtual Screens with real time information on pricing, offers,

availability

Self-Service Options with clear directional guidelines

In-Store technology inclusion like Virtual Assistants

Self-Serving kiosks, especially for merchandising, DIY customers

Attractive signage, social media feeds with customer feedback

Trained women staff targeting women customers

On-call support, designated relationship managers for premium customers

especially at service centers

FUTURE PARTS RETAIL & SERVICE CENTER

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Service Aggregation

The What, The Why and The How

Alex Rose - Marketing Director

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How do we Research and Buy ‘Services’?

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Who Are WhoCanFixMyCar.com?

�Aggregator / ‘compare the market’ for servicing/repairs�4,800 dealerships and garages�50,000 drivers since launch�Garages pay a 3.5% commission when they win new

business

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How does Who Can Fix My Car work?

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Other Service Aggregators

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What’s the Benefit to Dealerships? #1

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�32m cars on the road�24m are 3+ years old

�1m are Peugeots�20,000 are in-market for servicing this week

� 10,000 will be open-minded about where the car is repaired

£149 ‘Service+MOT

’


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What Can Dealers / OEMs / Service Outlets do? #1

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What Can Dealers / OEMs / Service Chains do? #2

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… And, Of Course …

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Poll Question 2

• Which of these aftermarket trends, according to you, will have the most important impact on your business by 2025?

• e-Retailing

• Big Data

• Telematics

• Retail technologies

• Others

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For Additional Information

Jennifer Carson

Corporate Communications


(210) 247-2450

[email protected]

Kumar Saha

Industry Principal


416 495 2688

[email protected]

Anuj Monga

Senior Research Analyst


+91 96 54 37 30 69

[email protected]

Stephen Spivey

Global Program Manager, Aftermarket


210 247 3845

[email protected]