E-commerce Revs Its Engine in the Automotive Aftermarket
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E-commerce Revs Its Engine in the
Automotive Aftermarket
As consumers become increasingly comfortable
buying automotive parts online, companies across the
aftermarket – from manufacturers to pure-play e-tailers –
are positioning themselves to benefit from the growing
importance of e-commerce.
Against a backdrop of plateauing new supplies sold on the aftermarket are
Industry Commentary vehicle sales, aftermarket parts is one critical to the vehicle owner’s career
of the most attractive areas of growth and personal life.
Michael Doyle in the automotive industry. Around the
world, more vehicle owners are This backdrop has created a
+1 312 364 5258
investing in replacement parts that tremendous opportunity for
mdoyle@williamblair.com manufacturers and retailers in the
keep their vehicles on the road longer
and accessories that add touches of automotive aftermarket to build and
Derek Beres deploy a more robust e-commerce
personalization, performance,
+1 704 969 1761 or functionality. presence. Relative to other consumer
dberes@williamblair.com products, e-commerce penetration for
The aftermarket is particularly automotive parts is still low. But the
attractive as we enter what is likely the aftermarket landscape is evolving
Adam Filkin
later stages of the current economic rapidly, and e-commerce is the fastest-
+1 312 364 8077 expansion. During a downturn, vehicle growing channel. Global e-commerce
afilkin@williamblair.com owners are even more likely to invest sales for the automotive aftermarket
in repairs rather than purchase a new are projected to grow at a compound
car. While some accessories and other annual rate of 18.9% from 2017 to
aftermarket products are discretionary 2022, reaching $49.5 billion in 2022,
purchases, many of the parts and according to Technavio.
Accelerating E-commerce Growth for Auto Parts
The growth rate of e-commerce sales for the global automotive aftermarket is
expected to accelerate each year between 2018 and 2022, with total sales
reaching $49.5 billion by 2022.
Automotive Aftermarket E-commerce Sales Growth
19.6% 20.0%
19.0%
18.5%
17.7%
2018 2019 2020 2021 2022
Source: Technavio.In this first article of a two-part series, more price-sensitive and often their Amazon is rapidly expanding
we examine the e-commerce growth purchases are less time-sensitive;
opportunities and the challenges these factors make Amazon an
its automotive capabilities so
facing automotive manufacturers, extremely appealing option as DIY that it can compete at the
traditional retailers, and pure-play e- shoppers migrate online. same levels of service and
tailers as they navigate this rapidly Furthermore, Amazon is rapidly
convenience as the major
expanding landscape. We also look at expanding its automotive capabilities
how these trends are shaping so that it can compete at the same traditional retail chains.
dealmaking activity in the levels of service and convenience as
automotive aftermarket. the major traditional retail chains.
The ease of shopping online for
E-commerce Acceleration Puts automotive parts will only improve as
Traditional Retailers on Notice companies create cleaner, more
Today, automotive customers helpful online experiences for
increasingly prefer to shop for parts consumers. For example, e-tailer Tire
online. In addition to the lower cost Rack offers the intuitive Tire Decision
compared with traditional retail and Guide that generates personalized tire
the general convenience of buying recommendations based on vehicle
online, factors driving the growing specifications. EBay Motors, a leading
popularity of e-commerce for the option for unbranded automotive
automotive aftermarket include the parts, allows shoppers to view
ease of finding the right part, the diagrams of specific automotive parts
ability to research independent for individual vehicle models.
reviews, broader product portfolios,
and price transparency. Amazon and a Streamlined supply chains and the
host of other pure-play e-commerce ability to sell parts at a lower price
players are capitalizing on these than traditional retailers have resulted
advantages—increasing e-commerce in robust growth for several pure-play
penetration in the automotive e-tailers that focus just on automotive
aftermarket and putting pressure on parts, such as RockAuto and Tire Rack.
traditional retailers and RockAuto, the largest e-tailer of
manufacturers to adapt. automotive parts, operates a drop ship
model, shipping parts from a network
Over the last several years, Amazon of over 300 manufacturers. The
has made massive investments to privately held e-tailer is one of the
expand its automotive aftermarket industry's most exciting names to
capabilities, and these efforts led to watch, with over 15 years of double-
growth in excess of 30% for digit sales growth.
automotive parts sales in 2018,
according to S&P Capital IQ. In
addition to its customer base of more Governors That Have Historically
than 300 million users that generates Limited E-commerce Penetration
real-time customer insights, Amazon To understand the e-commerce
now has same-day automotive growth opportunities for the
aftermarket delivery in growing automotive aftermarket, it is
number of major U.S. cities; supply important to consider the factors that
contracts with some of the world’s have led to the e-commerce
largest parts manufacturers, including penetration gap between automotive
Bosch, Federal-Mogul, Dorman, and parts and other consumer categories.
Cardone; and the game-changing The “Last Mile Challenge” is
Amazon Home Services, which will particularly acute in the automotive
dispatch an installer to the customer’s aftermarket, and a combination of
desired location. product and market characteristics
make it difficult for e-commerce to
These advantages have allowed gain traction for certain types of
Amazon to capture market share from automotive products.
automotive parts chains and other
outlets that cater to do-it-yourself
(DIY) vehicle owners, including gas
stations, mass merchants, and local
hardware stores. DIY consumers areTimeliness is the biggest impediment. traditional automotive retailers. But, One of the biggest advantages
Unlike more discretionary consumer in the battle for the online customer,
products, automotive shoppers tend to retailers with a brick-and-mortar
that traditional retailers have
have an immediate need for parts. presence have the ability to advance is their national distribution
There is also a knowledge gap; their e-commerce strategy through network that allows for
shoppers are not only less confident their store network.
multiple deliveries of
about which parts to purchase, but
they also often lack the technical Traditional automotive retailers have parts to stores each day,
expertise and necessary tools to install realized that they need to deploy a including weekends.
the part themselves. The weight and complementary e-commerce strategy
bulkiness of many automotive in which online convenience enhances
aftermarket parts is another challenge, the in-store customer experience and
largely because this can result in leverages the distribution network
higher shipping costs. Because of and in-store employee expertise.
these factors, automotive parts that Relative to e-tailers, traditional
have particularly low online retailers with a national footprint have
penetration include batteries and several key advantages: in-store
heavy, complex items that are part of pickup, the comfort of speaking with a
the powertrain. knowledgeable employee, and a
responsive distribution network that
Conversely, discretionary products can quickly get the part to
have proved more conducive for e- the customer.
commerce than mission-critical parts.
Discretionary parts, such as lighting One of the biggest advantages that
and accessories, are often bought for traditional retailers have is their
personalization reasons. This makes national distribution network that
speed of delivery and installation less allows for multiple deliveries of parts
of an issue and lowers the cost of to stores each day, including
choosing the wrong part. In addition, weekends. In addition, some of the
accessories typically are physically traditional retailers have built mega-
smaller and easier to ship, and once stores in large markets. These large-
received, shoppers can install them in footprint stores serve as regional hubs
a DIY fashion. and can maintain massive amounts of
inventory and a wide array of SKUs. Of
course, the cost of maintaining these
Traditional Retailers Shift Gears in robust networks of warehouses and
Race for E-commerce Market Share stores limits traditional retailers’
The growth of pure-play e-tailers is ability to compete on price.
undoubtedly a major threat to
Pure-Play E-tail Contribution to Aftermarket Sales
E-tailers are aggressively challenging traditional retailers for share of the
automotive aftermarket. In addition to the growth of specialized sites such as
Tire Rack and RockAuto, Amazon has invested aggressively over the last few
years to add capabilities that make shopping online for automotive parts more
convenient, including sending an installer directly to the customer’s house.
United States E-Tailing Market Size ($ in billions)
Estimated 18% CAGR for Pure-Play $12.9
E-Tailers from 2017-2022 $10.8
$9.1
$7.7
$6.5
$5.5
2017 2018 2019 2020 2021 2022
Source: Technavio.The brand recognition of industry option allows the manufacturer to Traditional retailers are
stalwarts such as Advance Auto Parts, capitalize on the third-party site’s
AutoZone, and O’Reilly is another traffic and brand recognition, the
better-positioned than pure-
advantage that larger traditional margins are thinner and the play e-tailers to overcome the
retailers can leverage in their efforts manufacturer has less pricing control. “Last Mile Challenge.”
to gain e-commerce market share. In
addition, these retailers can offer a Alternatively, manufacturers can also
true omnichannel experience through go direct-to-consumer with their own
fully constructed consumer websites branded website or by listing their
with full access to parts catalogs, parts on a third-party marketplace,
including the ability to check in-store such as Amazon Marketplace or eBay
availability and place orders online. Motors. Direct-to-consumer, however,
Moreover, traditional retailers are requires shipping capabilities that
better-positioned than pure-play e- some manufacturers might not have.
tailers to overcome the “Last Mile In addition, selling directly to
Challenge.” Thanks to their consumers online requires enough
regionalized distribution networks, brand recognition to generate organic
traditional retailers can stock specific traffic to the website, or the company
parts based on local consumer needs to make significant investments
preferences and fulfill in search engine optimization (SEO) or
immediate needs. advertising. These necessary
expenditures eat into the margin
benefits that motivate manufacturers
Manufacturers Evaluate Their E- to sell direct-to-consumer in the first
commerce Roadmaps place. Finally, manufacturers can
In the current landscape, automotive pursue a combination play comprising
manufacturers have multiple options stand-alone e-commerce and third-
that they can pursue to complement party listings.
their traditional business model of
working with warehouse distributors
and brick-and-mortar retailers.
Manufacturers can list their parts on
third-party websites, such as Amazon,
RockAuto, and Tire Rack. While this
Manufacturers Consider Alternate Routes to E-commerce Success
Automotive manufacturers have several options to complement their existing business model of working with warehouse
distributors and brick-and-mortar retailers. Manufacturers can list their parts on third-party websites, go direct-to-consumer
with their own branded website, or deploy a combination play. Each option presents its own set of strengths
and weaknesses.
Third-Party Third-Party Direct via Website
E-commerce E-commerce or Marketplace
Pros • Leverage site traffic • Margins / economics
• Distribution • Opportunity to
capabilities extend brand
• Consumer confidence
Cons • Margins • Requires small parcel
• Less pricing control drop shipping
capabilities
Direct via • Patented channel
Website or conflict
Marketplace Examples • Amazon • Amazon Marketplace
Manufacturers Consumers • AutoAnything • eBay
• Auto Parts Warehouse
• RockAuto.com
• The Tire Rack
• U.S. Auto PartsMerging Traffic: E-commerce Drives Challenge" for mission-critical parts. A
Dealmaking knowledge and expertise gap will
The growth of e-commerce in the challenge pure-play e-tailers because
automotive aftermarket is driving many customers are still more
interest from strategic acquirers and comfortable speaking to a person in
financial sponsors alike. Strategic the store about automotive parts.
buyers have shown a healthy appetite
for e-commerce brands that reach Despite these headwinds, e-commerce
consumers directly and capture higher is poised for strong growth in the
margins while avoiding channel automotive aftermarket over the next
conflict. Recent acquisitions where the several decades. In our next article, we
target’s online presence was an will examine how the emergence of
important value driver include Wheel the install-it-for-me (IIFM) model is
Pros’ acquisition of ReadyLIFT, a emerging as a hybrid of the
manufacturer and distributor of conventional choices of either DIY or
suspension leveling products and lift do-it-for-me (DIFM). To learn more
kits for trucks, Jeeps, and sport utility about these and other trends shaping
vehicles (SUVs); Truck Hero’s the dealmaking environment in the
acquisition of Superlift Suspension automotive aftermarket, please do not
Systems, a manufacturer, distributor, hesitate to contact us.
and e-commerce retailer of
suspension leveling products and lift
kits for trucks, Jeeps, and SUVs; and
Drake Automotive Group’s acquisition
of Fender Gripper, a manufacturer of
protective fender covers, trunk mats,
and carpet underlayments.
Given that many financial sponsors
are modeling for a recession in their
holding periods for new investments,
the automotive aftermarket’s
defensive characteristics make the
sector particularly attractive. Sponsor
interest is particularly high for early
movers and category creators with
significant barriers to entry. Recent
sponsor acquisitions of automotive
aftermarket companies with strong e-
commerce capabilities include FSN
Capital’s acquisition of Rameder
Group, the leading European
distributor of towbars, bike carriers, “William Blair” is a trade name for William Blair &
Company, L.L.C., William Blair Investment
and roof racks; TSG Consumer Management, LLC and William Blair International, Ltd.
Partners’ acquisition of Power Stop, a William Blair & Company, L.L.C. and William Blair
Investment Management, LLC are each a Delaware
supplier of performance-upgrade company and regulated by the Securities and Exchange
brake products; and Gridiron Capital’s Commission. William Blair & Company, L.L.C. is also
regulated by The Financial Industry Regulatory
acquisition of Rough Country, a Authority and other principal exchanges. William Blair
manufacturer and marketer of International, Ltd is authorized and regulated by the
suspension products and off-road Financial Conduct Authority (“FCA”) in the United
Kingdom. William Blair only offers products and
accessories for the truck and services where it is permitted to do so. Some of these
Jeep markets. products and services are only offered to persons or
institutions situated in the United States and are not
offered to persons or institutions outside the United
It remains to be seen how e-commerce States. This material has been approved for
penetration will progress for the distribution in the United Kingdom by William Blair
International, Ltd. Regulated by the Financial Conduct
automotive aftermarket relative to Authority (FCA), and is directed only at, and is only
other consumer products. For many made available to, persons falling within COB 3.5 and
aftermarket product categories, even 3.6 of the FCA Handbook (being “Eligible
Counterparties” and Professional Clients). This
the best online shopping experiences Document is not to be distributed or passed on at any
will struggle to overcome fundamental “Retail Clients.” No persons other than persons to
whom this document is directed should rely on it or its
challenges, including time and speed contents or use it as the basis to make an
requirements and the "Last Mile investment decision.You can also read
