Online channels to account for 1 out of every 10 parts sold in the automotive aftermarket by 2030, finds Frost & Sullivan
eRetailing is on course to disrupt the global automotive aftermarket. New research by Frost & Sullivan, 2020 Strategic Analysis of eRetailing in the Global Automotive Aftermarket, estimates that by 2030, online channels will account for 1 out of every 10 parts sold in the automotive aftermarket. Steady growth is expected as eRetailing revenue will likely increase at an estimated CAGR of 13.3% from 2019 to 2026. Along with growth in eCommerce, business models, competitive positioning and customer acquisition strategies in the automotive aftermarket will transform dramatically.
China Embraces Online Sales Platforms
Spurred by the inherent advantage of having the largest addressable market, North America currently accounts for the largest share of automotive aftermarket eRetailing revenue. Meanwhile, the online channel is set to emerge as a significant distribution platform in Western Europe before expanding to the rest of Europe.
Europe has already seen the launch of several business model pilots and has proven to be fertile ground for pure-play eRetailers. Over time, online aftermarket retail in the U.S. and Western Europe will evolve to add newer customers, particularly installers and do-it-for-me (DIFM) buyers.
Emerging markets will continue to drive the momentum as growth in more mature markets tapers off. Here, digitization-led business models like eRetailing will get a head start amidst a landscape characterized by high degrees of fragmentation and largely unstructured sales channels.
By 2026, China will account for a staggering 1 out of 5 parts and accessories sold online globally. This performance will be spurred by the strength of its marketplaces and the ability to reach the DIFM segment through effective online-to-offline (O2O) solutions. While China will dominate in terms of overall revenues, India, with a projected CAGR of 22.8% over 2019-2026, will record the highest growth rates in aftermarket online sales revenues.
Mass and Pure-Play eRetailers Take the Lead
Mass eRetailers and pure-play eRetailers will lead the digital transition. Mass eRetailers, such as Amazon, continue to be the main purchasing channel for buyers in North America and a few other markets. In sheer gross merchandise value (GMV) of automotive goods sold via digital platforms, Amazon is ahead of global online sellers that target the aftermarket. Europe, on the other hand, has the largest number of pure-play eRetailers with consolidation, especially in the tire segment. As volumes grow and traditional retailers increase their online presence, competition between pure players is expected to intensify.
Amazon’s dominance is likely to persist in North America, although companies such as Alibaba, JD.com, Mercado Libre and Oscaro are likely to mount a challenge in European and emerging markets. In the future, automotive manufacturers are also expected to venture into direct selling, while OES participants such as dealers are likely to partner with other channel participants.
The Journey toward Profitability
Electronic minimum retail price (eMRP), innovative O2O business models and digital voice assistant capabilities will impact online aftermarket retailing, setting it on a path of sustainability and profitability.
Most online sellers compete on price, with spiraling competition underpinning deep discounting practices. This approach, however, is squeezing overall margins and eroding brand value. Accordingly, manufacturers will need to agree on eMRPs—the minimum retail price that can be offered in the online sales channel—to mitigate channel conflicts and protect the interests of their channel partners.
The welding together of physical and the virtual in a seamless online-to-offline continuum will give rise to innovative business models and catalyze the growth of online parts sales. Traditional retailers will leverage O2O to boost digital sales and complement their physical presence, even as pure players will use O2O to do the reverse—build on their online presence through a physical network.
Digital voice assistants like Amazon’s Alexa and Apple’s Siri have the potential to be game-changers. Mass eRetailers like Amazon and other service providers will leverage these voice assistants to enhance their retail capabilities through in-vehicle ordering. For example, customers could book appointments for an engine oil change or vehicle servicing through Alexa.
Leveraging Innovative Digital Channels and Business Models
Looking into the future, car-as-a-marketplace and online service marketplaces will turbo-charge aftermarket eRetail. The car-as-a-marketplace concept taps into in-car connected capabilities, enabling products and services to be ordered online. Here, aftermarket sellers have the opportunity to collaborate with various in-car platforms to position their products and services for in-car retailing. The integration of Alexa with in-car infotainment systems already places Amazon at an advantage in terms of driving online sales of its aftermarket-related products and services.
Online service marketplaces—on-demand digital platforms that connect all key stakeholders in the maintenance ecosystem, including independent workshops, dealers, customers and suppliers—are emerging as a popular channel to book vehicle services online. These marketplaces list service shops, generate quotes, book appointments and, in many cases, enable online payments.
Here, aftermarket sellers could push the sales of specific brands or provide parts to select workshops to fulfill customer service requirements. OE suppliers have already partnered with these online platforms to boost replacement parts sales. By 2026, vehicle services totaling $2 billion are expected to be booked online.
Looking Ahead
Cataloging inefficiencies, difficulties posed by returns management and slow delivery times threaten to dampen market prospects. Increasing vehicle complexity and the DIFM nature of part replacements have shrunk the customer pool of DIYers who have, so far, been the principal buyers of online parts.
Acknowledging these challenges, eRetailers have worked to mitigate inaccuracies in cataloging to minimize the number of return orders. To ensure faster delivery times, eRetailers have entered into partnerships or have invested in supply chain solutions.
The emergence of new mobility solutions like ride-hailing, leasing and subscription-based models of vehicle ownership is shining the spotlight on fleet customers. In the future, B2B/B2B2C eCommerce solutions could target demand from fleet customers.
Online service marketplaces will have a big role to play in furthering market prospects. Automotive aftermarket eRetailers could integrate vertically with service marketplaces while developing complementary channels for online replacement parts sales and services.
For more information on 2020 Strategic Analysis of eRetailing in the Global Automotive Aftermarket, please contact Anuj Monga, Research Manager – Aftermarket, Automotive and Transportation at anujm@frost.com
