Auto parts sites fill up with content to fuel growing sales amid downturn in new car buying
By Mary Wagner
When Tom West’s Volkswagen dealer quoted him a price of $600 to install a new towing hitch on his car, West decided to look elsewhere: online. He bought the part he needed there for $149 and took it to a local auto repair shop that installed it for $50.
West happens to be the CEO of online and catalog auto parts retailer Whitney Automotive Group, but plenty of consumers today are doing the same thing West did as economic times get tough: they find new ways to save.
Consumers have put the brakes on new car purchases and many are looking beyond dealer service departments for economical repair options for the cars they already own. This has sellers in the estimated $40 billion do-it-yourself auto parts market readying for what they see as a potential surge, one of the few bright prospects in economic conditions currently dismal for retail.
Growing demand
First-quarter numbers at one of the largest parts retailers, AutoZone Inc., underscore the opportunity, as the chain’s total sales increased 8.1% during its fiscal quarter ended Feb. 14. But the store-based chains count Internet sales as only a fraction of their business, with AutoZone, for example, recording web sales estimated by Internet Retailer at $61.1 million on total sales of $6.5 billion in fiscal 2008.
Sales at web-only retailers like Whitney Automotive Group, with annual sales estimated by Internet Retailer at $122.8 million, and U.S. Auto Parts Network Inc., with sales at a reported $153.4 million, already exceed those of large store-based players, and they see new opportunity online.
Where? In serving targeted content as well as parts. Affording easy access to information—on how to repair a car or enhance its performance—and broad access to merchandise hard to find in stores are two areas in which the web excels, and it’s there that online sellers see their chance to make the downturn into an uptick, and maybe more.
“If people increase their desire to fix their own cars, it doesn’t mean they’ve increased their ability to do it,” says Shane Evangelist, CEO of U.S. Auto Parts Network Inc. “But if the ability as well as the desire increases, that plays very well into selling auto parts. And if you can become the trusted advisor to the people trying to fix their cars, we think that’s positive for us.”
The challenge for U.S. Auto Parts and others selling online will be to figure out how to best leverage the web’s unique properties to grab their share of the pie.
Consumer demand for auto parts is driven by the age and mileage of vehicles in use and it generally increases when fewer new cars are sold and older cars are kept on the road longer, according to Linnea Kirgan, industry specialist at First Research/Hoover’s Inc.
Vehicle miles traveled—the aggregate miles driven among all vehicles in operation—dropped 3.6% in 2008 due to last summer’s increase in gas prices, according to the U.S. Department of Transportation. That’s been offset by the fact that the average age of cars on the road is creeping up as new car sales weaken, according to a recent study from R. L. Polk & Co., which says the age of the average vehicle on the road in 2008 was 8.8 years, up 10% from 8.01 in 1999, and the upward trend should crest at an average 9.37 years in 2012.
Keeping cars humming
It takes replacements parts to keep cars humming post-warranty. That’s good news for auto parts retailers, but they still face a number of factors that limit growth in the do-it-yourself segment of the market, even during a time when consumers are looking particularly hard to save money on services such as car repair.
“30 years ago, anyone could change their own spark plugs. In some cases now, it might take you 45 minutes of taking parts off to get at the spark plugs. Generally speaking, it’s more difficult to work on vehicles,” says Jim Lang, president of Virginia-based Lang Marketing Resources.
The computerized electronics powering many automotive components, which may require scanning tools to diagnose problems, may also discourage would-be do-it-yourselfers, as does the difficulty of obtaining parts for the increasing number of foreign cars on the road, according to Lang.
“These factors have tended to grind down the percentage of work done by DIYers,” he says. “Hard times or recessions don’t necessarily increase DIY work. It didn’t show up in the last couple of recessions of the early ‘80s and ‘90s.”
How-to content
But that was before the Internet was as big a part of how consumers shop as it is now, and online sellers of auto parts have been ratcheting up site content to press their advantage. AutoZone, for example, has gradually updated its consumer-facing site, AutoZone.com, most recently expanding the number of printable, vehicle-specific repair guides and job diagrams available free to registered users.
This year it’s done a major upgrade to its AllDatadiy.com site, improving navigation and expanding content on the sister site to AllData.com, which targets service professionals. AllDatadiy.com allows consumers to subscribe for access to vehicle-specific technical repair data at rates starting at $26.95 a year.
At U.S. Auto Parts Network Inc., Evangelist notes two consumer trends affecting the company’s business. A growing do-it-yourself mindset among consumers augurs well for the sales of hard parts like brakes, he says, though a fall-off in new car sales is likely to depress the sales of cosmetic or performance-related accessories most often purchased by car owners within six months after they buy a new vehicle. Overall, in the fourth quarter sales for U.S. Auto Parts dropped by 9.4% to $33.8 million from $37.3 million in the fourth quarter of 2007.
“It’s a tough time to sell performance and accessory products because discretionary spending is down and new car buying is down,” Evangelist concedes. “Where the opportunity for us is that our engine parts and hard parts business is starting to take off.”
To feed that growth, U.S. Auto Parts is looking to drive down supplier costs and consumer prices by renegotiating supplier contracts and by sourcing car body parts and, more recently, engine parts offshore. The company also has opened its own distribution center on the east coast, cutting distributor costs by bringing products in directly and shipping orders from its own warehouse, Evangelist says.
But perhaps its most ambitious bid to capitalize on what it sees as rising interest in DIY is its plans for AutoMD.com, a web site that provides car diagnosis and repair content and community features that it acquired for an undisclosed sum last October. The company is overhauling AutoMD.com, Evangelist says, and some of the how-to content will likely be integrated into its e-commerce sites, AutoPartsWarehouse.com and PartsTrain.com, in the third quarter.
Once fully developed, the web site will enable a vehicle owner to input information about the symptoms of a car’s ailment and ultimately arrive at a diagnosis and prescription for repair. Users will be presented with local repair shop options for service if they want a professional to perform the service; Evangelist says the company is qualifying local shops that it would be willing to recommend.
Site visitors also will be provided with counsel on services, parts and cost, and information through how-to guides aimed at building consumer confidence in their knowledge and ability to perform the service themselves.
“We need to help customers find solutions for their cars, whether that means they buy it online and install it themselves, or if that means that we simply direct them to a local shop to get their car fixed. We believe that once they understand the true difficulty and time it takes to take it to a shop versus doing it themselves, they will probably do it themselves,” Evangelist says.
The car doctor
AutoMD.com will likely launch around the fourth quarter as a separate stand-alone content destination, with links back to the company’s e-commerce sites for those who want to buy parts. Evangelist likens the planned site to “an Edmunds.com for repair and maintenance,” a reference to Edmunds, a leading independent source on used automobile values.
Whitney Automotive Group is seeing a shift in what its customers are buying. “Historically they were buying accessories, now they’re buying items designed to keep the car running,” West says. “We feel this economic pressure is driving more people who hadn’t considered automotive repair in the past into doing it themselves.”
The company is going after that opportunity with a strategy that leverages its huge assortment beyond its main site by targeting specific audience segments with a number of new sites that, on the front end, stand apart from JCWhitney.com. “We’re creating a specific assortment for a number of unique micro-segments that we think deserve their own experience,” West says.
For example, flagship site JCWhitney.com is heavy on educational content and customer service, supported by a 250-agent call center whose trained reps provide tips by phone and chat on getting the right tools and finding the right repair instructions. With four microsites launched to date, West says the company is planning several more.
But to target the experienced DIYer who knows exactly what he wants to buy, and is looking for the lowest price possible, it’s launched CarParts.com, with a smaller assortment. The site strips out service and support content—for instance, offering no phone or chat customer service and charging a 15% re-stocking fee, unlike Whitney’s main e-commerce site—and it passes the associated cost savings on to consumers.
Price competition
CarParts.com’s pricing aims for a price point 10% to 20% lower than the average among online discount sellers of auto parts, which also makes its prices lower than those at JCWhitney.com. For example, a bug deflector retailing for about $40 elsewhere on retail sites goes for $35 on JCWhitney.com and $21.99 on CarParts.com, according to vice president of e-commerce Geoffrey Robertson.
Whitney also is expanding its business model to support other retailers looking for a bigger piece of the parts business. Since last November, it’s powered the automotive tab on Sears.com, handling the category’s entire e-commerce operation, including merchandising, sourcing, customer service and fulfillment and expanding the automotive assortment at Sears.com by hundreds of thousands of SKUs, West says.
“Since we launched Sears, more companies have come to us to say they have automotive traffic and want to do more in the aftermarket. It’s creating a whole new growth channel for us,” West adds.
While store sales still dwarf online sales of aftermarket auto parts and accessories, the category’s online sellers are betting that a changing economic climate will spark sales, and they’re putting themselves in position for that. How fast sales will accelerate and how well any of those efforts will pay off has yet to be determined. But one thing’s clear: while the current market conditions have much of retail sputtering out of gas, they’re fueling opportunity in this category for the unique assets the online channel brings to sales and merchandising.
“This is one of the most exciting times—almost a perfect storm for the aftermarket online,” West says.
mary@verticalwebmedia.com
