The Future of e-Retailing in Automotive Aftermarket


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e-Retailing for automotive parts and services is expected to experience double-digit growth in North America and Europe through 2020. The market will not only witness higher online sales, but will also see new forms of aftersales fulfillment, such as mobile service, remote repair, social buying, and so on. These developments may present new revenue opportunities for various aftermarket stakeholders, but there are significant challenges as well.

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The Future of e-Retailing in Automotive Aftermarket

  1. 1. Future of Parts e-Retailing for Automotive Parts and Service in North America and Europe Online/Mobile Expected to Be A $40 Billion Parts Sales Channel by 2020 Kumar Saha, Industry Principal Automotive & Transportation June 19, 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.
  2. 2. 2 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 Follow me on:
  3. 3. 3 Focus Points Transformational Shifts in Automotive Parts Retailing Market Size, Country and Key Category Analysis for Online Parts Sales (U.S., Europe) Key Competitors – Who, Where, What, How (U.S., Europe) Changing/Emerging Business Models and How They Will Shape Future of Parts Sales Key Takeaways and Impact Analysis
  4. 4. 4 How is Digitization and e-Retailing Changing the Automotive Business – Some Key Facts 70-80 percent of customers in North America and Western Europe research online before making a vehicle or parts purchase By 2020, three out of four leads for new vehicle sales will be generated through an online or mobile platform By 2020, more than 20 percent of all replacement tires in Western Europe will be sold online Online and mobile channels will account for nearly $40 billion in sales for automotive parts in North America and Europe combined by 2020 e-Retailing of automotive parts is expected to grow by 20-30 percent year-over-year in certain European countries till 2020
  5. 5. 5 Poll Question 1 • Which of these transformational trends, according to you, will have the most important impact on online parts sales by 2020 ? • Big Data • Bricks and Clicks • Last-Mile Logistics • Others
  6. 6. 6 Top Transformational Shifts Expected to Shape the Future of Parts Retailing (2013 to 2020) Degree of Certainty (Mass implementation by 2020) DegreeofImpact (Highlongtermimpact) Low High Low High New Business Models: Social Commerce Connected Retailing: Gamification, LBS, in-vehicle Future Stores: Express Service Stores, Mobile Engaging Retailing: Peer reviews, product experts Omnichannel Retailing ‘Bricks and Clicks’ Models Last-mile retailing – Click ‘n’ collect; one- hour delivery Big Data Retailing: From selling products to selling solutions 1 23 4 5 6 7
  7. 7. 7 Transformational Shift #1– Future Stores Automotive OEMS such as Audi and BMW taking lead in “futurizing” stores, with about 100 digital stores expected to be opened by 2020. Parts retailers and service shops should focus on express format that facilitate on-the-fly customers, instant mobile appointments, as well as facilitate cross-shopping (common household items, toys, accessories) and more attractive non-repair formats that attract more women (eg. Pep Boys in U.S.) Small Express formats Ephemeral Shorter leases / stores within stores Urban Centrally located in cities Big Box Small Box Retailer store size to be 15% to 20% less than the current average store size by 2020. Lease and rent discounts of up to 40% expected by 2020 as retailers seek to make stores temporary and rotate quickly through different spaces. Future stores will be accessible to all within walkable distance—2 to 3 miles from city centres and urban hubs. Future Store Format (2011-2020)
  8. 8. 8 Transformational Shift #2 – Omnichannel Retailing Department Stores Supermarkets Hypermarkets Online Mobile Payments Mobile Apps Bricks (pre-2000) Advent of Clicks (post-2000) Interactive Stores (Motion sensor displays) Virtual Stores (Ambient mobile retail) Virtual Hyper-markets (Amazon) The Future—Bricks and Clicks (2015 and Beyond) Parts purchasing and service fulfilment will likely become more hybrid in the future. Customers will purchase parts through multiple platforms – both service provider owned (traditional store, pop-up store, mobile store) and third- party owned (eg. Amazon, eBay). Depending on the nature of repair work, the service could be provided remotely (i.e. software update) or physically (at service shop, through mobile truck etc.)
  9. 9. 9 Transformational Shift #3 – Connected Retailing Near-field Communication Augmented Reality Scanners / Sensors (RFID) Motion Sensing Gamification QR Coding Technology is converting buyers, including into multi-channel shoppers, partially shifting the point-of-sale to online channels such as mobiles and online web stores. Purchasing service on-the-go, remote participatory service, customer loyalty through app gamification, and augmented-reality repair media will become more common.
  10. 10. 10 Transformational Shift #4 – New Business Models of Retailing Advent of new retail formats. E.g.: Facebook stores, pop-up stores, mobile apps for aftermarket services Development of new approaches to customer loyalty. E.g.: through the influence of social media, loyalty reward programs for car servicing will be awarded to users based on ‘recommendations on Facebook’ rather than number of physical visits Convergence of mobile connectivity and telematics will enable In-vehicle purchases, location-based promotions Degree of ‘Bricks’ Degreeof‘Clicks’ 0 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 Low High Low High Online Hyper- Markets Virtual Stores Pop-up stores Social Commerce Click ‘n’ Collect Subscription Commerce Mobile Commerce Crowdbuying f Note: The retailing formats have been plotted based on the degree of bricks and clicks involved in making the sale. We have used both quantitative and qualitative reasoning to measure the degree of impact. In-Vehicle Purchase; LBS
  11. 11. 11 Transformational Shift #5 – Engaging Retailing Geospatial marketing Ubiquitous search Price Transparency New Channels Peer-to-peer reviews Targeted advertising Long-tail offerings Raised Awareness In-store digital staff Loyalty programs Recognition of a need Information Search Evaluation of Alternatives Purchase Post-purchase evaluation 1 2 3 4 5 Technology at each stage of the purchasing cycle keeps the customer engaged with relevant information, evaluation, assistance and reviews on the product Ways of engaging consumer with technology Information, interaction, and analytics will be used to engage the customer at all stages of the purchasing cycle E.g.: dealers under the same brand will recognise (returning) customers, with ‘product geniuses’ tailoring their assistance to personal requirements and previous shopping patterns.
  12. 12. 12 Transformational Shift #6 – Last-Mile Logistics Central distribution center to customer (packing and last mile delivery outsourced) Regional distribution center to Shop (In-house) Bricks (pre-2000) Advent of Clicks (post-2000) Bricks and Clicks (2012 and Beyond) Special Delivery Options E.g. Wal-Mart U.S. E.g. Amazon U.S. Same-Day Night Time Robotic Warehouses Stores as DCs Collection Points Each distribution centre supports 90 to 100 stores in a 200-mile radius. Closest central distribution centre identifies and sorts product which then packed and delivered by UPS Advent of ‘Click and Collect’ aftermarket services: development of complete online services for the aftermarket – customers book a service online with technician inspecting the vehicle at a drop-off point or at home; spare parts online order with video tutorials or fitting by third party workshops.
  13. 13. 13 2012 2020 Transformational Shift #7 – Big Data Retailing 1.2 Zettabyte 100.2 Zettabyte Query and reporting Data Mining & Visualization Predictive Modeling Optimization & Simulation Video / Voice Analytics Social Sentiment Analysis +40% / Year Types of Data Analytics Capabilities Transactions RFID Scans, Sensors Vehicle OBDII CRMs POS Systems Web Blogs Social Media Location-Based Audio / Video Images Structured Data Unstructured Data Big Data Big Data is growing at 40% annually Big Data in Retail, Global, 2012 and 2020Big Data, Sources & Types of Services, 2014 Price Differential Vouchers Mass Customization On-demand marketing Geo-fencing customers Store Inventory Tracking Engaged employees Big Data Services in Retail Supply chain optimization Custom merchandising Prioritizing high-value customers Analytical tools to collect and segment customer data and to create inter-linkages between information sources. A combination of big data and location-based capabilities will revolutionize the aftermarket with personalised offers on diverse services, such as insurance, maintenance, spare parts, entertainment, fuel. Sales and after sales services will become more pro-active than re-active through predictive selling based on amongst others location, destination, type of vehicle, etc
  14. 14. 14 Impact on Aftermarket: The 3600 Integrated Customer Journey Search Evaluate Purchase Advocate Need Product demand from potential parts/service buyer Brainstorming for appropriate parts on budget, specifications after validating online reviews Visiting the Web store Registration and log-in Searching for the right part/service Online comparison, Selection and configuration Request sent to service shop/retailerConfirmation of available service and parts offering Appointment booked for on-site or mobile service Payment instructions - online/credit card/net banking/Bitcoin Confirmation of order acceptance Joins social commerce / online community for loyalty points and updates Repeat visits, sell adjacent products, predict services through telematics Social Commerce Big Data Online Store Analytics
  15. 15. 15 Impact on Aftermarket: Fulfillment Will Emerge as Key Differentiator Shipping Strategies Same-Day Delivery Source: Frost & Sullivan analysis. Locker Boxes Free Shipping Crowdsourced Delivery Customer Options Click ‘n’ Post Click ‘n’ Collect Click ‘n’ Fit Strategic Value 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
  16. 16. 16 Impact on Aftermarket: Future Smart Distribution and Service Network Service Brand A Service Brand B Service Brand C Parts Warehouse Parts Warehouse Parts Warehouse Linear distribution of parts/service network with limited customer convenience Suburban Areas/City Perimeter Parts/Service Outlets Parts/Service Outlets Parts/Service Outlets Customer Service Brand A Service Brand B Service Brand C Parts Warehouse Parts Warehouse Parts Warehouse Dynamic distribution of parts/service network with unlimited customer convenience City Center/ Rural Areas Parts/Service Outlets Customer Mobile/ Express Service Mobile/ Express Service Vehicle Pick-up/ Dropoff Mobile/ Express Service Vehicle Pick-up/ Dropoff Vehicle Pick-up/ Dropoff City Perimeter Suburban Areas Parts/Service Outlets Parts/Service Outlets Multi-brand mega-service centre Multi-brand mega-service centre Future (2020)Current
  17. 17. 17 Impact on Aftermarket: Shifting from Service Model to Solutions Model Predictive analytics to determine servicing package New Business Models Personal Connectivity Telematics Big Data Mega Trends Customer rewarded on digital engagement create feedback loop Parking/fuel finder app, GPS services, carsharing Other products (household, toys) Service Model Parts sales Regulatory Inspection Installation Loyalty discounts Online sales, mobile fitment Promotions Multiple customer access points Solutions Model Customizable, Subscription Service Connected Loyalty Mobility Enabler Lifestyle Partner Omnichannel Experience • Silo approach • Service as end point • Customer approach • Service as starting point
  18. 18. 18 Poll Question 2 • Which, according to you, would be the most prevalent fulfilment trend in online parts sales? • Online Research with In-Store Purchase • Online Purchase with In-Store Pick-Up • Online Purchase with In-Store Service • Online Purchase with Direct Delivery
  19. 19. 19 e-Retailing Regional Comparison: North America & Europe • 4% online penetration • Low online penetration for tires • Weaker presence of tire e-retailers • Stronger presence of marketplaces, Amazon • Consolidated competition • Key competitors: Amazon, AutoZone, US Auto Parts Network • 3% online penetration • High online penetration for tires • Stronger presence of tire e-retailers • Weaker presence of marketplaces, Amazon • Fragmented competition; many regional competitors • Key competitors: Delticom, Oscaro, Allopneus Source: Frost & Sullivan
  20. 20. 20 Online Parts vs. Total Aftermarket Parts Revenue (Europe) ~€141 B ~ € 5 B ~3 % of total aftermarket ~11% of total aftermarket 2013 2020 ~ € 166 B ~ € 18 B 4X UK 2012 Parts e-Retail Share: 4.9% France 2013 Parts e- Retail Share: 5.8% Germany 2013 Parts e- Retail Share: 5.7% Automotive Parts and Service e-Retailing Market: Online Parts vs. Total Aftermarket, Europe, 2013 and 2020 Note:. All figures are rounded. The base year is 2013. Source: Frost & Sullivan Total Aftermarket Online Italy 2012 Parts e- Retail Share: ~2%
  21. 21. 21 e-Retailing Penetration/Growth by Key Regions (Europe) Automotive Parts and Service e-Retailing Market: Parts e-Retailing Penetration and Growth Rates, Europe, 2013-2020 France, Germany and UK expected to have double digit penetration of online parts sales by 2020. All these countries will have the lowest growth rates because of relative maturity of online market France likely to lead in penetration because of extremely fragmented nature of market and growth of regional tire e-Retailing Spain’s proximity to France and expansion efforts by French e-Retailers will ensure higher penetration and growth of online parts in the country. Italy also expected to experience high growth because of relative nascence of market Other European regions will be buoyed by the growth potential of Eastern European countries such as Poland, Hungary and Slovakia Russian market expected to experience the highest growth because of overall growth in car parc , fragmented aftermarket and high incidence of DIY consumers, who will prefer the online channel for pricing and convenience NOTE: Bubble size represents 2013 parts eRetail revenue. Base year is 2013. Source: Frost & Sullivan Rest of Europe
  22. 22. 22 Automotive e-Retailing Product Category Analysis (Europe) Source: Frost & Sullivan Automotive Parts and Service e-Retailing Market: Product Category Revenue Analysis, Europe, 2013 and 2020 NOTE: Others include accessories (mirrors, floor mats, seat covers, interior door handles etc.), powertrain parts such as engines, transmissions, and other related parts. Also included are HVAC, infotainment, tools and wipers. Parts Categories 2013 Revenue 2013 Share 2020 Revenue 2020 Share Tires € 2.34 44% € 8.43 46% Body Parts € 0.21 4% € 0.92 5% Brake Parts € 0.29 5% € 1.28 7% Batteries € 0.10 2% € 0.55 3% Steering & Suspensions € 0.05 1% € 0.18 1% Filters € 0.11 2% € 0.37 2% Starters &Alternators € 0.04 1% € 0.18 1% Lighting € 0.08 1% € 0.18 1% Exhaust Components € 0.03 1% € 0.18 1% Injection Parts € 0.02 0% € 0.07 0% Others € 2.03 38% € 6.05 33%
  23. 23. 23 e-Retailing Competitive Analysis (Europe) Automotive Parts and Service e-Retailing Market: Market Share Analysis by Participant Type, Europe, 2013 and 2020 Parameters Tire eRetailers Auto eRetailers Mass eRetailers Traditional OES Dealers Suppliers Parts e-Retail Activity Brand Equity Geographic Presence Innovation to market Source: Frost & Sullivan Automotive Parts and Service e-Retailing Market: Key Parameter analysis by Participant Type, Europe, 2013 HighLow 2013 2020
  24. 24. 24 Emerging Bricks ‘n’ Clicks Convergence Models in Parts and Service Collaborative Bricks & Clicks – Blackcircles Mobile Service – Kwik fit, Allopneus Social Commerce – Norauto OES to Marketplace – BMW, Nissan Service Aggregation/ Review Sites – Who Can Fix My Car, Big Lion Third-party service networks – Tire e-Retailers Customized Fulfilment – Free delivery, One-day delivery, Click n’ Collect Automotive Parts and Service e-Retailing Market: Convergence Models in Parts & Service, Europe, 2013 Source: Frost & Sullivan
  25. 25. 25 Key Takeaways on Future of Aftermarket Parts and Service (Europe) Service and parts purchase experience will transform from a distinctly bi-channel one to an omnichannel one Traditional aftermarket retailers will step up game and account for nearly 25 percent of all online revenue by 2020 Russia will have the highest growth (30 percent) in online parts sales in Europe while France will have the highest penetration rate (14 percent) Online tire sales expected to account for more than 20 percent of overall European tire revenue by 2020 11 percent of all automotive parts in Europe will be sold online by 2020 Source: Frost & Sullivan
  26. 26. 26 Online Parts vs. Total Aftermarket Parts Revenue (North America) $136.3 B $5.1 B $167.3 B $16.6 B Automotive Parts and Service e-Retailing Market: Online Parts vs. Total Aftermarket, North America, 2013, 2016 and 2020 2013 2020 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 1.5 X 3X Note: All figures are rounded. The base year is 2013. Source: Frost & Sullivan
  27. 27. 27 Percent Revenue Forecast by Competitor Type Independent automotive e-Tailers will lose market share as other participants ramp up their e-Retailing efforts Automotive Parts and Service e-Retailing Market: Revenue Forecast by Business Type, North America, 2009–2020 Note: All figures are rounded. The base year is 2012. Source: Frost & Sullivan
  28. 28. 28 Online Sales Penetration % (2013) – Key Traditional Participants Note: All figures are rounded. The base year is 2013. Source: Frost & Sullivan Automotive Parts and Service e-Retailing Market: Online Sales Penetration % for Key Traditional Participants, North America, 2013 NOTE: Bubble size represents total aftermarket revenue of companies.
  29. 29. 29 Key Takeaways on Future of Aftermarket Parts and Service (North America) Service and parts purchase experience will transform from a distinctly bi-channel one to an omnichannel one Traditional aftermarket retailers and mass e-retailers will account for half of all revenues by 2020 Direct retailing, as opposed to goods sold on marketplaces, will account for 25 percent of total value of parts sold in the U.S. Online tire sales expected to expected to experience highest growth (30 percent) by 2020 About 10 percent of all automotive parts in the U.S. will be sold online by 2020 Source: Frost & Sullivan
  30. 30. 30 Poll Question 3 • At what year-over-year rate do you think e-retailing for automotive parts and accessories will grow in the next five years? • 0-10% • 10-20% • 20-30% • Other
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  35. 35. 35 For Additional Information Chiara Carella Head of Corporate Communications Europe, Israel and Africa +44 (0) 207 343 8314 Kumar Saha Industry Principal Automotive & Transportation 416 495 2688 Anuj Monga Senior Research Analyst Automotive & Transportation +91 96 54 37 30 69 Stephen Spivey Global Program Manager, Aftermarket Automotive & Transportation 210 247 3845