North American Automotive Aftermarket Workshop: Opportunities and Trends in the North American Aftermarket

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Frost & Sullivan presents the current state of the automotive aftermarket industry, along with developing trends.

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North American Automotive Aftermarket Workshop: Opportunities and Trends in the North American Aftermarket

  1. 1. North American Automotive Aftermarket Workshop Opportunities and Trends in the North American Aftermarket Presented by Mary-Beth Kellenberger, Global Aftermarket Program Manager North America Automotive & Transportation
  2. 2. Workshop Introduction and Objectives The North American Aftermarket represents a profitable opportunity for sustainable revenues. Frost & Sullivan has a long history of covering the automotive aftermarket. Mary-Beth Kellenberger, Global Aftermarket Program Manager, North America will discuss the current state of the market and the developing trends. The recent developments in the North American automotive industry have created many challenges, but most importantly, have also generated opportunities for growth. Frost & Sullivan will outline the top opportunities for your company in this market. <ul><li>Who Should Attend </li></ul><ul><li>We recommend that all key personnel involved with aftermarket, market research, product and strategic planning attend. Key people from the following departments are recommended: </li></ul><ul><ul><li>CEO Aftermarket </li></ul></ul><ul><ul><li>After Sales and Service </li></ul></ul><ul><ul><li>Advanced Product Planning </li></ul></ul><ul><ul><li>Marketing and Branding including Consumer Research Teams </li></ul></ul><ul><ul><li>Corporate Strategy Division and International Sales </li></ul></ul>
  3. 3. Proposed Agenda The North American Automotive Aftermarket Understanding the Products that Drive the industry. A Look a the Top 10 Products by Revenues What Motivates the Sale from the Owners Perspective The Aftermarket is NOT Immune to the Effects of an Economic Downturn Understanding How Changes in the Economy Alter the Aftermarket Understanding Distribution and the Competitive Elements at Play CEO’s perspective of the Automotive Aftermarket External Forces at Play: A Review of Political and Regulatory Influences Distribution and Retailing Best Practices Key Take-Aways for Building your Growth Strategy North American Market Metrics: Vehicles in Operation, Vehicle Sales, Domestic vs. Import Nameplates, Cash for Clunkers
  4. 4. Examples of Research That Will Be Presented
  5. 5. The Aftermarket Today (North America), 2008 2007 Source: Frost & Sullivan <ul><li>What Are Aftermarket Products? </li></ul><ul><ul><li>Those installed after the initial sale of the vehicle from the dealer </li></ul></ul><ul><ul><li>and non warranty replacement parts. </li></ul></ul><ul><li>Major Factors Influencing Aftermarket </li></ul><ul><li>Demand: </li></ul><ul><ul><li>Vehicles in Operation (VIO) </li></ul></ul><ul><ul><li>Vehicle use (miles traveled) </li></ul></ul><ul><ul><li>Part life -expectancy </li></ul></ul>
  6. 6. Aftermarket Revenue Distribution by Product Category, 2009 Wheels expected to drop marginally, but category expected to remain strong. With the integration of advance sensors, electronics, and rising material costs, revenues are expected to increase. Category share expected to increase with increased reliance on electronic vehicle applications and infotainment systems. With consumers showing trends of defaulting vehicle servicing or extending the periods, revenues have dropped in 2009. On the other hand, increased average vehicle age has triggered demand for more ‘major’ maintenance activities. Regular service revenues are expected to recoup with economic stability. Has shown a decreasing trend in 2009 due to reduced disposable income. Category expected to pick up with economic recovery. What is expected in 2015? $76B $90B ’ 08 ’ 15
  7. 7. Overview of Major Participants (North America), 2008 Source: Frost & Sullivan Identity Program Group Program Group Retailer Retailer Retailer Retailer Retailer Retail Sales 20% 20% 85% 50% 100% 73% 60% Wholesale 80% 80% 15% 50% 0 27% 40% Private Label Sales 90% 90% 50% 25% (Estimated) 27% 20% 25% Private Label Brands NAPA CARQUEST Duralast, Valucraft & Others Best Test, MicroGard & Others Prostart, Futura & Others Autocraft, Endurance & Others Motomaster Geographical Coverage North America North America U.S. U.S. U.S. U.S. Canada
  8. 8. Private Label Strategies – Retail Participants (North America), 2009 Advance Auto Parts currently has over 30 private label brands covering their private label product categories. Most product categories have their own PvL brand. Advance Auto Parts AutoZone - IDEAL <ul><li>Retail participants in the aftermarket generally follow the multi-brand strategy with the exception of AutoZone which follows the Multi-Tier private labeling brand strategy and Canadian Tire which follows the single-brand strategy under the private label product brand of Motomaster. Theoretically, AutoZone has proven to have the most efficient private label branding strategy amongst the aftermarket retailers. </li></ul><ul><li>The multi-brand strategy has been proven to be ideal for retailers when offering low-cost goods to the consumer while appearing to have a wider selection. </li></ul><ul><li>As private label products have become more sophisticated with the introduction of premium products as private label products, the multi-brand strategy was incapable of creating a relation between the retailer and the product. In turn raising marketing costs and losing customer loyalty. </li></ul><ul><li>Research shows that many retailers have experienced disadvantages due to their wide variety of private label brands. Many are now in the process of consolidating various related private labeled products under one private label brand. </li></ul>Canadian Tire Pep Boys O’Reilly Auto Parts Source: Frost & Sullivan
  9. 9. Overall SWOT Assessment of the North American Automotive Aftermarket – Market is highly mature, but fairly stable with constant new variables. <ul><li>STRENGTHS </li></ul><ul><li>Most developed in the world. </li></ul><ul><li>Coverage of all makes, all models. </li></ul><ul><li>Stable distribution structure. </li></ul><ul><li>Caters to the largest consumer pool in the world. </li></ul><ul><li>Constant demand for maintenance products. </li></ul><ul><li>North American automotive culture demands for aftermarket products. </li></ul><ul><li>Fast cash turnaround for participants. </li></ul><ul><li>Efficient reverse-engineering. </li></ul><ul><li>R&D for performance and safety products starts mostly in the aftermarket. </li></ul><ul><li>THREATS </li></ul><ul><li>Constant new entrants. </li></ul><ul><li>Lower cost imports. </li></ul><ul><li>Quality improvements from low cost imports. </li></ul><ul><li>Less vehicles in operation. </li></ul><ul><li>Increased logistics costs. </li></ul><ul><li>Parts proliferation. </li></ul><ul><li>Increased adoption of electronics in vehicle manufacturing. </li></ul><ul><li>Increased popularity of vehicle leasing. </li></ul><ul><li>Fall of vehicle sales. </li></ul><ul><li>OPPORTUNITIES </li></ul><ul><li>Economic rebound expected to boost sales for accessories and minor maintenance products. </li></ul><ul><li>Electronic integrated products increase unit price. </li></ul><ul><li>Constant high demand for maintenance products. </li></ul><ul><li>Economic hardship has triggered an increase in DIY. </li></ul><ul><li>Increased average vehicle age demands ‘major’ maintenance products and services. </li></ul><ul><li>Increased profits with Private Labeling and Wholesale. </li></ul><ul><li>WEAKNESSES (CHALLENGES) </li></ul><ul><li>Heavy fragmentation. </li></ul><ul><li>Constant new entrants. </li></ul><ul><li>Consumer perception of product quality. </li></ul><ul><li>Many products & services are heavily reliant on social & economical state. </li></ul><ul><li>Constant introduction of new vehicle technologies. </li></ul><ul><li>Difficulties in repairing new vehicle electronics and applications. </li></ul><ul><li>Technician training lacks detail of all models. </li></ul><ul><li>Increasing logistics costs. </li></ul>Mature, Stable, but with constant new variables. RESPOND CAPITALIZE SEIZE PREPARE Current State Market Forces Source: Frost & Sullivan Stable Saturated Highly Unstable
  10. 10. Contacts Johanna Haynes Corporate Communications Direct: 210.247.3870 Email: johanna.haynes@frost.com Mary-Beth Kellenberger Global Aftermarket Program Manager Automotive & Transportation Direct: 416.490.1997 Email: mkellenberger@frost.com

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