Aftermarket   Perspectives
Read Aftermarket Perspectives online at from David PortalatinThe big question in 2011 has ...      Table of Contents      Are Things Sounding Familiar? ........................................Page 5      Afte...
Read Aftermarket Perspectives online at Thing Sounding Familiar?As talk in economic circles heat...          the daily commute, reducing miles driven. The unemployment rate in July was 9.1 percent,          showing...
Read Aftermarket Perspectives online at VehiclesMost in the automotive aftermar...       While it is true that average annual expenditures on a vehicle tend to peak at around 10 years       of age,...
Read Aftermarket Perspectives online at Automotive Service Picks Up SteamNew car sales ...      by consumers as bringing more coupons and promotional offers to the table, compared to      other outlets. Wh...
Read Aftermarket Perspectives online at ExpertiseThe NPD Group is the premium provider of c...
Learn MoreFor more information, contact The NPD Group at866-444-1411 or email
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NPD Aftermarket Perspectives

  1. 1. Aftermarket Perspectives
  2. 2.
  3. 3. Read Aftermarket Perspectives online at from David PortalatinThe big question in 2011 has been, “What’s going on with the economy, and what does itmean for the aftermarket?” Throughout the year we looked at how factors like high gasprices and miles driven affected aftermarket sales. While many economic conditions havestarted to mirror the events of 2008, we have noticed some key differences in consumerbehavior. For instance, more consumers have turned to DIFM this year than in the past fewyears as DIFM has become more of a “must.”You can learn more in this booklet about the trends that shaped the aftermarket this yearand those that will influence next year’s sales. It is compiled from of past issues of After-market Perspectives, a monthly communication from The NPD Group. Each edition focuseson our data and my perspectives on the industry issues that matter to your business rightnow. Aftermarket Perspectives is designed to help you better understand your consumers andtheir needs and uncover opportunities — especially in these economically volatile times.As always, we’re pleased to bring you the information you need to succeed in today’senvironment. I hope you find these articles helpful. Please contact me if you’d like to learnmore, or visit The site is updated each month with a new article.David PortalatinDirector of Industry AnalysisThe NPD 3
  4. 4. Table of Contents Are Things Sounding Familiar? ........................................Page 5 Aftermarket-Friendly Vehicles ..........................................Page 7 DIFM Picks Up .................................................................Page 9 Industry Expertise/About NPD..........................................Page 114
  5. 5. Read Aftermarket Perspectives online at Thing Sounding Familiar?As talk in economic circles heats up concerning the prospects of a double-dip recession,questions arise about how such a scenario could affect the aftermarket. Fortunately, we knowhow consumers responded to the economic downturn in 2008, and we can look at currenttrends for any similarities. The overriding change in consumer behavior when the recession hit wasa notable deferral of all spending. In 2008, consumers reported they postponed approximatelyone-third of all needed vehicle maintenance and repair. As a result, unit sales volumes inthe auto parts channel declined nearly 8 percent. By mid-2009, in a more stable economy,consumers embraced the reality that spending to keep their old cars running smoothly wasthe most economically responsible alternative, ushering in the robust aftermarket sales of thepast 24 months. But now, are high gas prices and persistent economic challenges pushingconsumers back into deferral mode?Updating key market driversTo begin to evaluate the prospects of an aftermarket double-dip, let’s take a look at the macroeco-nomic factors most relevant to the aftermarket, as determined by our 2011 forecast model:■ GDP — Real GDP in the second quarter rose 1 percent (this is the revised second estimate). While this number signals some economic growth, it is fairly weak. An economy with a more robust growth rate would provide a better environment for stronger after market sales.■ Miles Driven — Gasoline prices remain well above the critical $3.00 per gallon mark, and in response, consumers are cutting back on driving. Through June, total miles driven were down 15.5 billion miles on the year, or 1.1 percent. Based on gasoline sales indicators, we don’t expect July or August results to show improvement. Fewer miles translates into less wear-and-tear and longer maintenance intervals, and therefore has a negative effect on the aftermarket.■ Unemployment — Unemployment is a double-edged sword for the aftermarket. First, rising unemployment constrains consumers’ ability to spend. Second, it takes people out of 5
  6. 6. the daily commute, reducing miles driven. The unemployment rate in July was 9.1 percent, showing no lasting improvement in 2011. There are still 6 million fewer employed persons in the U.S. than there were in July 2008. Furthermore, the average number of weeks un- employed rose to 40 – the highest in modern history. ■ Revolving Credit — After paying down $200 billion in debt following the recession, a new frugality emerged where consumers were motivated to take care of their cars to avoid incurring more debt for new vehicles. However, recent economic conditions have consumers once again relying on credit cards. Revolving credit debt in June is up 10 bil- lion dollars (1.3 percent) since April. If the monthly household budget gets “maxed out,” consumers may be pushed back into deferral mode. ■ CPI Used Cars — Consumer attitudes have changed about how to define an “old” car. This means more and more consumers are content to drive older vehicles and are revaluing used cars. The CPI for used vehicles reflects this attitude, which is favorable to the aftermarket and continued to rise with an index value of 152 in July, up from 144 in January. What does in all mean? Of the five factors driving aftermarket sales, three are trending negative. We’ll call GDP neutral and the used car value positive, as it reflects a continued desire to assign higher value to aging vehicles. As a result, it is not surprising that auto parts channel unit volumes are trending below the level we projected nearly one year ago. At last year’s AAPEX show, we announced a 2011 forecast of -0.9 percent in unit volume versus year-ago. Year-to-date through July, unit volume was down 1.7 percent versus the same period in 2010. In part, the strong performance in 2010 creates a difficult hurdle for positive growth in 2011. But thanks to the forecast modeling done last year, we have a rational basis for better understanding why the market is trending lower. We will revise and update the forecast model based on all of this new information. You’ll see the results, along with our 2012 forecast, here at AAPEX.6
  7. 7. Read Aftermarket Perspectives online at VehiclesMost in the automotive aftermarket have long understood that there is a typical vehicleprofile that is friendly to the aftermarket. Such vehicles are likely no longer under the originalmanufacturer’s warranty and are beginning to show some normal wear-and-tear with ageand usage. How to precisely define this vehicle profile is the subject of some discussion, butgenerally the conversation centers around a vehicle age range that begins at about four yearsafter purchase (when most warranties begin to run out) and ends at around 10 years.In the past, conventional wisdom held that spending on vehicles more than 10 years old willwane as these cars lose value and consumers begin to look toward replacement. The vehiclepopulation that fits into this range has often been referred to as “the sweet spot.” Borrowedfrom the sports world, this term refers to that place right in the center of the barrel of a base-ball bat or the face of a golf club. When you hit the sweet spot, the contact feels pure, andthe ball seems to effortlessly spring to life and take flight. For aftermarket manufacturers andretailers, hitting the vehicle sweet spot is the key to a home run of revenue.A growing “sweet spot”For some time now, we have monitored the lingering effects of the recession on consumerattitudes and behaviors. A new frugality among many consumers has them holding on to carslonger than before and seeing value in the necessary expenditures on repair and maintenancerequired to keep older cars going. This new vehicle mindset calls for some closer examinationand re-evaluation of how we define the sweet spot. Our Car Care Track® captures automotivepurchase information from a nationally representative sample of approximately 72,000 vehicleowners annually. Comparing pre- and post-recession behavior allows us to gain insight intoemerging new behaviors and opportunities.Automotive Purchasers With Vehicles More Than 10 Years Old 43% 37% 2005 2010 Source: The NPD Group/Car Care Track /December 2010 ® 7
  8. 8. While it is true that average annual expenditures on a vehicle tend to peak at around 10 years of age, Car Care Track provides evidence that there may be a growing opportunity among owners of cars over 10 years old. Of those surveyed for Car Care Track, 43 percent of consumer panelists said they had a vehicle more than 10 years old in 2010. In 2005, before the recession and the decline in new car sales, only 37 percent of respondents had cars over 10 years old. The spending curve in 2010 peaked at $633 in annual expenditures for 2001 model year vehicles. But although the curve declines gradually at this point, spending on older cars remains relatively high. In fact, spending on vehicles 10 years and older is an average of 10 percent higher than spending on newer vehicles. So the vehicle population is aging, and consumers are demon- strating a willingness to continue to spend on these vehicles. Annual Expenditures by Vehicle Age $700 2005 2010 $600 Annual Expenditure $500 $400 $300 $200 $100 $0 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 Vehicle Age in Years Source: The NPD Group/Car Care Track®/December 2010 Responding to Change While these new trends in consumer behavior are clearly positive for the aftermarket, retailers and manufacturers will need to stay focused on the trend to maximize the opportunity. Here are some questions to ask in considering how best to benefit from older vehicles: ■ Does my assortment reflect these new vehicle realities? ■ Does my value proposition appeal to the consumer trying to extend the life of an aging vehicle? ■ What needs can we anticipate owners of older vehicles will have? The surge in aftermarket-friendly vehicles represents a great opportunity for growth, and a clear understanding of the consumers who own them will help marketers benefit from this trend.8
  9. 9. Read Aftermarket Perspectives online at Automotive Service Picks Up SteamNew car sales in the U.S. are on the rise. Through the first six months of 2011, light vehicleunit sales were up nearly 13 percent over last year. Even though this increase is significant, itonly translates into about 6.3 million new cars, trucks, and SUVs sold. That puts us at a ratestill well below pre-recession levels, meaning most Americans remain focused on repairingand maintaining the nation’s aging vehicle fleet.With consumers still largely focused on spending only on those things they absolutely need,many are finding professional automotive service among the “must” expenditures in thefamily budget. To help you get a better handle on where America is going for do-it-for-me(DIFM) automotive services, we’ve just released a special report: Consumers Shifting Gears toDIFM Outlets. It drills into Car Care Track® (our monthly consumer tracker of automotive purchasebehavior) data, complemented by insight from a customized consumer survey on the topic.This timely study, fielded in mid-June, found 68 percent of today’s drivers said they will haveall automotive service and repair performed by a professional. For you, that means it is criticallyimportant to understand the changing behaviors and motivations of DIFM consumers tomake the most of this opportunity.Consumers shifting gears on service outletsThe comprehensive report contains more than 100 pages of charts and expert analysis coveringevery aspect of the DIFM marketplace. Among the findings is that many consumers’ outletbehavior is shifting. Reliable personal transportation is a must-have, yet consumers are still beingsqueezed by rising unemployment, high gas prices, and price inflation in many automotivecategories. In the tension between the need for transportation and the economic pain consumersare feeling, the value equation is being closely scrutinized. For some consumers, this meansmaking new choices about where to have their vehicles serviced and why.In this environment, tire stores and car dealers are two segments that have gained momentum.Dealerships have likely benefited from the uptick in new unit sales, as some new car owners arereturning to the dealer for initial services. But a closer look reveals these two distinct outletsmay have something in common contributing to their success. Both appear to be perceived 9
  10. 10. by consumers as bringing more coupons and promotional offers to the table, compared to other outlets. When looking at what attributes of the service/repair occasion consumers were most satisfied with, those at dealerships and tire stores were much more likely to say they were extremely satisfied with a coupon or special offer. While it is important to acknowledge that overall value can be derived from delivering on a variety of attributes including, trust, convenience, knowledge, price and others, it appears these outlets might be leveraging cou- pons and specials to appeal to a price-conscious and value-driven consumer. Customer Satisfaction Index Coupons or special offers 140 127 120 117 56 64 98 100 80 60 Independent Car Discount/ Quick Lube Tire Store Repair Shops Dealership Mass Merchant Source: The NPD Group/Consumers Shifting Gears to DIFM Outlets/June 2011 Positioning for success in the DIFM market Understanding where consumers perceive value in the marketplace and uncovering what relevant attributes play to your strengths is critical to creating a position that will be attractive in today’s environment. Knowing who is winning in the market and how they are doing it will allow both suppliers and installers to collaborate to craft winning strategies. Key questions for a winning DIFM strategy include: ■ How is the consumer defining value, and is that changing? ■ What outlets offer the best opportunities for growth? ■ What attributes of my brand, product, or service model are most relevant to consumers in the current economic environment? Among the many truths reinforced in these turbulent times is that change is inevitable. Taking the consumer’s pulse will help you stay abreast of changes in attitudes and behaviors and keep your offer and message relevant.10
  11. 11. Read Aftermarket Perspectives online at ExpertiseThe NPD Group is the premium provider of consumer and retail information for the NorthAmerican automotive aftermarket, petroleum marketing, and convenience retailing industries.NPD expertise and data provide industry leaders with essential market information to assist inmaking more effective business decisions. NPD is uniquely qualified to help marketers applyinformation to address key marketplace issues from multiple perspectives, based on morethan 20 years of experience in these industries.NPD’s diverse portfolio of services includes consumer panel tracking and national and StoreLevel retail point-of-sale (POS) tracking. Specifically, NPD information supports benchmarking,competitive analysis, assortment and product planning, and identification of new channelopportunities.About The NPD GroupThe NPD Group is the leading provider of reliable and comprehensive consumer and retailinformation for a wide range of industries. Today, more than 1,800 manufacturers, retailers,and service companies rely on NPD to help them drive critical business decisions at the global,national, and local market levels. NPD helps our clients to identify new business opportunitiesand guide product development, marketing, sales, merchandising, and other functions. Infor-mation is available for the following industry sectors: automotive, beauty, commercial technol-ogy, consumer technology, entertainment, fashion, food and beverage, foodservice, home,office supplies, software, sports, toys, and wireless. For more information, visit 11
  12. 12. Learn MoreFor more information, contact The NPD Group at866-444-1411 or email