Recently I participated in an Auto Care Association webinar along with a panel of industry analysts and researchers discussing the lasting impacts of COVID-19 on the aftermarket. There were many interesting and valuable insights shared in the hour. But I want to focus on the changes that I believe will resonate for years and account for lasting change in 1) the level of digital commerce and 2) the new business models for automotive service shops.
For the past year or more, I have enjoyed a wonderful partnership and friendship with Jon Hedges. Jon and Julie Hedges operate a respected digital marketing practice in Hudson, Ohio. Since his days at Summit Racing, Jon has been fascinated by all things “Internet”. And since the pandemic arrived on the scene Hedges and Company has offered up some timely and meaningful data about the growth of digital sales channels in a range of industry categories. We have come to look forward to the weekly blog from Hedges & Company as a measure of how far up eCommerce sales are going to go and where the sales growth will level off.
With stay at home orders in place across the country earlier this year it was no surprise that miles traveled hit an historic low in April and online purchases reached for the sky. As cabin fever set in, automotive enthusiasts either took the covers off their project cars or took on some long-postponed Do-It-Yourself vehicle maintenance. To underscore the passion of “gearheads”, it was satisfying to see Hedges plot the sales increase (as measure by analyzing million of web sessions and transactions) in channels such as Light Truck / Off-Road; Powersports; Accessories and Performance / Racing. As we headed into May, the average sales increase over March 1 was over 40% - but the greatest of these was Racing product sales, topping an 80% sales increase from pre-pandemic levels. Even with tracks closed and gatherings banned, Gearheads will find a way.
While that’s fun to look at, the important business insights from this research has to do with “at what level will the increase in eCommerce sales stick”? Since early May, the average weekly eCommerce revenue increase over the same period in 2019 was 67%. And recent data shows that level holding steady into July. Jon and I did some reckoning and concluded that if less than half of the sales lift (30%) had legs and lasted the rest of the year, it would add over $1 billion to eCommerce sales in 2020. If the level of eCommerce increase is 40% or more, that would amount to an additional $2 billion in ecommerce.
Think about how many times UPS or FedEx has delivered to your home since the pandemic began. It is not hard to conclude that the behavior of millions of American Do-It-Yourselfers and driveway mechanics has been irreversibly altered in favor of the convenience of online shopping. Online commerce still remains a relatively small slice of the total aftermarket pie. The Auto Care Association predicts total aftermarket sales in 2020 will reach $405 Billion. Total eCommerce sales through retailers, etailers and marketplaces could reach $40 B in this extraordinary year. That’s only a 10% share. But online commerce remains the fastest growing channel and it’s aided by the tailwinds of consumer preference for safety and convenience.
However, not everyone is a DIYer and not every automotive service or repair lends itself to the driveway. One of the most lasting changes brought about by the pandemic will be in Do-It-For-Me automotive service shops. Automotive service consumers (and most are women) have new expectations for sanitation, distancing and contactless service. In the Auto Care webinar, Vandy Chen, Executive Director, Market Intelligence at Tenneco / DRiV Motorparts Group addressed the most common questions posed by automotive service operators: What is the lasting impact of COVID-19 on my business and what can I do to be successful in the future? In describing the after-COVID business models, Vandy suggested aftermarket shops take a play from the OE Dealer book and offer vehicle pick-up and delivery service. There will be a certain portion of car owners who do not want to venture into an automotive waiting room any more than they want to sit in their doctor’s waiting room.
Early examples of mobile maintenance that provides certain services at the customer’s home or place of work have appeared. Consumers are likely to prefer contactless and bring-it-to-me models for automotive service in the same way they choose to get groceries and prepared meals. Of course, when the best alternative is to bring your vehicle into a shop for work, there is a new expectation of cleanliness, barriers and sanitation from the front door to the driver’s seat when your service is complete.
Decision-makers throughout the aftermarket supply chain must rethink the customer’s experience in light of their new expectations. Suppliers, distributors, retailer and service providers must consider every option that reduces touch points and gets product to the point of need in the way the customer chooses – in the store, at the curbside, in the driveway or delivered to the front door. The customer is King. And isn’t that how it really should be?
