Trends

How rising gas prices affect aftermarket-parts sales.

High gas prices are a concern to many in the industry. Other than media reports on soft truck sales, it is often difficult to measure the real effect gas prices have on the automotive aftermarket.

The average price for a gallon of gas, adjusted for inflation, recently matched the record levels set during the 1981 energy crisis. In addition, according to data collected by the Federal Highway Administration, the average mileage driven per person dropped for the first time since 1981.

RacingJunk.com, an online community of racers and performance enthusiasts, has conducted a poll among its 140,000 members showing how high gas prices impact our industry. According to the poll, 35.5 percent of members reported they didn't drive as far to races or car shows this year and 39.4 percent reported spending more time looking for bargains, all due to higher gas prices. These members are heavy spenders, too—38.1 percent report spending $5,000 or more a year on racing and high-performance parts.

For a sign that consumers are looking for ways to save on gas, we can take a clue from the world's largest marketplace for automotive parts, eBay.com. Using data supplied by Terapeak, we can see there is a direct relationship between the average price of a gallon of gas (left scale on chart below) and the number of products actually sold on eBay with "gas saver" in the title (right scale on chart below).

What this means to you: High gas prices won't make consumers stop driving, but spending more on gas definitely has an impact. Consumers are looking for ways to save gas. If you operate a retail store, try featuring gas-saving products even if you're primarily a speed shop. More customers may call ahead looking for a part instead of just hopping in the car, so pay attention to how your store sounds on the phone—not only what it looks like—and plan ahead how to close the sale over the phone for out-of-stock merchandise.

RETAIL SALES OF AUTOMOTIVE PARTS TURNING AROUND

Following a very strong mid-2006, retail sales of automotive aftermarket products had a tough time beginning in November 2006. Snow and extremely cold weather across most of the United States took its toll and softened retail sales of automotive aftermarket parts, accessories, and tires through February.

The good news is retail sales have started to rebound. The chart to the right compares the increase or decrease in monthly retail sales to the previous year. While growth may not be as strong as it was a year ago, it is at least now heading in the right direction.

Our research has shown there is a lot of inventory in the pipeline from a lot of aggressive buying in the first quarter, so manufacturers of specialty parts and accessories may not feel the full effect of the retail rebound until the third or fourth quarter of this year at the earliest—or not until 2008.

What this means to you: Although there are pockets of the country with weaker economic conditions, overall retail sales are up. Manufacturers may be able to capture some of this momentum with aggressive marketing and move more inventory sitting in warehouses or on store shelves.

WHAT DOES IT FIT?

Direct Communications, Inc. (DCi) maintains a comprehensive product database on nearly 200 of the specialty-parts industry's most widely distributed brands, representing hundreds of thousands of parts and hundreds of millions of dollars in retail sales. About one-quarter of all products are universal, meaning they are intended to fit more than one specific vehicle.

Getting beyond universal products, it may be helpful for retailers new to the specialty-parts market to see which vehicle model years these products fit.

As you can see from the chart below, the largest representation of application-specific specialty products fit 1990-2000 model-year vehicles.

The vehicle platforms that represent the greatest number of specialty products are the Ford F-150 and Chevrolet Silverado. Both far outnumber the next most popular vehicle platforms, including the Ford Mustang.

What this means to you: A retailer looking to get into the specialty-parts market should understand where the biggest part of the market is for inventory planning and marketing.

CATALOGS ON THE INCREASE

According to Oxbridge Communications, publishers of The National Directory of Catalogs, the number of automotive catalogs has more than doubled over the past five years, growing from 261 to 553—an increase of 118 percent.

Of the catalogs identifying a target audience, 285 were business/consumer and 194 were consumer.

These 553 catalogs were mailed by 297 distinct catalog companies—an average of about 1.8 catalogs per company.

Although the number of catalogs increased 118 percent, overall sales of specialty parts through catalogs have not shown much change over the past five years, so more companies are fighting for their share of the same pie.

What this means to you: Specialty-parts retailers have had to compete with mail-order catalogs for years and that won't change anytime soon. The always-competitive catalog business is becoming more of a challenge with more competitors.

Jon Hedges of Hedges & Company is a long-time veteran of the automotive aftermarket specializing in database marketing, strategy, and research. He can be reached at (330) 474-1650, or via the Web site www.HedgesCompany.com.