The increasing influence of digital transformation is reshaping the global automotive industry. Automotive aftermarket, the secondary market of the automotive industry is also experiencing this paradigm shift from traditional legacy systems to the digitalized world powered by Big Data, Predictive Analytics, Mobility and IoT. In the automotive aftermarket world, Electronic inventory management and ordering systems were available and extensively used long before the dot-com boom of the ’90s itself. However, the popularity and the widespread expanse of the Internet has created an online marketplace that is rapidly disrupting the traditional distribution models.
Change in the customer buying behavior has acted as a catalyst in the progress of automotive aftermarket. The millennial customers have become more sophisticated and mobile oriented while staying connected with their local automobile retailer. The consumers are now expecting a seamless experience spanning via omnichannel including physical retail supply shops, apps, websites and so on. The other factor that contributes to the progress in the automotive aftermarket, especially in the US, is the improved average age of a vehicle by 24+ months. Vehicle Owners are increasingly repairing their cars instead of purchasing new ones, parts information and availability of parts online have increased and all these factors have played significant roles in the digital transformation revolution happening in this space.
The rise of B2C, B2B & B2B2C ecommerce framework for selling parts online has pushed traditional aftermarket stakeholders like Original Equipment Manufacturers (OEM), Warehouse distributors, Dealers and Shopper (jobber) to establish more channels to improve the availability of parts, improve customer service and bring transparency in the order tracking system.
Aftermarket includes dealing with complex products and supply chains. This complexity associated with the sector is one of the major reasons for the delayed entry and lack of maturity of this sector in the e-commerce space, compared to other industrial sectors. However, the industry is now understanding the nuances of online retailing and also the fact that embracing e-commerce is much more than putting up an online storefront. Moving into e-commerce for the automotive aftermarket requires a well thought-out strategy of shifting the business and sales model, the channel relationships, supply chain, and quite possibly the vision and culture of an organization.
To define a better e-commerce strategy, it is also imperative to understand how different stakeholders work in an aftermarket industry. Original Equipment Manufacturers (OEMs) and dedicated aftermarket suppliers sell parts to national and regional distribution centers, which in turn sell to local garages and service centers. OEMs being the original producers of car parts –generally are more expensive and they ensure quality and guaranteed compatibility to the customers. On the other hand, aftermarket parts are generally economical, and offer a greater range of quality – sometimes even superior to the original parts.
- 70-80% of customers in North America research online before making a part purchase
- Online and Mobile channels will account for nearly $40 billion in sales for automotive parts in North America and Europe combined by 2020
We can foresee a lot of potential in the automotive aftermarket domain by the way the e-commerce trends are unfolding in this space. One interesting aspect of this sector is that there is not a single dot-com that has killed off the traditional players, because brand-recognition is key to winning new customers, and the bricks-and-mortar presence is crucial for retaining existing business. The future of aftermarket looks like an integrated B2B and B2C model powered by data analytics, 3D and IoT. Connected cars and the IoT holds the potential to transform the frequency at which the automotive parts are purchased and how they are accessed. Big data and predictive analytics can play a key role in detecting the maintenance issues well in advance and predict the need for replacements that otherwise may be unnoticed by car owners and mechanics. Drivers could then automatically be connected to e-commerce platforms and garages/shoppers for re-ordering and servicing.
The arrival of 3D printing is another disrupting technology poised to reshape the automotive aftermarket sector by providing readily accessible parts. If properly integrated, 3D printing has the potential to benefit automotive spare parts manufacturers with economical, fast, and localized production, resolving many of the current logistical issues that the aftermarket industry faces with e-commerce.
The decisive test bed for essential change in the aftermarket will be the integration of B2B and B2C business models. How do you integrate the two models in a digital environment? That’s the multi-billion-dollar question which we need an answer.
At Connected Life, we have improved the aftermarket business for one of the largest auto parts retailer franchisees in South Africa by improving their catalog placement, introducing new customer segment online, inventory display and bringing more transparency in customer’s order tracking.