More Auto Parts for More Vehicles: Insights and Trends in the Retail Auto Parts Industry

2. More Vehicles, More Miles = More Auto Parts • Different sources measure and describe the performance of the retail auto parts industry differently. According to Statista data, sales at retail totaled $142.6 billion during 2015, or a 3.9% increase from 2014. • The NPD Group tracks 29 automotive aftermarket categories. Its findings also revealed a 3.9% increase in dollar sales during 2015, but the total is a mere $14.6 billion. It forecasts a 2.7% increase for 2016 to $15.1 billion. • The NPD Group and other industry watchers cite the average age of 11.5 years for all vehicles on US roads during 2015 as a primary driver of industry growth. The AAA reports that 35% of Americans have delayed repairs, which eventually cost more.

3. Stock Market Success Stories • According to the 2015 Automotive Aftermarket Investment Report, the parts retail & distribution sector of the industry generated a 17% return on its 2015 stock performance, compared to a -.73% return by the S&P 500. • The total automotive aftermarket sector experienced a 0.2% increase in sales and 7.4% increase in earnings for 2015, which was the 8th straight year of exceeding the overall performance of the S&P 500. • The NPD Group reported that Advance Auto Parts’ same-store sales decreased 2.5% during fiscal Q4 2015, AutoZone Inc. increased 3.6% during fiscal Q2 2016 and O’Reilly Automotive Inc. increased 7.7% during fiscal Q4 2015.

4. Understanding the Auto Parts Consumer • According to the AAA’s 2016 Your Driving Costs study, the cost of owning a motor vehicle is the lowest of the past six years, with lower gas prices the primary contributor. Maintenance costs will increase 3.3%, however, due to motor oil prices and shop labor. • Aftermarket Business World’s Consumer Attitude Study (October 2015) found that approximately 75% of auto parts shoppers compare prices; however, it was not the primary reason for buying a specific product in most of the 12 parts categories. • Of the 12 product categories measured in the study, television was the top advertising channel among consumers in 5 and was a close second in the other 7 categories. An auto chain was consumers’ #1 purchasing location in 9 of the 12 categories.

5. Revealing the Latino American Auto Parts Market • According to Aftermarket Business World’s Hispanic Consumer Attitude Study (November 2015), “a recommendation” was the top reason for purchasing water pumps and battery chargers, but was second for auxiliary lighting. • An auto chain was Latino American auto parts consumers’ top purchasing location for the 3 categories measured: water pumps, 50%; auxiliary lighting, 48%; and battery chargers, 46%. • When asked if they were likely to return to the purchase location, “highly likely” was the #1 answer in all 3 product categories: auxiliary lighting, 53%; battery charger, 42%; and water pump, 64%.

6. Growth Forecast for Online Purchases of DIY Vehicle Parts, 2013–2018

7. Triumphs, Troubles and Trends • According to Aftermarket Business World’s Reseller Product Study in the February 2016 issue of the magazine, 53% of resellers surveyed said product sales increased during 2015 and 58% said they expected them to increase during 2016. • Despite resellers’ optimism, the 2 largest chains scored poorly on the 2016 American Consumer Satisfaction Index: Advance Auto Parts, 72, the second lowest in the specialty retailer segment, and AutoZone, 75. The media score in the segment was 77. • In its report on 3-D printing in the automotive industry, Frost & Sullivan predicts that the use of innovative materials will allow OEM manufacturers and suppliers to print parts quicker and at multiple locations and custom print parts for individual customers.

8. Advertising Strategies • Promote a “Shade Tree Mechanics Day” during a sunny Saturday in conjunction with a local independent repair shop. Consumers receive a free 15-minute session to ask questions and/or a quick inspection of their vehicles. Provide refreshments and same-day discounts. • A similar type of event can be promoted to attract the increasing number of women who buy auto parts and install them are their vehicles. Include female mechanics or store employees among those conducting seminars or question-and-answer sessions. • Advertise a “Family Summer Road Trip” promotion during early June and maybe again during mid-July, highlighting parts and fluids that may need to be checked or changed before a trip. Offer a free cooler or other car-trip items for a qualifying purchase.

9. New Media Strategies • Promote and conduct an online survey to determine for what kind of vehicles older adults and all adults with the largest incomes are buying auto parts. Provide a coupon for all participants and create an in-store display with those parts to attract these consumers. • Given the seasonal nature of auto parts, retailers have ready made topics for a blog or videos: checking and changing wiper blades prior to winter and summer, checking batteries before the summer in southern states, etc. • Incentivize customers to tell their “shade tree mechanic” stories in text, photos and/or videos: symptoms and diagnosis of problem, trip to auto parts stores and comments on service, installation of part(s) and long-term reliability of the improvement.