August Market Trend Analysis

Coronavirus And Stimulus Drive Up eCommerce Sales

COVID-19 lockdown orders kept most people off the road and at home throughout the Spring, and many retail businesses suffered for it, even those who were allowed to remain open. The automotive aftermarket was no exception, with companies such as Advance Auto Parts, Genuine Parts Co. and O’Reilly Automotive reporting quarterly sales declines compared to last year. However, even though in-store sales may have dropped, online sales and activity have been on the rise. 

According to Hedges & Company, which analyzed more than 13 million online user sessions and purchases for automotive parts and accessories websites (including retailer websites and manufacturers selling direct-to-consumer), a comparison of online revenue from the week of the first week of March, 2020, to the week of May 17-23 showed a 56% increase. In comparison, the same week in 2019 (May 19-25) illustrated only a 1% decrease from the first week of March 2019.

“For years, eCommerce adoption in the automotive aftermarket has been slightly behind most other industries,” Hedges explains. “It’s been that way since the beginning of eCommerce. That completely changed in just two months. It would have normally taken several more years to get to where we are right now. Today, eCommerce market share in the automotive aftermarket is where we forecasted it to be in 2022 or beyond.”

The increase in sales during the end of April and beginning of May averaged about 50%, with the biggest increase being the week of April 26 to May 2, which showed a 61% increase over the first week of March. Notably, this significant increase came after stimulus checks started being released (beginning the weekend of April 11-12).

Research found the following patterns during the 10th week of the analysis (May 17-23) in comparison with the first week of March in addition to the overall aftermarket eCommerce sales increased 56%:

• OEM replacement-parts sales saw decreases for the first five weeks and only went positive during the week stimulus payments began appearing, with a 26% increase in sales. 

• Light-truck and off-road parts sales saw a 26% increase (down from a 37% increase two weeks prior).

• Performance and racing parts sales were up 69%.

• Powersports saw a whopping 121% increase, which Hedges attributes to seasonal sales and the fact that powersports enthusiasts can practice social distancing while riding.

Automotive aftermarket accessories increased 75%.

When comparing the first 10 days of May to March, Hedges found that the pages-per-session metric on these websites was only up 0.8%, while the average duration dropped 1.4%. However, average conversion rates improved 11.1%.

Together, these metrics suggest that shoppers knew what they wanted to buy, since they were actually spending less time browsing. The number of new visitors to these websites increased by 6% from March.

As the world begins to slowly open back up and everyone adjusts to the “new normal,” it’s clear that businesses – especially aftermarket parts companies, must have a solid digital presence moving forward.

“Aftermarket companies must have a comprehensive digital strategy,” Hedges concludes. “That includes the obvious: a good website and a good online presence. But a strong digital strategy requires a plan for all digital channels, including social, organic, display, email and others. It requires great product data and a separate set of data for a manufacturer’s website. It requires a plan to stay on top of the ever-changing aftermarket requirements for Google Shopping. It requires measuring ROI on all marketing investments. Actions taken by aftermarket companies in the next six months will determine the winners for the next decade.”

READ MORE HERE: aftermarketnews.com

Google positioned to dominate the ‘O2O economy’

Google is the company in the strongest position to capitalize on the growing online-to-offline (O2O) economy. Nearly $12 trillion in offline economic activity is likely impacted by the internet.

Nearly every ‘enterprise’ is a local business. The term “local business” is often misunderstood and typically conjures up images of mom and pop stores and very small businesses. But any business that transacts offline or sells products and services in a physical place is effectively a local business. The logos below are just as much local businesses as are small merchants. That’s because the majority of their transactions happen in-person, in the physical world (although COVID-19 is changing that).

National and global brands that are considered ‘local businesses’

Most marketers have heard a statement that goes something like this: “roughly 80% of U.S. disposable income is spent within 10 to 20 miles of home.” It turns out this is common sense but not grounded in any single dataset or study. 

However in 2017, Access Development conducted a survey that found, “more than 90% of consumers make most of their purchases within 15 minutes of home or work.” This includes things like fuel, groceries, food, personal care, home and garden, entertainment and retail shopping. Coronavirus stay-at-home orders have forced more of those purchases online and e-commerce has grown by triple digits in many categories. E-commerce spending in the U.S. in 2019 was about $600 billion. But the amount of consumer spending influenced or affected in some way by the internet is roughly 20 times larger than that.

U.S. GDP was about $21 trillion in 2019 (it will be less this year). Roughly 70% of that is driven by consumer spending. According to multiple studies, roughly 81% of all U.S. adults (90% of internet users) conduct online research before buying things locally. That includes product research, phone and address lookups, consulting reviews and so on. That suggests that about $12 trillion of the $21 trillion in U.S. economic activity is touched in some way or directly influenced by the internet. This behavior is often called “ROBO” or “ROPO”: research online, buy/purchase offline.

COVID 19 is solidifying online shopping behaviors and bringing new buyers online. In the first quarter of 2020, Target said it saw five million new Target.com shoppers. But 40% of those people are buying online and picking up in the store or at curbside. BestBuy, during the same period, reported 250% e-commerce growth with 50% of those orders picked up at the local store. This “BOPIS” hybrid model is going to be increasingly prevalent and retailers that can do it well will prevail accordingly.

Google Maps addresses the ‘full funnel’

One could call Google Maps the “digital fulcrum” of O2O activity and Google My Business is its primary local data source. While the company doesn’t capture all O2O activity, a significant percentage of online research that results in offline purchases goes through Google. Google Maps is a kind of “User Interface for the real world.”

But it’s not just a place to look for store hours or contact information. Google Maps can address the “full funnel” — from discovery to consideration and transactions. Over the past several years Google has increasingly added conversion tools to Maps: booking/reservations, requests for quotes, food ordering and messaging. These transactional tools solve multiple problems:

• They reduce “leakage,” when someone clicks through to a bad website that fails to close them.
• They deliver value to consumers and reinforce usage.
• They demonstrate the value of the platform to SMBs in particular.
• They help convert SMBs into advertisers.

Google does monetize some transactions on the platform but most of its revenue still comes from PPC ads. Acquiring and retaining SMB advertisers has been costly and challenging for Google over the years. SaaS subscription fees offer an intriguing potential answer to that challenge. G Suite is an example of a successful SMB SaaS product that could spawn more such offerings in the future.

Looking ahead. The future of local search is a much more diversified and distributed experience than its past. Beyond the traditional text query in a box, it involves more visual content, augmented reality (AR) and voice. Tools like Google Lens or “search by photos” and image search enable consumers to use different inputs to access information and shop. And AR will factor more prominently in local search over time, as more digital content gets overlaid on the real world.

Finally, voice becomes the primary UI for new devices and categories, from virtual assistant-powered smart-home hardware to in-car systems. It’s not always about “search” but it often is. And behind it all is machine learning and, increasingly, artificial intelligence.

The digital and physical worlds are becoming increasingly integrated and Google has inserted itself as a central mediator of those experiences — the commercial value of which many times greater than e-commerce — with a growing emphasis on task completion and transactions.

READ MORE HERE: searchengineland.com

U.S. Automotive Aftermarket Size Projected to Reach $86.2 Billion by 2025

According to a new report from Million Insights, the automotive aftermarket industry is estimated to grow at 1.8% compound annual growth rate (CAGR) over the forecast period of 2019-2025 as the scope and its applications are rising enormously across the United States and the U.S. automotive aftermarket size is projected to hit USD 86.2 billion by the year 2025. The market is anticipated to grow because of the rising adoption of automotive technologies like safety and exhaust technologies along with several other aspects that influence vehicular performance and provide weight reduction and cost-effectiveness in automobiles. Additionally, the rising vehicle age and vehicle parts in the U.S. are anticipated to propel the demand for replacing parts, therefore, driving the growth of the market in the country. According to Auto Care, the average age of the 290 million vehicles on the road is nearly 12 years old and expected to continue to rise. 

Increasing disposable income of consumers in the U.S., the growing sales of passenger cars, and factors like rising adoption of modern lifestyle and developing infrastructure are contributing in propelling the growth of the market. Huge investments in research & development by automakers and advancement of technology are anticipated to propel the demand for heavy commercial vehicles, prompting a rise in demand for products like tires, wheels, towing and several other miscellaneous accessories, thus driving the growth of the market in the coming years.

Industry Insights

The U.S. automotive aftermarket size accounted for USD 75.31 billion, in 2018, and continues to grow.  The U.S. automotive industry has gained a significant boost in its sales of aftermarket parts and OEMs as the aftermarket business has generated attractive revenues and margins in the evolving market. The growing requirement of proper maintenance of parts of vehicles has promoted the aftermarket sales. The automotive aftermarket is regulated by strict government norms and regulations with regards to the heavy-duty vehicles market.

Favorable government regulations, subsidies and policies in the U.S. are propelling the demand for the electric vehicles industry. Since electric vehicles are eco-friendly, their usage supports government policies for pollution control and climate change. Moreover, these vehicles are battery powered and do not function on regular fuels like gasoline, thereby eliminating the emission of harmful gases. The rising use of light-weight auto parts in electric vehicles to enhance its efficiency is anticipated to drive the market growth in the forecast period.

Digitization assures transparency in auto maintenance and repair service delivery. This allows several stakeholders, along with car owners, to observe the repair and replacement cost of parts. With the help of online services, the car owners can fulfil their desire of ordering customized components like resonators and mufflers from abroad for their unusual specifications and low prices. Moreover, the rapid improvement of digitalized technologies has augmented opportunities for service dealers, and automakers to manufacture innovative products for the sake of maintaining the competition in the U.S. market.

The latest production technologies are expected to render significant cost benefits to vehicle owners. For example, the influence of 3D printing in fabricating car components is expected to increase all over the world with time as it enables minimal production costs and greater efficiency with time utilization and optimal material. Rising investments are being made by associations and manufacturers in R&D activities to provide cost-efficient and high-end materials, creating more opportunity for growth.  

Replacement Part Insights 

The U.S. automotive aftermarket has been segregated into various segments like tires, filters, body parts, lighting & electrical components, turbochargers, battery, brake parts, wheels, exhaust components and others, on the basis of replacement parts. The others segment dominated the U.S. market in 2018, seconded by the tire segment. The turbocharger segment is anticipated to grow at the fastest rate in the forecast period owing to its ability to increase the volumetric efficiency of engines and making them amenable to stringent emission standards.

The tire segment is expected to dominate the automotive aftermarket in the U.S. by 2025 owing to factors like frequent replacement of tires when compared to its automotive counterparts. Further, the turbocharger segment is anticipated to grow at the fastest CAGR in the forecast period. The surging trend of downsizing of engines and using turbochargers to balance power requirements are anticipated to propel the demand for turbochargers in the forecast period.

Distribution Channel Insights

On the basis of the distribution channel, the automotive aftermarket in the U.S. is segmented into wholesalers, distributors and retailers. For basic automobile models, the distribution channel comprises members like automobile exhaust sale hubs, tier 1 distributors and aftermarket units consisting of jobbers and at last repair shops. The major contribution towards overall sales of aftermarket parts is by tier 1 distributors, seconded by direct channel sales. The retailers segment dominated the market in 2018. Further, the distributors and wholesalers segment is anticipated to witness rapid growth in the forecast period.

The adoption of latest distribution techniques like online catalogs and e-commerce by vendors has helped them in adding value to the products offered and distribution network. Manufacturers are expanding their regional and global presence rapidly by supplying their products to automobile manufacturers all over the world via online platforms. Moreover, several distributors and suppliers are adapting strategies like collaborating with local market players to gain traction in the domestic market.

Service Channel Insights

The automotive aftermarket in the U.S. is divided into OE (delegating to OEMs), DIFM (Do It for Me) and DIY (Do It Yourself), on the basis of service channels. The OE segment dominated the market in 2018, seconded by DIFM segment. The DIY segment is anticipated to grow at the fastest rate in the forecast period as DIY car kits are growing popular rapidly owing to their easy availability, convenience to use and help save time. DIY customers are highly sensitive towards the price and the expansion of e-commerce has helped customers in making economical purchases, thereby, leading to increase in overall sales of aftermarket parts. Further, rapidly evolving technologies in the U.S. market has cautioned the players to evaluate their performance to retain their market position.

Certification Insights

The automotive aftermarket in the U.S. is categorized into uncertified parts, certified parts and genuine parts, on the basis of certification. Genuine parts are produced by vehicle manufacturers while certified automotive parts are inspected and tested by authorized organizations, and uncertified parts can be used in the place of original automotive parts. The genuine automotive parts segment is expected to dominate the automotive aftermarket in the U.S. and the certified parts segment is expected to grow significantly in the forecast period.

The market is witnessing a surge of strategic collaborations and alliances between leading auto insurance companies and collision repair centers to gain competitive advantage and capture a considerable amount of share in the market. Moreover, manufacturers are concentrating on manufacturing certified parts in compliance with NSF standards. This is anticipated to propel the demand for certified parts in the U.S. market.

Impact of COVID-19

The U.S aftermarket automotive is being severely affected by the outbreak of coronavirus. The country’s high rate of spread and the prolonged lockdown has disrupted the supply chain, with an adverse effect on the market growth. Uncertainty among consumers regarding the market scenario in future has resulted in lower spending on automotive products. The shortfall in liquidity and cash crunch has severely affected the sales of automotive in the U.S, thereby, adversely affecting the market growth. However, with relaxing lockdown measures and reopening of the economy in major cities across the U.S are projected to accelerate the market growth.

U.S. Automotive Aftermarket Share Insights

The competition in the market is high and has encouraged the players to focus on catering high quality products to retain their competitive advantage. A growing focus on strategic initiatives like mergers, acquisitions and alliances has resulted in market consolidation, which has helped companies to enhance their brand value and customer loyalty base along with instituting their global presence. With the rising competitiveness in price, several companies are challenged to offer innovative products at an economical price. The increasing number of domestic players in the country have emerged as a threat to the leading players. Key players are adapting mergers and acquisitions to increase their market share and maintain their position in the market.

READ MORE HERE: millioninsights.com & digitaljournal.com

Automotive eCommerce Conversion Rate Optimization 

New research from Hedges & Company identifies key areas impacting e-commerce conversion rates. The research data points to Site Speed, User Experience, Product Pricing, Market Segment and Email Marketing as keys to improving a site’s conversion rate and online sales.

Millions of transactions over 3-1/2 years shows the impact of site speed (bottom axis) on eCommerce conversion rate (left axis) for automotive parts and accessories websites. The blue line shows typical conversion rates.

The Hedges & Company Conversion Rate Optimization Case Study shows site speed accounts for about half of the conversion rate for automotive parts and accessories websites.

Hedges analyzed millions of online purchases from more than 100 parts and accessory websites in the U.S. and Canada. The data covered transactions from 2017 through mid-2020 and includes retailer websites and manufacturer websites selling direct to consumer (DTC).

“This new Conversion Rate Optimization Case Study is useful for aftermarket businesses wanting to improve efficiency and grow revenue from their eCommerce websites,” said Jon Hedges, Principal at Hedges & Company. “It shows which areas of a website to look to improve and how they will impact the conversion rate.”

Site speed is by far the most significant factor. How fast a website loads as reported in Google Analytics attributes to nearly 50% of an eCommerce site’s conversion rate. Using statistical analysis and predictive modeling, Hedges found an average conversion rate of 0.5% for automotive websites that load in eight seconds. Websites that load in five seconds doubled that conversion rate to 1.0% and sites that load in three seconds have a 1.8% average conversion rate.

The company also looked at mobile conversion rates. The data showed site speed had a similar impact on conversion rate for customers shopping on their phone. The data pointed to five main categories affecting a website’s eCommerce conversion rate. The categories are:

1. Site speed: About 50% of a site’s conversion rate is influenced by site speed. It is how quickly shoppers can see and interact with site content. 
2. User experience and trust signals: This has a 5% to 15% effect on a site’s conversion rate. User experience includes the site’s functionality, such as navigation or site search. It looks at the accuracy and completeness of product information. It includes trust signals and whether the company publishes a street address, or badges indicating secure and protected transactions. It can be the look and feel of a website: does it look contemporary or outdated? These are the factors that impact a user’s experience and comfort level with a website. 
3. Product prices and shipping cost: This has a 5% to 15% effect on a site’s conversion rate. Pricing looks at overall competitiveness and how it fits into the market. If a site carries popular brand name products and at average or minimum advertised price (MAP) pricing, the impact is neutral. If prices are higher, it can reduce the conversion rate. 
4. Market segment: This factor affects 5% to 15% of a website’s conversion rate. This addresses the market you sell in and the competitive landscape. If a business sells in a very competitive crowded market segment or serves a market segment with fewer direct competitors, the conversion rate will be impacted. 
5. Email marketing: This factor affects up to 5% of a website’s conversion rate. This looks at whether a website had a well-managed email marketing program. The data showed customers who visit a website after receiving an email converted to buyers twice to ten times higher than the average shopper. Well-managed email marketing increases user engagement and conversion rate; however, if email marketing is overdone, it has minimal impact on the conversion rate.

Hedges & Company has created a conversion rate optimization tool where you can score your own automotive website. It is free to use and available here: https://hedgescompany.com/blog/2019/10/conversion-rate-optimization-tools/

READ MORE HERE: aftermarketnews.com & hedgescompany.com