Automotive eCommerce: What is the Future of Aftermarket Sales?

Featured article by Adam Smith

The global automobile sector is on the verge of changing monumental proportions. Since megatrends are likely to reshape the future of automotive eCommerce and the automotive aftermarket worldwide, this study seeks to quantify trends’ effects opportunities for original equipment manufacturers (OEMs) while also providing strategies and approaches to navigate the dynamic and challenging transition.

Why is this significant? Well, when it comes to the automotive aftermarket sales, this is particularly important since the “sweet spot” for” automotive” parts producers, distributors, and retailers is about 10 years, with the exact number varying based on the component type.

From the BMW through the Ford Model T and the Bentley, automobiles have seen significant changes throughout history. In addition, a move to eCommerce platforms as a significant sales channel in the automotive aftermarket retail sector is one of the driving trends in the automotive retail industry as the cars themselves make the conversion to electricity.

More and more of the buyer journey is taking place online, which is not entirely due to the COVID-19 epidemic, as some believe. The industry has been heading in this direction for some time, thanks mainly to the maturation of Millenials into a significant automotive aftermarket-buying generation.

Detailed below are several future scenarios for automotive eCommerce aftermarket sales to watch for in the years ahead.

What is the future of aftermarket sales?

Consider the concept of self-driving cars, and expand upon it for aftermarket sales. For example, remote vehicle diagnostics and routing services are not always associated with businesses that have manufactured a physical component of the car, such as original equipment manufacturers (OEMs) or suppliers.

In fact, new business models may develop that will fundamentally alter the conventional value chain logic of the aftermarket. Moreover, since the other four trends are all tied to particular actors along a specific value chain, each of them can potentially transform an industry as the roles and responsibilities of those individuals shift. Yet, futures in three aftermarket situations are very different from one another.

Throughout the value chain, there are five kinds of actors that address possible strategic actions concerning three provocative future automotive aftermarket eCommerce sales scenarios to present the broad spectrum of how the aftermarket game might change depending – not least – on the strategic moves taken by the players involved in the aftermarket game.

A short explanation of three possibilities follows, including one with a “balanced” perspective and two with more extreme outcomes that may seriously affect automobile suppliers.

The digital aftermarket world is a well-balanced universe

Undoubtedly, stakeholders at all levels of the automotive aftermarket value chain benefit from the digitization of processes and customer interfaces, according to this optimistic forecast for 2030: Original equipment manufacturers (OEMs), suppliers, and distributors reap the benefits of digitizing internal processes, adding value through car data, and placing a strong emphasis on e-commerce. Using this role, intermediaries can acquire exposure with industry clients since they are known as the face of automotive aftermarket sales.

The industry’s “power market” is reasonably balanced in this scenario since most existing participant categories retain their places in the market. Even when new entrants establish themselves in this sector, incumbents hang on to the most considerable portions of the aftermarket pie in their respective fields.

Often, even in circumstances that seem to be well balanced, not every player will come out on top. As the number of intermediaries grows, brick-and-mortar shops may lose their ability to attract enough customers onsite for daily interactions and sales.

How distributors are in control

In 2030, rapid distributor growth, similar to what has occurred in North America, into various value chain sectors and the capture of new market share may be revealed. Further, three significant assets in this potential scenario could be utilized, including:

– Enhancing distributors’ distributors’ cities and customer relationship management skills by providing them with direct customer access and data access via workshop cooperation.

– Significant consolidation across Europe, with the top five distributors owning the vast bulk of the market.

– Because of distributors’ skills, they can gain control of the fleet company and profit from a value chain linked from beginning to finish.

OEMs are in charge of the aftermarket

Another possible outcome is OEMs will expand their operations and enjoy more market dominance in 2030. Think of this in relation to customer interaction in the vehicle. Thus, using their network of service workshops, OEMs can maintain complete control over face-to-face customer contact, excluding third parties from a significant portion of direct customer interaction.

What does this mean? In terms of data mining and analysis,OEMs can build strong analytical skills, and they are increasingly incorporating remote diagnostics and improving the value chain into their operations.

Manufacturers and distributors are increasingly expanding their operations into other stages of the value chain through partnerships and new ventures. In contrast, the activities of parts manufacturers and distributors are decreasing towards the provision of components to OEMs.

An increasing number of automotive aftermarket sales customers are making purchases via eCommerce

One of the most prominent developments in aftermarket sales, is the always-expanding number of customers understanding that they no longer need to visit a local dealership to make a purchase. Take a step back in time, five to 10 years, and eCommerce aftermarket sales was still in its infancy. To get estimates, compare product lines, and test out the offerings, most customers shopped in brick-and-mortar storefronts.

Even while all of that is still feasible, the act of completing a transaction online is what we’re concerned we’re in this case. Carvana, Carmax, CarGurus, and eBay Motors are just a few companies that are setting the standard. These data from IBISWorld convey the proof in the pudding:

– The market for online auto dealers in the United States is projected to grow to $36.2 billion by 2021.

– Over the next five years, market size is expected to increase by 5.4 percent.

– From 2016 to 2021, the market size of online auto dealers in the United States increased by 4.3 percent on an annualized basis.

Also, according to Carvana, they sold about 244,000 cars online in 2020. This is a 37 percent increase over the previous year. Moreover, the United States is not the only market where automobile buyers are increasingly turning to the Internet. Statista reports that customers in the United Kingdom, India, and China are increasingly receptive to the idea of purchasing a car via eCommerce.

When looking at these possible future scenarios from an automotive aftermarket seller’s viewpoint, it becomes apparent that quick execution is vital. Both the more extreme scenarios and the example that depicts a more balanced world show that the future position of automotive aftermarket eCommerce sales suppliers will be very different from what it is today. How? Expect new developments for optimizing business models, revenue streams, skill sets, and partnerships in addition to the traditional tactics currently in use.