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Lower gas prices and higher employment are causing drivers to put more miles on aging cars, creating a growing market for auto part consumption that could increase by as much as 3 percent to 4 percent annually over the next four years. According to the Auto Care Association, the do-it-yourself market is poised to grow by 10 percent to reach $54bn by 2017. The do-it-for-me (DIFM) market, where professional mechanics perform the work, could grow by as much as 12 percent to $102bn. And the competition for sales is just heating up with Amazon Business getting into the parts business and gaining market share daily. Amazon Business is now live in eight countries, including five in Europe. Given all the opportunity for growth, it only makes sense that the behemoth is now pursuing the automotive aftermarket.
Amazon Business is intent on winning the commodity type business which completely changes the competitive landscape for those SKUs. Where customers used to take advantage of the convenience of “one-stop shopping”, now they are only one-click away from a greater number of options – often at better prices. One of the results for parts distributors will be smaller orders which are more expensive to service and create additional pressure on margins.
But distributors can and should compete on service. Amazon lacks the expertise about the products it sells – something that has been the cornerstone of service in the parts business. Put your extensive product knowledge to work for you, as it’s a key differentiator. Give customers a way to interact with your product experts online and in-person through social, chat, phone, etc. -- people who can offer advice on which product is best for the customer’s specific application and share technical information about how to use the product is paramount. Make it easy for them to view product reviews and make purchases.
Speed is an advantage that Amazon plays up in its brand messaging. But speed needs to be a differentiator for you too. Automation is one way to take time out of the fulfillment process, but you have to build the business case on both creating and sustaining competitive advantage and the incremental market share to be had by investing. The key is to have quick access to inventory that is strategically located as close as possible to your customer base, supported by the ability to provide same-day delivery, typically within an hour or so.
Most of all, to compete you must make the customer experience seamless and frictionless. You’ll need to realign your thinking to view the purchase from the customer’s perspective. That means systems are integrated, inventory is accurate, and service levels and communication are the same across channels. But making it seamless for your customer makes it complex for you.
Companies that recognize and respond to the shift in power to the customer are winning hearts and wallets. The key is not to get hung up on trying to save a penny. Investments will need to be made. Companies need more aggressive goals around creating and sustaining competitive advantage. Think bigger. Think long term. Focus on service, speed and a seamless customer experience.
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