When R.L. Polk & Co. released its annual vehicle population report in February, it predicted that the aging vehicle parc meant more business for the aftermarket industry. And that makes sense: old cars need to be repaired and maintained in order for their drivers to keep them on the road.
The report obviously implied that independent repair facilities would benefit from this trend. Older vehicles also spell success for warehouse distributors — who are reporting an increase in revenue and profits almost across the board.
"An aging vehicle population is good for all sectors of the aftermarket," Dan Smith, president of the Capstone Financial Group, told Aftermarket Business magazine during an exclusive interview. "We've studied the distribution side of the business carefully, and it would appear that the companies that have begun to concentrate on the do-it-for-me side of things are really seeing their business increase."
For the past several years, warehouse distributors have been focusing their efforts on the commercial side of the aftermarket. This sea change, which marks a shift in focus from the purely retail side of the business, is paying off in dividends for companies such as Advance Auto Parts, which purchased Autopart International to gain a stronger foothold in the New England market.
"Generally speaking, the do-it-for-me side of the business focuses on non-discretionary type of repairs," Smith adds. "Consumers just have to have these items, so we haven't seen a lot of softness in the DIFM sector yet."
Of course, there are certain segments of the distribution chain that have suffered with the downturn in the economy. Of all the sectors, the specialty distributors and retailers have been hardest hit. Smith attributes this to a simple desire on the part of consumers to save money for the purely non-discretionary repairs their cars will need.
Although distributors have changed their focus from the retail to the commercial side of the business in recent years, Smith says that they have not yet had to change their business strategy.
"So many of these warehouse distributors already have an excellent geographic concentration," he says. "They've done a good job of buying up retail locations or storefronts in concentric circles around their warehouses, and have become entrenched."
Smith cautions that there's not a lot that these distributors can do to change their business model at this point, aside from sourcing out their products — which he calls an "iffy proposition."
According to Polk's report, the median age of passenger cars in operation remained at 9.2 years in 2007, tying a record high in 2006. The median age for trucks is increasing however, jumping from 5.8 percent in 2006 to 7.3 years in 2007. And although registrations were down, the median age for light trucks in 2007 increased by 4.4 percent to 7.1 years.
"The median age of trucks, while still lower than cars, is starting to increase more now than in the recent past as the surge of pick-up trucks, SUVs and minivans purchased in the 1990s get older," says Mark Seng, vice president of Polk's Aftermarket team.
Which easily translates into one thing — more cash in the aftermarket's proverbial back pocket.