It’s no secret that the Internet opened the floodgates to the information superhighway. Consumers and business executives alike have access to virtually everything and anything via the click of a few mouse buttons. But did anybody think we would be accelerating this quickly? Did anybody think we would be selling so many products online?
Where once people were hesitant to provide personal information like credit card numbers on the Internet, now is a virtual world where people can’t punch in those numbers quickly enough.
The online industry isn’t just growing by leaps and bounds, it’s growing by mountains, with proof in the statistics. eMarketer, an aggregator of data and analysis on e-business, online marketing and emerging technologies, says that business-to-consumer e-commerce revenues will jump from $41.5 billion in 2000 to $133 billion this year. Findings from one of eMarketer’s studies entitled, “Online Selling and eCRM” — which surveys both business and consumer websites to show how they are evolving — state that 74 percent of Internet users in the U.S. will engage in some form of online shopping.
The study also notes that the majority of Internet retailers saw a substantial increase in sales last year. Jupiter Research from January 2004 suggests that online retail sales will grow from $65 billion to almost $117 billion by 2008.
And, consumers aren’t the only ones shopping and spending in the expanding world of websites. Research from the Gartner Group says that worldwide, business-to-business e-commerce will reach $8.5 trillion by 2005. Yes, that’s correct — $8.5 trillion. So big is this industry that there are now definitions for the different types of sellers online. An e-tailer is a small company that conducts business only online — they have no storefront. A “clicks and mortar” business does business actively online as well as has a physical store location, and a “bricks and mortar” business is a traditional storefront business that is not using the Web to sell products.
The first two are becoming the ideal business models for future growth in various industries, the aftermarket being no exception.
The dot-com era of the late ’90s may have left many folks in the aftermarket saying, “I told you so.” They went on with their traditional business models, never looking back and never giving the Web another thought. But that attitude may soon serve detrimental, as the industry’s participants need to stay afloat this colossal wave of Web trends.
Columnist Bob Moore shares an industry analogy that sums up how fast the Web and technology are advancing: he compares it to dog years. In such an industry where change occurs at lightning-fast speeds, one could argue that for every 365 days, technology advances seven years.
For those who are keeping their heads completely above water — the ones who have decided to tap into this bottomless pool — rewards are being reaped.
The ‘techie’ tech
Did technicians even access the Internet five years ago? A lot has changed in so little time. Repair shops have gone from archaic to high-tech. They are no doubt becoming technology savvy, with more tapping their fingers on keyboards looking for parts they can purchase from websites.
According to the 2004 “How’s your business?” report from the Automotive Service Association (ASA), there are an estimated 79,695 independent mechanical repair businesses in the U.S., employing more than 318,000 people. More than 50 percent had $15,000 or less in inventory last year; slightly more than 20 percent had between $15,000 and $30,000. Almost 90 percent have Internet access and have changed from dial-up to broadband. About three out of four are using the faster methods to log on.
With regards to making purchases, three-fifths say they use the Internet to order and track parts. And more than half do product research and purchase tools and equipment via the World Wide Web.
Don Vidoli, co-owner of Fairfield County Motorsport in Fairfield, Conn., says, “We probably do 75 to 80 percent of our purchasing online.” Fairfield County Motorsport is a small six-bay, six-employee shop that does mostly general mechanical repair but also specializes in motorsport tuning and fabrication.
They’ve been computerized since 1987 and Vidoli, who is also an ASA member, thinks the logical extension has been tapping into the advent of the Internet. He has 10 computers in his facility total, five of which are networked and linked online.
So, where does Vidoli order his parts from? Worldpac is his main supplier; he uses them several times a day. “They are fortunately one of the earlier parts suppliers to embrace the concept of online ordering. They have been very impressive.” He explains how easy it is to look up prices and check parts availability. “They’ve done probably the best job I’ve seen of supplying information,” he continues, adding that the Worldpac site includes photographs and descriptions of products, as well as a summary with reference to technical services bulletins and other parts that might be needed for a particular job.
With two warehouses nearby, Worldpac (which was recently acquired by General Parts, Inc.) makes deliveries in Vidoli’s area three times a day. Vidoli’s shop also works with another online supplier from time to time called Ssf Import Auto Parts. In fact, the only time Fairfield Motorsport doesn’t order parts online is when they are forced to get something from the dealer. But clearly, the preferred method of doing business is via Web ordering. “For the most part, it’s faster if the system is set up correctly,” says Vidoli. “You aren’t playing telephone tag, which often times you end up doing in other situations.”
He suggests that for a small shop, the time-savings is a real competitive advantage. “With an increased focus on productivity, we really come across as professional to the customer.” Vidoli is certain Web use has increased their profitability and has helped them stay in better touch with the customer.
According to Aftermarket Business’ exclusive 2005 State of the Industry Report, most repair shops bought 27 percent of their product online in 2004. In 2003, jobber store websites were used by 51 percent of the respondents. The same amount reported buying parts from these sites in 2004. However, their use of specialty sites (62 percent) and salvage yards (32 percent) to procure parts is growing at a rapid pace.
Bill Moss, owner of Advantage Certified in Manassas, Va., says, “I think the online purchasing of products among techs will steadily grow.” Moss, an ASA member, also uses Worldpac’s site as well as a salvage site called car-parts.com, but only when he is looking for something that’s harder to find. “We buy products online about four times a week, but between tools, shop maintenance and cost of goods sold, we use the Web every day.” Moss’ 12-bay shop is a BMW-only sales and service facility so the majority of parts are dealer ordered.
Glenn Staats, CEO of Internet AutoParts, Inc. (IAP), says, “People who don’t sell over the Internet yet are not a step behind, but soon, they will be.” He believes that in two to three years, most distributors won’t have a choice: they’ll need to be online to sustain.
Internet AutoParts was the first industry-sponsored, Web-based automotive aftermarket parts procurement and communications company. It was formed by a number of companies including Activant, MAWDI, General Parts, O’Reilly and by financial investors led by Hicks, Muse, Tate & Furst. Staats says there are now about 30 shareholders. He also explains that this is as close to a cooperative as it gets. “The goal of IAP is to connect service dealer customers with their distributors online.” IAP provides the interface and the lookup, and its software communicates parts availability and costs between the warehouses and their respective service dealer customers.
WDs and jobber members need to have an electronic supply chain management system, like those offered by Activant, to link in. Service dealers are given usernames and passwords so they can log in, look up and order inventory from their vendors.
Staats says IAP has been extremely successful. “We do over 6,000 orders per day right now but it’s growing very fast. Last year, we grew an average of 10 percent month over month.”
But even with such impressive numbers, Staats is quick to point out that although $125 million will likely go through their site in 2005, it’s just a sliver of total sales: IAP’s shareholders sell between $5 and $7 billion each year. “We don’t have any major impact right now.” But, he notes that’ll change soon enough because “the Internet is going to connect every location in America, and it’s going to do it fast.”
Are you feeling behind the game now? Even with this online explosion, most analysts say not to worry quite yet. eMarketer reports that only 11 percent of corporations reported fully implemented e-business strategies a few years ago. That number has surely increased since then, but the market still has plenty of growing up to do. It is really still in its infancy.
Julie Ask, a lead auto analyst from Jupiter Research, says in regards to those hesitant to tap into the online world, “It could be a few years before a jobber/distributor is really impacted. You’re not dead in the water today, but it’s just a matter of time.” She reports that we’ll see a steady growth of technicians and consumers using the Web to find and purchase parts.
And that is the very reason Ron Decker of Decker Auto Supply, a two-step jobber, is selling to his service dealer customers via an online e-commerce ordering system. Another Activant system user, Decker and his wife, Linda, have been in the business since 1967 and have no problem pushing the technology envelope.
“If it wasn’t for our computer system, we’d be lost,” claims Decker. His buyer has been with him for 30 years and helps create online reports and models. They also sell about 17 percent of their volume electronically, which equates to about 125 invoices a day, not including those entered manually.
Two years ago, Decker says Internet sales accounted for only 1 to 2 percent of business. Using Auto ComLink for their interface, they’ve created a gateway for customers to connect to his Activant catalog, look up parts and costs and place orders. What the Web has done for Decker’s is “relieved my wholesale team to take better care of the people calling in. We haven’t gotten rid of any people, we are just able to do a better job because of the online system.” He estimates that they would receive about 200 more calls a day if they did not offer online parts ordering.
The California-based auto supply shop covers customers within a 20-mile radius in the Fresno and Clovis region. They have a fleet of 32 trucks with GPS that handles hot-shot deliveries all day. Their business is a true testament to the proper use of technology.
The next generation enthusiast
According to epaynews.com, research shows that business-to-consumer e-commerce totals in 2005 are likely to surpass $133 billion, depending on the research methodology used.
So, along with the professional technician, automotive enthusiasts are transforming their Internet habits, roaming Web pages and making purchases. The number of online automotive aftermarket sites is proliferating as fast as the number of new SKUs hitting warehouse shelves. A search for the keywords “purchase automotive parts and accessories online” on Google brought up 475,000 listings, offering virtually endless options for consumers looking to buy automotive parts, chemicals or accessories. These sites are popping up everywhere and for good reason: opportunity. There has been a flooding of automotive aftermarket specialty sites. Go online and see for yourself.
ExpressAutoParts.com boasts “the largest selection of auto parts on the Internet.” They even offer affiliate programs to aftermarket companies interested in partnering up. BuyAutoParts.com says they, too, offer “the largest selection of auto parts anywhere.”
Car Parts Emergency, at www.carpartsemergency.com, provides a complete online catalog of OEM car parts for import vehicles. The site says they ship from a network of warehouses around the country and claims they offer the “lowest prices on the Web guaranteed.” They’ll match or beat any online advertiser.
AutoPartsPlace.com offers millions of auto parts and accessories including aftermarket, OE and rebuilt items. They also guarantee “the lowest prices online.” AutoAnything’s website (www.autoanything.com) says they are one of America’s largest and fastest growing e-tailers of specialized automotive accessories. Auto-Anything was founded in 1979 by Selwyn Klein, who began as a manufacturer and retailer of Blue Ribbon genuine sheepskin seat covers and custom carpet floor mats. In 1997, he expanded the company into an online retailer of automotive accessories.
With all these sites, it must be hard to get noticed in an online crowd that constantly resembles the SEMA show, but that hasn’t been a problem for Tim Stewart, owner of Xccessory.com, an e-tailer of SUV, truck and car accessories.
Stewart has been lucky to have served in both the automotive and Internet industries. Having held positions at Nissan North America and Edmunds.com, he put his talent and expertise to use by launching his company in 2000. Based out of Lake Forest, Calif., this e-tailer has its own warehouse, but also drop ships from warehouse distributors and manufacturers for nonstocking merchandise.
Stewart’s strategy is unique in that he has more than one website featuring accessories products. “Xccessory.com is a landing point, but there are three different sites,” Stewart explains. One caters to the SUV market, www.suvxccessory.com; another to trucks, www.truckxccessory.com; and the last to passenger cars, www.car-xccessory.com. It initially launched as one site, but Stewart saw an opportunity for growth and tapped into it. He’s gone from 6,000 orders to about 15,000 per year. And he manages to get the attention needed in a somewhat cluttered online marketplace. “We focus on developing our site so it gets picked up by the search engines and we also use pay-per-click advertising.”
Since Xccessory.com sells mostly accessories from companies like Husky Liners, Aries Automotive and Auto Ventshade, the majority of customers are automotive enthusiasts, though they occasionally get calls from specialty installation shops and OEM dealers. They are also the largest online supplier of Hummer accessories.
The real ‘monster garage’
Though there are several sites like Xccessory.com that are succeeding and growing, there is no other site that compares to the goliath that is eBay.
Established in 1995, eBay boasts itself as “The World’s Online Marketplace.” Overall, the site reported having 135 million registered users at the end of 2004, with net revenue of $3.27 billion. But besides selling apparel, furniture, collectibles and electronics, they also consider themselves the world’s largest online marketplace for automotive parts and accessories, selling everything from spark plugs and control knobs to transmissions and hoods.
A part or accessory sells on eBay every two seconds. An auto body part sells every 11 seconds and a powertrain part sells every 25 seconds.
“We have several hundred thousand different sellers, from individual persons who have extra parts in their garage all the way up to distributors and manufacturers,” says Paul Nadjarian, senior category manager of eBay Motors. “Some of our biggest sellers are retailers. They are seeing eBay as a complementary channel to their retail business when they have closeout inventory. It helps them move inventory quicker.” Nadjarian estimates that in 2004, more than $1 billion in gross merchandised volume was sold at eBay Motors, which has more than doubled in the last two years.
And there is no lack of parts for sale. You name it and eBay probably has a seller for it. In fact, Nadjarian thinks it might be easier to try and identify what items are not sold on the site.
As for buyers, they come from far and wide. They are consumers and professionals. They are collectors and distributors. Moss of Advantage Certified says, “I have techs that buy toolbox purchases on eBay and they get it for half the price.” Though he hasn’t bought anything on eBay directly for his shop, he uses the site to buy items for his personal street rods. And Vidoli of Fairfield County Motorsport has a similar story, though he uses the site to sell old stock or used parts.
eBay Motors has been the No. 1 automotive site in terms of monthly unique visitors for 33 consecutive months, according to AC Nielsen’s NetRatings, averaging 10 million unique visitors. And people aren’t just spending a few minutes on the site. They are tallying an average of 49 minutes, according to eBay numbers for December.
With eBay being so heavily involved in the automotive aftermarket, we wondered if other large online entities were planning on entering the business. Searches for “automotive” on Amazon’s website brought up only two pages of items like automotive safety kits, text books and seat cushions. Brand specific products included Actron auto scanners, Mr. Clean car wash systems and Yakima mounting accessories.
Overstock.com, another extremely large online e-tailer, has very few automotive-related items. There is, however, a “request to sell products” form that can be filled out by any vendor interesting in selling on the site, though a spokesperson says that Over-stock.com has no plans to sell auto parts and accessories any time in the near future.
Though that may be their strategy, it surely shouldn’t be yours.