By Philip Atkins, Director, Strategic Forecasts and Planning, Automotive Aftermarket Suppliers Association (AASA)
The automotive aftermarket is in the midst of change. Digital disruption is enabling an increasingly online-to-offline (o2o) model. The pace of this disruption in the automotive aftermarket is accelerating, driven mainly by end customer trust in online services and new strategies from so-called “digital giants” such as Amazon, eBay, etc.
The Automotive Aftermarket Suppliers Association (AASA) and Roland Berger, one of the leading global consultancy firms, address this change in a new, member-exclusive report: “Digital Transformation: The ‘New Retail’ Future of the Aftermarket And How to Win.” Through interviews with subject matter experts, digital experts and suppliers, Roland Berger carefully details in its analysis how the aftermarket landscape is changing and the effect this change will have on the movement and sales of goods. Some highlights are presented here, as a preview of the more detailed presentation planned for this year’s AAPEXedu.
Key Drivers of the ‘New Retail’ Aftermarket
The analysis indicates that a “new retail” aftermarket is emerging. It is characterized by a strong integration between the online and the offline worlds, differentiated customer experience, and lower cost-to-serve and working capital requirements.
There are three key drivers that explain the emergence of the ‘new retail’ aftermarket:
- Unmet end customer needs and pain points: Digital giants such as Amazon are reinventing and enhancing the customer journey by solving pain points.
- Growing acceptance of new service models: End customers are gaining trust in booking online services and adoption rate is increasing, especially among millennials.
- Positive economic value generated: Online to offline models achieve a lower cost structure for repairs and distribution in addition to reduced working capital and higher inventory turns.
New business models in the do-it-for-me (DIFM) segment are now proliferating with new entrants gaining ground. The so-called “digital giants” are displacing the traditional purchasing criteria and threatening incumbents.
According to the AASA / Roland Berger report, a large percentage of the independent aftermarket (IAM) is projected to be addressable by o2o by 2030. Adoption will vary by service type, how it is linked to underlying parts, by repair complexity, and maturity of online diagnostics.
The impact will be shared across the entire value chain, pushing all participants to rethink their strategies as the aftermarket transforms into a “new retail” world with changing customer behaviors and online growth. The disruption will create both winners and losers in the supply chain. “Winning” in the new retail will require players to develop a new set of capabilities.
Preparing for the New Sales Frontier
Preparing for this new sales frontier means assessing your company’s situation, its strengths, and your competition to create a plan. According to Roland Berger’s analysis, aftermarket participants will need to prioritize and to focus investments where it really matters – and that will be unique to each player. However, there is a caveat: the capabilities that made an aftermarket business successful in the past will be less relevant in this future. A retooling of competencies will be needed to keep pace with the expected change.
In the report, Roland Berger identifies four key requirements that will support the adoption of o2o business models:
- Digital marketing
- “Prime” fulfillment
- Customer intimacy
Digital disruption will create both winners and losers in the aftermarket supply chain. To win in the “new retail,” all aftermarket channel partners should begin to set their strategies now. Players that are able to take the lead in this transition and differentiate themselves are much more likely to be the winners in the o2o world.
Although the full report is available exclusively to our members, AASA believes that Roland Berger’s work is timely and informative for everyone in the aftermarket. AASA will partner with Roland Berger at AAPEX 2019 to present a discussion about the emerging o2o business model that will be a force in the aftermarket in the coming years. “2025 and Beyond: The New Retail Frontier, The Future of the Aftermarket and How to Win” will be presented at 2:30 p.m. on Wednesday, Nov. 6, at the Sands Expo Center. More details about AAPEXedu are available here.
If you want to be a winner in this new retail world, then join AASA and Roland Berger at AAPEX to find out how to win. To register for AAPEX 2019, go to aapexshow.com/attendee. You also can learn more about our landmark report by visiting the AASA Member Center during AAPEX, Sands 101, or our website, www.aftermarketsuppliers.org.
About Roland Berger
Over the last 50 years, Roland Berger has grown in its role as the leading consulting firm in the automotive industry. It enables established and rising automotive players to make their business model fit for current challenges. Roland Berger supports clients in the automotive and independent aftermarket in defining and implementing their aftermarket strategy. More information is available at: https://www.rolandberger.com/en/Expertise/Industries/Automotive/.