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Auto Parts Stores 2016

Auto Parts Performance

• Different sources measure and describe the performance of the retail auto parts industry differently. According to the Statista data below, sales at retail totaled $142.6 billion during 2015, or a 3.9% increase from 2014.

• The NPD Group tracks 29 automotive aftermarket categories. Its findings also revealed a 3.9% increase in dollar sales during 2015, but the total is a mere $14.6 billion. It forecasts a 2.7% increase for 2016 to $15.1 billion.

• The NPD Group and other industry watchers cite the average age of 11.5 years for all vehicles on US roads during 2015 as a primary driver of industry growth. The AAA reports that 35% of Americans have delayed repairs, which eventually cost more.

US Automotive Parts Aftermarket, 2013–2018

|Year |Total |% Change |

|2013 |$132.1 billion |--- |

|2014 |$137.3 billion |+3.9% |

|2015 |$142.6 billion |+3.9% |

|2016 |$148.9 billion |+4.4% |

|2017 |$153.4 billion |+3.0% |

|2018 |$158.2 billion |+3.1% |

Statista, April 2016

Wall Street Darlings

• According to the 2015 Automotive Aftermarket Investment Report, the parts retail & distribution sector of the industry generated a 17% return on its 2015 stock performance, compared to a -.73% return by the S&P 500.

• The total automotive aftermarket sector experienced a 0.2% increase in sales and 7.4% increase in earnings for 2015, which was the 8th straight year of exceeding the overall performance of the S&P 500.

• The NPD Group reported that Advance Auto Parts’ same-store sales decreased 2.5% during fiscal Q4 2015, AutoZone Inc. increased 3.6% during fiscal Q2 2016 and O’Reilly Automotive Inc. increased 7.7% during fiscal Q4 2015.

US Auto Parts Retailers’ Equity Performance, 2014–2015

|Retailer |Price as of |Price as of |% Change |

| |12/31/14 |12/31/15 | |

|Advance Auto Parts |$159.28 |$150.51 |-5.5% |

|AutoZone |$619.11 |$741.91 |+19.8% |

|Genuine Parts (NAPA) |$106.57 |$85.89 |-19.4% |

|O’Reilly Automotive |$192.62 |$253.42 |+31.6% |

|Uni-Select |$26.42 |$49.38 |+86.9% |

Automotive Aftermarket Suppliers Association, 2016

Inside Consumer Purchasing Decisions

• According to the AAA’s 2016 Your Driving Costs study, the cost of owning a motor vehicle is the lowest of the past six years, with lower gas prices the primary contributor. Maintenance costs will increase 3.3%, however, due to motor oil prices and shop labor.

• Aftermarket Business World’s Consumer Attitude Study (October 2015) found that approximately 75% of auto parts shoppers compare prices; however, it was not the primary reason for buying a specific product in most of the 12 parts categories.

Auto Parts Consumers’ Shopping Habits by Selected Parts, October 2015

|Auto Part |Top Ad Channel |Top Purchase Location |

|Auxiliary lighting |Television: 34% |Auto chain: 43% |

|Batteries |Internet/email: 45%* |Discount store: 65% |

|Battery charger |Internet/email: 31%* |Auto chain: 44% |

|Brakes |Internet/email: 20%* |Auto chain: 50% |

|Chassis |Television: 31% |Auto chain: 37% |

|Gaskets |Direct mail: 36%* |Auto chain: 29% |

|Shocks & struts |Television: 38% |Independent repair shop: 31% |

|Spark plugs |Television: 24% |Auto chain: 42% |

|Starters & Alternators |Internet/email: 29%* |Auto chain: 33% |

|Water pumps |Internet/email: 31%* |Auto chain: 50% |

|Wheel bearings |Internet/email: 31%* |Independent auto shop: 35% |

|Wiper blades |Television: 25% |Auto chain: 44% |

Aftermarket Business World, October 2015 * Television second

Attracting Latino Americans

• According to Aftermarket Business World’s Hispanic Consumer Attitude Study (November 2015), “a recommendation” was the top reason for purchasing water pumps and battery chargers, but was second for auxiliary lighting.

• Similar to the findings in the table above, an auto chain was Latino American auto parts consumers’ top purchasing location for the 3 categories measured: water pumps, 50%; auxiliary lighting, 48%; and battery chargers, 46%.

• When asked if they were likely to return to the purchase location, “highly likely” was the #1 answer in all 3 product categories: auxiliary lighting, 53%; battery charger, 42%; and water pump, 64%.

Top 5 Advertising Channels* by Auto Part, November 2015

|Auxiliary Lighting |Battery Charger |Water Pump |

|Newspaper: 46% |Newspaper: 28% |Internet/email: 30% |

|Saw/heard no ads: 26% |Television: 26% |Television: 29% |

|Direct mail: 14% |Direct mail: 20% |Direct mail: 24% |

|Magazine: 13% |Magazine: 16% |Magazine: 21% |

|Television: 9% |Radio: 12% |Newspaper: 15% |

Aftermarket Business World, November 2015 * for Latino American consumers

The Online Parts Counter

• According to findings from eBay Motors’ Future of Automotive Shopping Survey (released October 2015), 47% of consumers surveyed said they had purchased auto parts online. Those 30 to 39 years of age were the largest group by age, at 54%.

• More women are also purchasing auto parts online, or 41%, according to the survey and 56% said they installed the parts they bought. In addition, 36% of women made those purchases on a mobile device compared to 28% for men.

• During a mid-2015 investor relations presentation, U.S. Auto Parts Network, Inc., an online auto parts retailer, forecast total online auto parts sales from DIYers would reach $6.6 billion during 2015, and then almost double by 2018 to $11.5 billion.

Growth Forecast for Online Purchases of DIY Vehicle Parts, 2013–2018

|Year |Total Sales |Online Sales |Online Sales Growth |Online Percent of All |

| | | | |Sales |

|2013 |$47.2 billion |$4.6 billion |NA |9.70% |

|2014 |$49.0 billion |$5.5 billion |+19.6% |11.20% |

|2015 |$50.8 billion |$6.6 billion |+20.0% |13.00% |

|2016 |$52.8 billion |$8.0 billion |+21.2% |15.20% |

|2017 |$54.8 billion |$9.5 billion |+18.8% |17.30% |

|2018 |$57.0 billion |$11.5 billion |+21.1% |20.20% |

Internet Retailer (U.S. Auto Parts Network), September 2015

Fixes and Failures

• According to Aftermarket Business World’s Reseller Product Study in the February 2016 issue of the magazine, 53% of resellers surveyed said product sales increased during 2015 and 58% said they expected them to increase during 2016.

• Despite resellers’ optimism, the 2 largest chains scored poorly on the 2016 American Consumer Satisfaction Index: Advance Auto Parts, 72, the second lowest in the specialty retailer segment, and AutoZone, 75. The media score in the segment was 77.

• In its report on 3-D printing in the automotive industry, Frost & Sullivan predicts that the use of innovative materials will allow OEM manufacturers and suppliers to print parts quicker and at multiple locations and custom print parts for individual customers.

Where the 89 Million “Sweet Spot” Vehicles* Are Located in the US, 2015

|Region |Percent |

|Northeast |37.5% |

|South |35.7% |

|Midwest |35.2% |

|West |33.5% |

Aftermarket Business World, September 2015

* Vehicles 6-12 years old; prime age for auto parts

Additional Analysis

With the help of recent surveys from The Media Audit for Cincinnati, OH and San Diego, CA, some interesting parallels and contrasts emerge in the profile of auto parts consumers.

• Not surprising, men are the primary auto parts buyers in both markets: 60.1% in Cincinnati (fall 2015 survey) and 64.8% in San Diego (winter 2016 survey).

• As expected, most of the auto parts consumers in Cincinnati were European Americans, at 78.4%, with African Americans a distant second at 14.3%. Of course, San Diego had a much higher percentage of Latino American buyers, at 34.1%, although European Americans were the largest ethnicity at 48.7%.

Remainder of Auto Parts Consumers’ Profile

|Cincinnati (Fall 2015) |Percent |San Diego (Winter 2016) |Percent |

|Adults, 25–34 |30.1% |Adults, 25–34 |28.1% |

|Adults, 35–44 |20.9% |Adults, 35–44 |28.4% |

|Adults, 55–64 |16.7% |Adults, 50–54 |15.1% |

|Income, 25K–35K |10.5% |Adults, 55–64 |12.8% |

|Income, 50K–75K |24.3% |Income, 15K–25K |14.1% |

|Income, 75K–100K |15.8% |Income, 50K–75K |18.9% |

|Income, 150K+ |14.3% |Income, 75K–100K |26.7% |

|High school graduate |28.2% |Income, 100K–150K |10.8% |

|Some college |37.9% |Income, 150K+ |11.7% |

|College degree |22.4% |Some college |45.5% |

|Advanced degree |10.8% |College degree |37.6% |

The Media Audit, April 2016

It’s interesting to note that although the largest age group of auto parts consumers is 25–44, there is a significant percentage 50 and older, especially in San Diego. The data also refute the stereotype of auto parts buyers being predominately low income. Not only are the largest income brackets middle to upper-middle in both markets, but also there is a relatively substantial percentage of consumers with incomes of $100,000 and greater.

Sources: The NPD Group Website, 4/16; Statista Website, 4/16; IHS Automotive Website, 4/16; Automotive Aftermarket Suppliers Association Website, 4/16; Motor & Equipment Manufacturers Association Website, 4/16; Aftermarket Business World Website, 4/16; Internet Retailer Website, 4/16; Retail Info Systems News Website, 4/16; The American Consumer Satisfaction Index Website, 4/16; The Media Audit Website, 4/16.

Updated: April 2016

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