Washington Automotive Wholesalers Association

Biggest And Fastest Channel Changes In Aftermarket History Underway

"Big and rapid changes are underway in light vehicle aftermarket channel volume and share. Thousands of Dealer closings are changing how products reach the car and light truck aftermarket."

"Dealer closings will significantly reduce the volume and share of products moving through the OE channel; while all other light vehicle aftermarket channels will gain product share, some more than others."

Jim Lang, Lang Marketing Group

Diminishing OE Share

Dealers generate three types of OE channel volume: products installed in Dealer bays, products sold by Dealers over their parts counters (primarily DIY sales), and Dealer wholesale product sales to Independent Installers. The growing avalanche of Dealer closings will reduce OE channel product sales in all three areas. 

More Than Bay Sales Loss

Dealer service bay product share will decline, releasing over $3 billion in Service market (non-warranty) product sales to the Independent aftermarket. This represents only a portion of the growing OE channel product loss. For some products, the majority of OE channel volume does not pass through Dealer bays, this is particularly true of OE products redistributed by Dealers to Independent Installers. 

Independent Channel Gains

As OE channel volume declines, each of the four Independent aftermarket channels will increase its product share: Integrated, Traditional, Specialized, and the Import channel.  

Product Volume vs. Product Share

While reduced OE channel activity assures an increase in Independent channel product share, how this translates into greater aftermarket volume for Independent channels depends on overall aftermarket performance as well as the strength of Service and Retail outlets served by each Independent channel. 

Integrated Distribution

The Integrated channel (characterized by ownership--or franchise affiliation--of products not changing hands from the time products are purchased from Manufacturers to the point of ultimate consumption or sale to an Installer) is best positioned to gain the greatest 2009 channel share. Integrated distribution strength rests in its participation in both the Service and Do-It-Yourself markets, as well as the types of Service and Retail outlets engaged in Integrated distribution.  Integrated distribution also generally has a cost advantage over multi-step channels (such as Traditional distribution). 

Traditional Distribution

The Traditional channel (multi-tier distribution involving Warehouses and/or Jobbers engaged in two-step and three-step distribution) will rank behind Integrated distribution in light vehicle product share gain. Nevertheless, the Traditional channel is well positioned to capture a substantial portion of the billions in product volume up for grabs as a result of Dealer closings. Traditional distribution is strong in replacement parts sales, a product sector which will weather the current economic downturn better than other major product categories such as accessories and chemicals. 

Specialized Distribution

Specialized distribution (characterized by its focus on a limited array of products or involvement in a particular segment of the aftermarket specializing in certain types of products) will increase its 2009 aftermarket product share. Distribution efficiencies as well as its ability to quickly adapt to changing market conditions (because of direct selling) puts Specialized distribution in a strong position to benefit from aftermarket changes. However, weak accessory sales, a mainstay of many Specialized distributors, will dampen the overall 2009 performance of this channel. 

Import Channel

The Import channel (involving Import Warehouses and/or Import Jobbers) will benefit from the expanding 2009 foreign vehicle aftermarket as well as the ability of Foreign Specialists to capture product sales abandoned by closing Dealers. The Import channel will rank among market leaders in percentage gain of aftermarket share, assisted by multi-branch Import Warehouse growth along with the availability of foreign OE brands through many of these outlets.

For complete analysis of all major aftermarket channels, see the 2009 AAIA Factbook & Lang Annual. Click here for a brochure and click here for an order form.