One of the most popular topics that I am receiving more and more questions about concerns Parts E-Commerce. Parts E-Commerce is technically not new as it has been for quite few years now, but with more and more Manufacturers getting into the game, more and more dealers are asking questions.
When Parts E-Commerce hit the stage quite a few years ago, it was pretty much only for the big players in the Parts OEM Dealer game and larger chain Aftermarket Parts Suppliers. Now, they have brought it all down to the "local level" for all dealers of any size in order to increase market share where anyone could get into the game of Parts E-Commerce.
When it all started, E-Commerce Websites were popping up everywhere and they are still out there today. Many Automotive Manufacturers are now jumping in with their own E-Commerce Sites and pulling in individual dealers into the mix who perhaps would not sign up with other E-Commerce Sites so all dealers can now participate.
With all the above being said, it now comes down to whether we, at the dealer level should jump into the game, no matter how big or small the individual dealer is. The end result with more and more dealers participating, the overall scope of Parts E-Commerce Sales will expand and grow.
This is where it all starts in this month's issue of ACG "Smart Parts" as we will break it all down and answer the overall question...
E-Commerce Parts: "Should We, or Shouldn't We?"
Like in many other potential sales ventures, we have break it all down with our "due diligence" to see if it's worth getting into in the first place. Some of the areas that we need to start with, especially if we are going with the Manufacturers Programs is "risk versus reward".
In this issue of ACG "Smart Parts", we will break it all down by category in order to come down to the decision of whether or not it's all worth it and how much we should expect as far as our Return On Investment, (ROI).
Here are the categories in our quest of finding out this month's answer concerning Parts E-Commerce Sales...
- Program Costs versus Potential Sales & Gross Opportunities
- Choosing the Right E-Commerce Platform, (if we do go E-Commerce)
- Shopping for the Right E-Commerce Website vs. the Manufacturer
- Reviewing the Most Recent E-Commerce Parts Sales Data
- Shopper Demographics
- Dealership Internal Accounting
- Functionality
- Navigation
- Shopping Cart Options
- Tech Support
- Pricing (both upfront and monthly fees)
- Manufacturer Costs
- OEM & Aftermarket Options
In addition to the above with our E-Commerce Platform, we then have to weigh the differences from those listed at the Hedges Company Website versus just going with the Manufacturers Program.
This involves having the same expectations that we listed above in choosing the right platform and now weighing the costs of each program. Not only that, but we also have to consider what I refer to as the Manufacturers "back end" money into the mix as well.
On top of that, and on the other side of the "back end" money, what are the limitations in the Manufacturers Program versus how much more control we could possibly have with going with an outside E-Commerce Website.
Reviewing the Most Recent E-Commerce Parts Sales Data:
This topic in our breakdown categories in my opinion would play a huge role in my overall decision of getting into this E-Commerce game. Thanks again goes out to our friends at Digital Commerce 360, (www.digitalcommerce360.com) for their excellent research through 2023 as 2024 stats are not yet available.
According to Digital Commerce 360 with their Top 1000 list of retailers, 2023 U.S. Parts E-Commerce Sales rose to 9.12B over 2022, which was 8.82B resulting in a 3.5% increase in E-Commerce Parts Sales.
Also, a U.S. Commerce Department study revealed that Automotive Parts & Accessory Sales purchased in 2023 reached 133.24B, up from 123.83B in 2022, resulting in a whopping 7% increase year over year.
Although these are positive increases, Digital Commerce 360 had this to add as well...
"Category growth for Automotive Parts & Accessory Retailers in the Top 1000 was quite different for Online Sales and Total Sales, (online & offline) Category Sales declined 3.6% in 2023, while Total Sales also fell to 7.6% in 2023"
This information seems to contradict from the previous statements, but it does indicate a kind of shift in where and how customers choose to purchase Automotive Parts & Accessories. Perhaps that's why they are more educated in comparing and shopping for price now than ever before.
Another survey provided to us from Statista, (www.statista.com) breaks down our Customer Base Demographics as to the age of our Automotive Parts & Accessory Buyers. This provides us key information as we do our own market surveys based on age demographics and how much they buy.
- 65 +: 7.3%
- 55-64: 13.5%
- 45-54: 18.8%
- 35-44: 23.0%
- 25-34: 23.2%
- 18-24: 14.3%
In addition to doing our research on who are our buyers from an age standpoint, we have to also research where we live from perhaps a rural area or up to metropolitan areas. This research will go beyond age breakdowns and take us into potential sales overall along with where Automotive Parts & Accessories fit in, (#7) in the Overall Retail Sales Market.
After that, we also have to look at our Automotive Retail Share by brand as compared to the of the Overall Automotive Retail share by Manufacturer. Breaking all of this down is a key component to finding out our potential in additional E-Commerce Parts Sales.
The goal is to define who our customers are including those who purchased from our dealership and those who chose not to return for whatever reason. This is also where many dealers miss opportunities in general as customer retention needs to be at the highest level.
Dealership Internal Accounting:
This is perhaps the most difficult area in many dealerships today that are participating in E-Commerce Parts Sales at whatever level. It is also sometimes determined by how the Manufacturer conducts the initial E-Commerce Parts Sale.
One most common example is that the customer purchases the part from the Manufacturer, then the dealer actually provides the part and bills the part Internally. This is not the proper procedure.
If the Manufacturer initiates the sale, the customer pays the Manufacturer, then the dealer provides the part to the customer. Then, the Manufacturer reimburses the dealer, and we now have a conundrum right from the start.
If the above is how the Manufacturers' Program works, then it should be considered as a "Charge Customer". Many dealers make the mistake by considering these transactions as an "Internal Sale", which is definitely not.
An "Internal Sale" is between dealer departments only and these E-Commerce Sales are just like a customer that has a Charge Account. In other words, and if you are selling E-Commerce Parts as listed with the above example, a Charge Account should be set up for the Manufacturer.
Works the same way as the Manufacturer initially accepts payment from the customer, who will then reimburse the dealer. When the customer picks up that E-Commerce part at the dealer, it is then "charged" the Manufacturer.
Once the dealer is reimbursed from the Manufacturer, the credit from the Manufacturer is then applied to the Manufacturers' "Charge Account", resulting in a "wash". Billing the E-Commerce part as an Internal is not what happened here.
As far as determining if this E-Commerce sale is a Retail, Wholesale, or an Accessory Sale to me is determined by my profitability. If the Manufacturer only allows me to bill these parts at a wholesale price and I am locked in, then it needs to be accounted for as either a wholesale or accessory sale.
If I am allowed to "recoup" full retail price, then these E-Commerce Sales will be moved to Counter Retail. The reason is very simple that if these E-Commerce Sales are out of my control as to how much gross can be achieved, then the sale should reflect the proper Sales & Cost of Sales Accounts on the Financial.
So!...Now that we have covered all the aspects, details, research and data that will lead to our own decision as to whether or not we should "dabble" into E-Commerce Parts Sales, the only remaining question is...
"Should YOU Get into E-Commerce Parts Sales?"
Your answer to that question is staring at you in the mirror if you do all the proper preparation and research...
We would also like to "Thank" our research team listed and we welcome all to visit their websites for more detailed information on this topic.
If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :
(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...
