The keys to the digitisation of the sales aftermarket sector
2020 proved to be a tough year for many companies. The global health crisis shook virtually all business sectors. In the case of the aftermarket sector, many experts were predicting a slow and costly recovery. However, there are signs that this recovery is likely to be faster than expected. The ageing of the European car fleet and the digitalisation of the aftermarket sector will be an excellent opportunity to rescue the AfterMarket industry.
Despite the decline in vehicle mileage in 2020, the pandemic has greatly affected consumer behaviour patterns. Fear of the virus and social distancing has changed our habits of movement. Insecurity in the face of social contact has led people to opt more for private transport, which has had a direct impact on shopping in the IAM (Independent AfterMarket) sector.
Growth in spare parts distribution
The digitisation of parts and services retailing across the sector is a trend that has accelerated the recovery in the aftermarket; in fact, the online distribution of spare parts is already above 2019 figures, according to a study conducted by ANCERA. According to this report this sector closed the first quarter of the year with a growth of +2% compared to the same period in 2019, before the pandemic.
It is not only the data that has improved but also the expectations with which Spanish retail expects to conclude the 2021 financial year. Specifically, companies expect to end the year with a growth of +12% compared to 2020, after the second quarter has exceeded all forecasts with a growth of 4% compared to the same period of 2019.
This is partly due to social distancing and fears of Covid-19 infection in the workshops, where there may be no non-contact options.
Growth of the workshops
In the case of workshops, we find a two-speed evolution, since in the first quarter of 2021 there was talk of a significant drop due to the bad weather in Europe (notably the case of the Filomena storm in Spain) and the mobility restrictions imposed in a large part of the continent due to the global pandemic.
However, the second quarter has been much more positive than the forecasts made. According to the latest report by CONEPA, during the second quarter the drop in workshop turnover was only -3% compared to 2019.
The most positive news can be found in the month of June, which has become the best month in the last 2 years, with a positive balance in almost all the companies in the sector. Activity was 5% higher than in the same month of 2019.
Digitisation is key in this recovery process
Some of the keys to this success have been digitisation. The inactivity generated during the months of confinement has meant that many companies in the sector have invested their time and effort in modernising and digitising their inventory and order management systems.
Not only workshops, but also manufacturers have improved their communication with the different actors in charge of managing and distributing spare parts. To a large extent, technology has made the Aftermarket (IAM) sector more accessible.
However, aftermarket manufacturers’ workshops (IAMs) are generally far from being digitally ready compared to OEM workshops, which can, in turn, be seen as an opportunity for future growth.
In this case, the challenges for the IAM workshop network are often resistance to costly digital transformation and the lack of a centralised management entity with powers to set standards and drive change.
IAM players have a wealth of options to drive digitalisation efforts, from marketing and sales to new products/business models and operational processes, but success requires the support of an agile organisation. There is no doubt that digitisation initiatives are critical to ensure the long-term relevance of industry players.
Current car fleet can stimulate recovery
The pandemic has changed the way we live, and that includes our driving habits. The willingness and spending power of drivers, as well as their preference for private transport, has positively influenced the recovery of the aftermarket industry.
With more people working from home, increased financial burdens and less personal travel, consumers are more likely to postpone buying a new car in the current climate. Instead, drivers are likely to continue to use their current vehicles and that – in the long run – benefits the aftermarket sector.
The age of the car fleet is a key factor
In the United States, the average age of the car fleet is around 12.1, a record high for the US market, according to IHS Markit data. In Germany, Poland and Russia it is about 9.6 years, 14.1 years and 13.4 years respectively. This may lead to increased investment in the repair and maintenance of the existing vehicle fleet, which will benefit operators in the aftermarket industry.
The digitalisation of the aftermarket sector is thus emerging as one of the main levers to accelerate the long-awaited recovery in the aftermarket sector. Investment in improved logistics and inventory systems will be the key to improving efficiency in a service with ever-increasing demand.