The automotive aftermarket’s growth over recent years probably isn’t going to slow down any time soon. In fact, the global market is expected to exceed $500 billion by 2027 with a Compound Annual Growth Rate of just under 4%. While the growth rate will be less robust for mature markets, such as North America, several factors and trends bode well for the industry. As technological advances make it possible to keep vehicles on the road longer, there’s a greater need for aftermarket products and services. Increases in sales of used cars and poor road infrastructure are also likely to contribute to growth.
Despite anticipated gains, trends in the automotive aftermarket will cause disruptions as well. In order to succeed in the coming decade, manufacturers, suppliers, and retailers will need to adapt. Drivers will almost certainly continue to seek out products and services to achieve higher vehicle performance, but shifts in the products consumers demand and the ways in which customers make decisions and purchases will require companies to develop market strategies that reflect shifting paradigms.
Maintain a Diverse Portfolio of Aftermarket Brands
Firms that develop a diverse portfolio of aftermarket brands will be far better positioned to maintain customer loyalty and weather disruptions in the supply chains of a particular brand. Having a comprehensive brand portfolio allows a firm to operate in multiple market segments, which in turn enables the firm to both retain customers by meeting their full range of needs and appeal to different groups of people. This means that acquiring new brands can protect sources of equity for other brands in the portfolio.
Companies that develop their brand portfolio based on product-market growth directions will strengthen their foothold in the market. Patrick James Trico Group LLC’s Founder and Chief Executive Officer continues to optimize the company’s brand portfolio through small acquisitions that allow Tico to enter new market segments. This kind of strategy is necessary for a firm to outperform its competitors.
Digitalize Aftermarket Sales and Services
It shouldn’t come as a surprise that one of the major trends of the next decade will be a pivot towards digital channels. The automotive aftermarket is already experiencing the digitalization of product sales and services and the proliferation of online portals. Customers will continue to rely on digital sources of information to determine which product they choose and digital platforms to make purchases. In fact, the portion of automotive aftermarket sales conducted through e-commerce is expected to increase to 30% by 2035. The exception to this trend involves products that are difficult to ship or that require an auto workshop to install.
As online providers and others move to divert the attention of consumers, traditional manufacturers and retailers may face difficulty retaining customers. Companies should increase their online presence by ensuring customers can purchase their products and services online and by positioning themselves as reliable sources of digital information. They should also adapt their marketing strategies in recognition of the growing role of digital advertising in customers’ decision-making process.
Sell Digital Products and Services
The share of aftermarket revenue held by digital offerings is anticipated to more than triple from 6% to 20% over the coming decade. As technological developments and increased connectivity pave the way for innovative components and services, customers will expect companies to make digital products and services available on demand. Connectivity also creates space for the automotive aftermarket to expand into entire vehicle systems. Analysts predict that revenue related to digital products will triple to just under 20%, while growth for services and diagnostics will increase three times faster than standard products related to vehicle collisions and wear-and-tear. This will include digitalized services, hardware, and software, from car data and displays to theft protection and driver monitoring software.
In response to the potential for new products and services, new players will likely enter the automotive aftermarket to fill the space created by the demand for digital offerings. Existing manufacturers, suppliers, and retailers will have to adapt to prevent these new players from dominating some of the fastest-growing market segments. Firms should consider acquiring brands that are focused on expanding digital products, and companies should anticipate developing product lines to meet the demand for digital.
These recommendations only begin to scratch the surface of the developments and trends that will impact the automotive aftermarket. The industry will also grapple with consumers’ preferences for electric vehicles, increases in commercial vehicle sales, market globalization, and reliance on proprietary partnerships, all of which will result in changes in demand for certain products.
Nevertheless, consumers’ desire for aftermarket products and services will only grow as they keep their vehicles for longer and begin to demand digital offerings. Existing players will face challenges associated with adapting to changing conditions, but strategic choices in brand portfolio, digital products, and digital marketing and platforms will give these companies staying power.