2017 Aftermarket Outlook
During this year’s Automotive Aftermarket Product Expo, Nathan Shipley, NPD’s director of Industry Analysis, shared how the aftermarket industry performed in 2016 and provided insight into what’s to come in 2017.
2016 At a Glance “2015 and 2016 were pretty good years for the aftermarket industry, and it’s tough to lap that and grow 4-5 percent every single year,” Shipley said. “Prior year performance doesn’t necessarily help us grow.” As with any given year, there are positives and negatives that come into play and affect day-to-day business — some in a good way, others not so much. 2016 came with good gas prices and hot weather, but there’s a lot more to it than that. Let’s dive in. “Gas prices are still very cheap, and we have all benefitted from that, because people drove more in 2016,” Shipley said. The weather had an effect on profits for 2016 as it was quite a hot year. As we all know, it’s not the heat, but the cooler weather that brings in more vehicles for maintenance and repairs and assists in the accessories department, as well. “We’re seeing deeper discounts on premium brands in a lot of aftermarket categories that are driving down the average retail price,” Shipley said. The growth rate through September 2016 was much slower than it was the previous year at just 2 percent. “Motor oil, however, is seeing an accelerated growth,” Shipley continued. “In 2014, the volume was down about 1.3 percent, in 2015, it was up 1.4 percent and in 2016, it landed around 1.7 percent.” For many years, we were seeing a trend in units sold decreasing, but price per unit increasing. That story is beginning to shift, where dollar sales are slowing down, and unit sales are increasing. Ultimately, we are trying to sell more services and merchandise for less money. “Miles driven is also a very important number for the automotive aftermarket industry. This number has continued to grow, and this year we are up about 3.2 percent,” Shipley said. “This actually equates to over 100 billion more miles driven over the last 12 months.” More miles driven means more service needed. 2012, 2013 and 2014 all stayed about the same when referencing gas prices. 2015 was a different story, as gas prices were low and allowed consumers to travel more. 2016 was similar until the fourth quarter when gas prices began to rise back up a bit. “The low gas prices freed up approximately 34 billion dollars in spending money, but much of this money went toward the significant rise in health care costs,” Shipley explained. “Money that we were saving at the pump was going right into healthcare spending.” New car sales are also a factor, as they really help those in the accessories lines but hinder those in the motor oil, maintenance and DIY divisions due to warranty programs. “The new car sales trend for 2016 was actually below that of 2015,” Shipley said. So what does all of this mean for the year ahead of us?
What’s to Come in 2017? Due to the immense number of new cars being sold year over year, there is a big opportunity in 2017 to take advantage of all of the potential customers whose cars are no longer under warranty. This is a great area to capitalize on. “There is also a transformation coming over the next 10 years,” Shipley said. “The baby boomer generation will no longer be the primary target. Millennials who are in the age range of 18-34 will become the primary target. This is a generational shift in the core consumer.” The boomer generation is just under 75 million strong with an average age of 52-70. The average retirement age is currently 63 years old. Generalizing, on average, the boomer generation will be completely retired over the next 10 years and with their retirement will go their mentality of living to work. “On the flip side of that, millennials grew up with technology, and the Internet was always around them,” Shipley explained. “The idea of terrorism is commonplace to millennials, along with student debt and their mentality of working to live rather than living to work. Ecommerce is also big in that they can push a button and have a product on their doorstep in a very short time.” Why is this important? Because this age group will actually get larger before it ever gets smaller. Are you wondering how that’s possible? It’s possible due to immigration. More people in this age group are coming into this country. “Close to 50 percent of people in this age range do not own a vehicle,” Shipley said. “This is a good thing to know, but not something that can be altered. Business owners, therefore, need to focus on the percentage of millennials who do own vehicles.” Business owners and operators need to adapt and understand how to educate and attract this new consumer. Shipley shared a few interesting statistics about this generational shift: • 44 percent of millennials do at least half of their shopping online • Part of that 44 percent do all of their shopping online • Over one-third always seek out online reviews before purchasing a product • 80 percent go to YouTube at least once per week • 50 percent go to YouTube at least once per day • Over one-third spend at least two hours on social media per day • Close to half of millennials say they watch videos to learn how to fix and install things on their cars “Over 40 percent of those between the ages of 18-24 said they go to Amazon.com simply to research the products they are interested in before ever considering making a purchase,” Shipley continued. “Over 30 percent go to retailer sites to research products, as well as Googling reviews.”
A Few Interesting Facts When asked what consumers will purchase online for their vehicles in 2017, the highest response rate was car accessories like floor mats, sun shades, tires and under-car parts. Online tire sales are more prevalent than ever, as consumers can generally save quite a bit of money by purchasing their tires online. They can then take those tires to their local shop to have them mounted and balanced for a cheaper rate. The less likely to buy online category for 2017 included wheels, wiper blades, air fresheners and appearance chemicals. Finally, the lowest likelihood category for online purchasing was batteries, fuel additives, motor oil and antifreeze.
Final Thoughts It’s crucial to look to the future and adapt to the coming generation, so you don’t get left behind. Think about what drives millennials, and consider shifting your marketing techniques to attract them. The moral of the story is adaptation. Keep an eye on gas prices, as well. If they do go up, the automotive aftermarket maintenance sector will do what it does best — help people take care of their cars and save money at the pump.