Lang Aftermarket iReport: Amazon’s Do-It-For-Me ‘parts delivery solution’
“Rapid parts delivery to Repair Outlets is often cited as the primary barrier that will prohibit online sellers from acquiring a large share of the Do-It-For-Me (DIFM) parts market.
“The aftermarket’s ability to rapidly supply parts to Repair Outlets requires an investment of billions of dollars in field inventories. As an alternative solution, Amazon’s unique approach to logistics and its unprecedented consumer presence will enable the Internet giant to provide automotive parts to Repair Outlets as part of an o2o strategy that will transform Amazon into a major player in the DIFM aftermarket.”
— Jim Lang, publisher, Lang Aftermarket iReport
Rapid Parts Delivery
The U.S. aftermarket has developed a unique system that can deliver automotive parts to almost any Repair Outlet in the U.S. in a matter of hours. This has caused consumers to expect rapid repair for most of their auto problems.
Effective But Inefficient
However, this system has a substantial cost. The rapid delivery capability of the U.S. aftermarket depends on billions of dollars in inventory located at more than 40,000 brick and mortar locations across the country.
This prepositioned inventory is effective in providing local availability of parts, but it is very inefficient in the cost of providing rapid delivery.
o2o DIFM Delivery Solution
Amazon’s exceptional logistic capabilities coupled with its unprecedented consumer presence (Amazon generates approximately half of all online retail purchases in the U.S.) provide it with an opportunity to participate in the auto repair business in a unique way and capture a substantial portion of its total parts volume.
In an o2o (online-to-offline) scenario, consumers purchase auto parts from Amazon and have them delivered to an authorized installer in their area. Amazon schedules a time with the consumer for installation, to coordinate with the delivery of the required parts to the Repair Outlet.
Consumers receive the benefit of lower prices for auto parts and a frictionless service transaction, as soon as the day following their order with Amazon.
Repair Outlet Benefits
Installers do not receive profits on parts delivered to them by Amazon, but they receive the full price of installation and have the opportunity to sell additional repair services. They can also develop an ongoing relationship with customers for their future vehicle repair needs.
o2o DIFM Product Range
At this time, the o2o DIFM activity is limited to repairs for which diagnostics are not necessary to determine what products are needed to fix the vehicle’s problem.
Presently, this covers over one-third of total aftermarket product volume in the DIFM market and includes items such as Brake Pads, Windshield Wipers, Motor Oil, Tires and Batteries among other products.
Expand Diagnostic Capabilities & o2o DIFM Potential
Amazon could extend its Prime membership to provide consumers with OBD plug-ins or other diagnostic tools that would enable Amazon to engage in a wider range of o2o repair, based on the diagnostic information they would receive.
As Amazon expands its o2o repair business, it will disrupt auto parts distribution, where repair is conducted, and the brands of products used.
Gateway to Consumers’ Larger Transportation Purchases
By expanding its o2o Do-It-For-Me presence, Amazon will position itself as a solution for the multi-trillion dollar transportation needs faced by consumers in the future, ranging from autonomous vehicles to ride-sharing and transportation as a service. In the short term, it could also include the purchase of used cars and light trucks and even electric vehicles.
Six Major Takeaways
- The delivery of aftermarket products depends on billions of dollars in inventory located at more than 40,000 brick and mortar locations across the country. This is an effective but inefficient system.
- The need for rapid delivery of auto parts to repair shops is generally regarded as the primary barrier that will prohibit the growth of Internet auto parts sales to Repair Outlets.
- Amazon can overcome this barrier by using an o2o (online-to-offline) strategy in which consumers purchase auto parts from Amazon and have them delivered to an authorized installer in their area.
- Amazon can sell a large variety of parts in the Do-It-For-Me market and avoid the problem of rapid delivery to Repair Outlets, by scheduling the work to be completed after products have been delivered to the installer.
- Amazon can greatly expand its o2o DFIM range by providing its Prime members with OBD plug-ins or other diagnostic tools that would enable Amazon to engage in a wider range of DIFM repairs.
- Succeeding in o2o automotive repair, Amazon will position itself as a solution for the multi-trillion dollar transportation needs of consumers in future, as autonomous vehicles, ride-sharing, and transportation as a service sweep across the U.S.
Copyright 2019 by Lang Marketing Resources, Inc.
NOTE: Special thanks to publisher Jim Lang for granting us permission to publish the Lang Aftermarket iReport.