Speculation about another recession is a trending topic right now, and there is debate about whether or not we are headed into one. In the past, when major events hit the economy, it meant difficult times for dealers. During the Great Recession (2007-2011) and when COVID hit in 2020, the automotive industry experienced some of the biggest impacts.
What challenges should dealers expect to face if another recession is truly on the horizon? Some experts in the space argue that because the industry is still trying to recover from the ongoing impact of COVID, there may not be a significant upcoming change.
No matter what happens in the future, one thing appears certain. Whether or not we officially enter a recession, the automotive industry should not expect things to return to “normal” anytime soon. Instead, dealers and their manufacturers should look to solutions implemented since the start of the COVID pandemic to create recession-proof dealerships.
Despite the financial difficulties caused by the pandemic, many dealers have discovered innovative ways to increase revenue and expand their business.
How did they do this? One successful method was by creating a thriving online business in the parts department that could overcome the difficulties brought on by the pandemic and also meet customers’ needs.
Manufacturers Can Help Recession-Proof Dealers
When COVID hit in 2020, dealerships were hit hard in every department. They were selling fewer vehicles, performing fewer services, and selling fewer parts and accessories. In total, dealerships across America sold $6 billion less in parts in 2020 compared to 2019, according to NADA’s 2019 and 2020 annual reports.
However, this wasn’t necessarily the case for every dealership. In fact, dealers selling parts online through RevolutionParts saw a 27% annual increase in online parts sales.
“When all other places were laying people off, we were bringing our people back in and hiring. The online store just blew up.”
There are several reasons why selling parts online during this time was successful, but it was primarily due to fewer people shopping in person. However, as people began to return to their normal lives, consumers continued to shop for parts online because it became their preferred shopping method.
Online shopping is convenient and allows consumers and small repair shops to easily research and compare products.
Simply put, if a dealer is not selling parts online, they will never reach the large threshold of online shoppers that eCommerce businesses cater to. In 2022, there are expected to be more than 266.7 million online buyers in the U.S. alone—more than ⅓ of the country’s population.
Over the past two years, the parts department wasn’t the only department to be negatively affected by the pandemic.
The shortage of semiconductors significantly impacted the production and availability of new vehicles. The cost of both new and used cars rose to keep up with demand during that time.
If a recession hits in 2023, this trend will likely continue, and consumers will keep their current vehicles for longer.
While this has and will continue to impact the sales of new and used vehicles, it will likely result in more buyers for the parts department. The current age of the average vehicle on the road is over 12 years and rising. This rise in older vehicles means the need for maintenance and repair parts will also increase.
Recession-Proofing with Parts eCommerce
Manufacturers can take the lessons learned from parts eCommerce strategies over the past two years and implement new programs like a parts eCommerce program to protect and expand their dealerships’ parts revenue. Recession-proofing the dealership will allow them to perform better in future economic downturns.
Selling parts online allows dealers to access new customers across the country. This allows these dealers to be more competitive against aftermarket sellers while reinforcing brand loyalty among consumers.
When providing eCommerce programs to dealers, manufacturers should focus on the most efficient way to create a program that will result in the highest selling potential.
Here are a few options manufacturers should consider.
Tier 1 National Parts eStore Program – Manufacturers have the ability to sell parts through their own official eStore while leveraging dealers nationwide to fulfill the sale and deliver online purchases.
Tier 3 Dealership eCommerce Solutions – Dealers are equipped with their own parts web store to sell their own inventory and full brand catalog directly to customers nationwide. This option can also be integrated with today’s most popular online marketplaces like eBay and Amazon to capture a wider customer base.
Tier 1/Tier 3 Hybrid Model – The best solution is to equip dealers with their own online stores while utilizing the same dealers to fulfill orders from an official eStore to maximize selling potential.
Providing Better Access to EPC and Catalog Data – Better data and catalog content improve the customer experience and increase profits. By working more closely with 3rd party eCommerce providers, automakers can better support their retailers’ online sales and increase market share vs. aftermarket parts options.
Bottom Line
Whether or not the U.S. officially enters a recession, if we’ve learned anything from the past two years, it is that the future is unpredictable. Economic challenges often happen without warning, and the best way to protect your dealers is by planning ahead.
By providing dealers with a robust parts eCommerce program, manufacturers can help dealers recession-proof their business, increase revenue through the parts department, and provide a modern customer engagement experience for the brand as a whole.
Contact us to schedule a free consultation to learn more about RevolutionParts’ parts program solutions for manufacturers and how they can help future-proof the dealership.
