Auto parts stores.
How many of these places will be needed 10 years from now?
Car dealerships have a triple whammy coming straight at their bottom line.
An adversary in the form of Tesla, who has the monetary means to fight a legal war with the strong support of the general public.
A move toward car-sharing services at all levels of society. Right now this is at its early stages. However, in the long run, these services will continue to drive down the value proposition of buying and maintaining a new car.
Finally, the times are a-changin’. It’s no secret that young consumers in particular would strongly prefer to buy a new vehicle online instead of going through the four-square game and the interminable waits at a new car dealership.
If an automaker can legally offer direct sales and convenient test drive facilities without the traditional hassles of buying a car, they would likely get a big chunk of this market. Tesla is now the sole pursuer of this sales channel. But, if they manage to break through the litigious minefield, a lot of overseas manufacturers may decide that direct sales to the American public offers a far better business model than the dealer as an intermediary. If that happens, you will start to see some of the smaller manufacturers band together and offer direct sales channels in parts of the country where a stand-alone dealership doesn’t make sense.
The big box model of retailing is already experiencing a consolidation throughout many industries. Toys, office supplies and books have already become the domain of online stores. Inevitably, the auto franchise dealer model will become one of those casualties if the manufacturers can’t co-develop new retail models that better serve the consumer.
Brick and mortar auto parts stores will also find their traditional markets in a tailspin. It will likely happen in a far shorter period of time than the legally protected franchise dealer. The big issue for auto parts stores is that they can only differentiate themselves based on convenience.
If you need the part right now, you go to the parts store. But if you can wait, there is Rockauto, Partsgeek, Car-part, and countless other online merchants on Ebay and beyond who will get you what you need for a far lower price.
Someday soon, these evolving online auto parts entities, along with Amazon, will offer you the same convenience as a big box store. They probably won’t be open to walk-in public traffic. But in a world where online orders are discounted 30% to 40%, the need to have expensive real estate in a well-traveled area is becoming far harder to justify. There will be a shakeout in this industry that will be akin to what office supply stores are experiencing right now. If Amazon and everyone else can fulfill the delivery of a car part to you within 24 hours, the value of that big box in a retail setting goes down considerably.
Repair shops and tire centers have a different issue. Their customer’s financial resources. I contract out nearly all of my work to independent shops these days, and nearly all of them are having to locate financial institutions to help pay for the repair cost of their poorest customers. Title pawns are becoming the monetary source for financing these repair costs with interest rates that are between 10% and 25%… a month. For the struggling consumer with decent credit, auto repair franchises such as Firestone or Pep Boys are pushing credit cards whenever possible. The local manager of one of these shops recently told me that a little over 1 in 10 of their transactions requires a brand new company credit card to complete. Two years ago that was barely three percent of their business.
I am going to be brutally blunt. In the next 10 years the online world will overtake the big box model. This will not only change what you buy, but also how you use cars in your daily life. Like many of you, I can easily see a time when automakers will use subsidiaries and partners to become providers of automotive transportation services in those places where the population can sustain it. Auto parts stores, tire centers, repair shops, new car dealerships, and even insurance companies will not be needed by the majority of the population. The car will be able to drive itself and the maintenance will be done in-house. The driving regimen will be designed primarily for long-term cost savings, and most folks will simply use an app that allows them to pick whatever transportation service best suits them at a price that will vary depending on demand and their willingness to let other consumers share the cost of transportation.
Consumers will win. Manufacturers will use other companies to become transportation service providers, and no one will miss those big boxes.