Driven by the conviction that online retail of automotive parts and accessories will be a $40 billion market by the end of this decade, GM announced the launch of a new online marketplace early this January. It is not a new idea – several automakers have been selling online for a while now, albeit in a limited way. However, what this initiative does is take the idea up several notches. From the 5,000 accessory products that were initially on offer online, GM’s new online marketplace will now offer nearly 45,000 repair and maintenance parts, including everything from batteries and brake pads to windshield wipers and cabin air filters. This is a clear nod to the trend of automotive parts retail going increasingly digital (or ‘phygital’ as the case may be) as customers embrace the online route. Similarly, both Toyota and Lexus that have been operating dedicated online stores on eBay for a long time now recently launched their parts stores on Amazon in the UK.
Digital at the Core
The focus on an online marketplace aligns with long-term roadmaps in the auto industry that foresee software and subscription services generating tremendous revenue opportunities. In GM’s estimation, this will amount to $20 billion to $25 billion per year for it by the end of 2030.
Accordingly, future digital offerings are expected to cover more parts and accessories, over-the-air upgrades (such as the Super Cruise advanced driver assistance system), and subscriptions. There is also the promise of customers being able to purchase electric vehicles online with a comprehensive experience that spans initial research to actual purchase and associated vehicle financing.
Our Perspective
In multiple markets, convenience has been a major factor underlining the appeal of digital retail. In the case of GM’s digital store, customers can shop online and then have their selection delivered either to their doorstep or collect them from their local dealerships. Such a streamlined customer journey makes it easy to see why so many automakers are ramping up their digital presence and why so many consumers are abandoning the traditional dealership route to go digital.
Again, like in other industries, we are seeing OEMs adopt innovative digital-based marketing strategies as a powerful tool to attract and retain customer loyalty. For instance, customers purchasing parts from GM’s online store will be entitled to Chevrolet, Cadillac, Buick, and GMC rewards programs. They will be able to earn points that, in turn, can be used to buy products /services at participating dealerships.
One of the biggest draws of automaker-backed online marketplaces is the trust factor. Sales of fake original equipment (OE) automotive parts have been a major bane of the automotive industry. The online purchase option through a company website (rather than through a third-party online retailer) means that consumers are assured that the parts purchased are genuine. We also believe this will help fight the common perception that OEM parts are costlier than the aftermarket brands. The level of transparency on offer with an e-commerce platform will help address such customer perceptions and possibly encourage other OEMs to market themselves through similar, dedicated online platforms.
Going all out in the digital retail quest might seem, in theory, a good idea. However, the bottom line is that vehicles are defined by their complexity. It is a challenging task for customers to accurately select the part that is most compatible with their needs. Therefore, while we recognize that digital transformation is inescapable, it will be prudent for automakers to retain a strong physical element – the “phygital” that we referred to earlier – wherein dealers will continue to play a critical role in providing guidance and support to make the automotive retail process seamless, safe and efficient.
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