HUDSON, Ohio — More than $12 billion worth of auto parts and accessories are expected to be sold online in the U.S. in 2019 — twice the volume of just four years ago.
That explosive growth might have given new-vehicle dealerships a massive opportunity to expand their parts business on their websites. Except Amazon.com Inc. largely beat them to it.
The e-commerce behemoth is likely to capture nearly two-thirds of the online parts market this year, estimates Hedges & Co., a digital marketing agency in Hudson. Amazon's share of the market has risen even more rapidly than online parts sales overall, Jon Hedges, founder of the company that bears his name, said.
It's not too late for dealerships to build a lucrative online parts operation independent of or working with Amazon, according to Mr. Hedges, who has an extensive aftermarket background. Among dealerships' advantages are: ready access to a wide array of original equipment parts, warranty protection offered by auto makers, the technical expertise of dealership parts staffs and dealerships' own credible brand.
In the market
About two-thirds of parts bought on Amazon are sold by the company and provided directly through its warehouses and suppliers. The rest are sold on Amazon Marketplace — third-party sellers, including dealerships, that operate "stores" on the Amazon platform for a fee.
James Windrow, vice president of marketing at RevolutionParts Inc., a Phoenix company that provides dealerships with software for online parts sales, estimates that Amazon takes a 10 percent cut of revenue from tire-and-wheel sales on Amazon Marketplace and 12 percent for everything else.
"Parts managers know that there's a significant volume of sales taking place on Amazon," Mr. Windrow said. "But not a lot of dealers are selling there because of the percentages that Amazon takes."
Mr. Hedges estimates that 10 to15 percent of U.S. franchised dealerships sell on Amazon Marketplace and says that share is likely to grow.
"As more sellers become involved in Amazon Marketplace," Mr. Hedges said, "we think (the annual total of parts sold by third parties on Marketplace) might be close to $4 billion."
Amazon did not confirm these estimates. Adam Goetsch, the company's automotive director, told Fixed Ops Journal in an email interview that Amazon "engages with a broad mix of manufacturers and selling partners to carry the most complete selection possible and allow seldomly ordered parts to be accessible to customers."
Mr. Hedges says it appears that Amazon is shifting the mixture of the parts it sells, focusing its own efforts on high-volume parts such as tires, brake pads and filters while relying more heavily on Marketplace partners — including dealerships — for niche items and parts for lower-volume auto brands.
For dealerships that want to sell parts on sites such as Amazon and eBay as well as their own websites, RevolutionParts says its software makes it easier to list and market parts in multiple online channels. Windrow says about 1,200 new-vehicle dealerships use the company's software, which costs $525 a month.
About 350 of those dealerships are on Amazon Marketplace. Mr. Windrow said he gets a lot of questions from dealers and parts managers about how best to sell on the site.
"It's easier to communicate the challenge of Amazon to dealers who have wholesale parts businesses," he said. The wholesale parts business, he noted, emphasizes volume and speed. Because its profits are slim, he added, pricing must be realistic, and orders must be filled promptly and efficiently.
"You can't sell at a 30 to 65 percent markup — you may literally get zero sales" on Amazon, he said. "And you may turn on your (Marketplace) store and suddenly have 150 orders. If you only have two staffers, how will you fulfill them?"
Amazon, like eBay, requires sellers to communicate with customers through its site. A dealership can't collect Marketplace parts customers' email addresses and use them for its own marketing promotions. Disobeying Amazon's rules can get a Marketplace account penalized or disabled.
"Follow the proper channels and instructions," Mr. Windrow advised.
Jay Rankin, parts manager at Earnhardt Toyota in Mesa, Ariz., readily enumerates the costs of his dealership's participation in Amazon Marketplace.
"I don't think consumers are aware of how expensive it is to sell things on Amazon," Mr. Rankin says. "I'm losing 12 percent on the sale. Payment processors like PayPal also take fees. The expenses seem endless."
Despite these frustrations, Mr. Rankin acknowledged that Amazon is "where people shop."
Although the dealership sells parts on its own website, it has had an Amazon presence since 2016 in an effort to remain competitive, Mr. Rankin said. Earnhardt Toyota sells more than $1 million in parts each month. Most of that is wholesale, and about 5 to 10 percent of it is e-commerce, Mr Rankin added.
Mr. Rankin said he limits the selection of parts he sells on Amazon, constantly evaluating which items are reliably profitable.
"You tweak the pricing and the inventory piece by piece," he explained. "You don't necessarily want to be the lowest on everything. You still have to pay to pull the part and to ship it."
Amazon provides useful tools to help sellers judge how responsive they are to customers, which items are most popular and which pricing is most effective, Mr. Rankin said. "They'll ask you, 'Do you want the price to be in the 'buy-it-now' box?' " — an Amazon feature that promotes sales. Often, he said, the answer is no.
Because hundreds of sellers on Amazon may stock the same merchandise, customers often look only for the cheapest deal, Mr. Rankin notes. But sellers can earn a top listing through a combination of low prices and a good record of filling orders and responding to customer feedback.
Lots of parts can provide healthy profits, Mr. Rankin said, especially if sellers buy them in bulk, thus reducing the dealership's overall shipping costs. Mr. Rankin said he includes shipping costs in his listings because that increases the chances of being seen by Buy Now shoppers.
The main competitors of a dealership that sells parts on Amazon Marketplace, Mr. Windrow said, are Amazon itself, aftermarket vendors and some auto makers that sell items on Amazon directly rather than through their dealerships. Mr. Rankin says dealership parts employees' technical expertise gives them a distinct edge.
"A lot of online platforms use generic part descriptions," Mr. Rankin said. If Amazon notifies a dealership of a potential problem with a customer's order, the parts desk can contact the customer and intervene to correct the issue before the order is shipped, he noted.
That saves the cost of a return, which negates profit from a sale, and helps build positive feedback. The feedback is important, Windrow says, because Amazon customers often rely on reviews of sellers and will buy from a well-regarded seller who does not charge the lowest prices.
Dealers who use Amazon still need to diversify their parts business model, Mr. Hedges advised. He said he sees "plenty of dealers who sell on Amazon but want to be less dependent on it." He recommended paying adequate attention to other e-commerce platforms — notably eBay, which he noteed has less reach but also charges lower fees — and even more, the dealership's own website.
"Amazon customers are Amazon's customers," Mr. Hedges said. "They're loyal to Amazon."
Jason Hair, service and parts director of Volvo Cars Gilbert in suburban Phoenix, says his dealership pays close attention to parts sales on its website as well as Amazon, even though he estimates that the store processes 250 parts orders on Amazon for every online order from its own site.
Overall, Mr. Hair said, he sells $150,000 to $180,000 in parts online each month.
"Amazon is our heaviest hitter," he said. "Amazon and eBay are worldwide. Our dealership will never be able to compete with that scale in web searches."
Still, Mr. Hair added, the dealership website is valuable because "it has a very deep parts catalog, which is useful for the do-it-yourself customer."
"Volvo's a relatively small brand," he said, "and I think that gives us an advantage in the e-commerce market because we don't have the volume of competition a domestic dealer has."
Mr. Hair said dealership parts customers frequently respond to a price quote with the assertion that "I can find it on Amazon for less." But he noted that factory parts bought and installed at a Volvo dealership come with a lifetime warranty — an advantage Amazon can't match.
He conceded that Amazon's influence on online parts sales is likely to continue to grow.
"The dealership owner and I both feel that in the future, there's going to be more and more purchasing through Amazon," Mr. Hair said. "We need to be ahead of the game."