Opinion: 3 Reasons Why the Amazon Fears are Overblown
August 31, 2018—Although it is still relatively early innings for Amazon’s foray into auto part ecommerce, a writer with Seeking Alpha doesn’t believe Amazon will ever have strong traction in the category.
"I just don’t think auto parts is the kind of thing that consumers want to buy online and even if they do want to buy it online, I find it hard that Amazon will have any competitive advantage vs. the incumbents," the writer says.
Here are three reasons why:
Reason 1: People want to consult experts before making a purchase
AutoZone has responded to Amazon by heavily discounting its auto parts online and offering home delivery; however, according to the company, over half of orders placed online were picked-up in store, forgoing the online discount. The reason is that people want to confirm their purchase with an in-store expert. Generally speaking, auto parts are not consumables that you order on a regular basis. Given the large number of different car models and in-store SKUs, shopping for parts is a complicated and confusing experience unless the shopper is an expert.
Reason 2: Amazon has competitive disadvantages in auto ecommerce
Auto parts do not easily lend themselves to ecommerce. In order for a retailer to serve the auto part market, they must carry thousands of SKUs to support varying car makes and models. Because parts are purchased so infrequently and there are so many SKUs, inventory turnover is very low. On top of that, auto parts are generally very heavy and can be expensive to ship economically.
The brick and mortar auto part retailers like AutoZone can compete and win vs. Amazon. AutoZone’s stores double as distribution points for DIY and DIFM customers including online shoppers. Because AutoZone is using much of its “warehouse” space as a retail store, it can generate higher inventory turns and afford to carry more SKUs. Furthermore, AutoZone has a vast network of over 5,500 stores in the US. Most people live within a short drive of an AutoZone, making it convenient to stop by a store to pick up an item or ask a question.
Reason 3: Focus
Amazon has dozens of shopping categories and generated over $200 billion sales in the last 12 months. If Amazon gets 10% or 15% of the $57 billion market for auto parts, it won’t move the needle very much for the company. Therefore, Amazon will not focus a great deal of its resources behind the auto parts market, especially if it is unable to find ways to effectively compete vs. brick and mortar incumbents.
On the other hand, AutoZone is supremely focused on the auto parts market and will fiercely defend its turf. AZO quickly responded to Amazon’s entry into the market by significantly discounting its online prices and accelerating its investments in omni channel and warehouses that would enable it to better compete. AZO has all of its eggs in the auto parts basket and it is watching that basket very closely.