The traditional brick-and-mortar auto part stores are in big trouble following Amazon.com Inc.’s (AMZN) entrance into the market. The e-commerce market leader has been expanding to different marketplaces in recent years including video streaming, green groceries, and auto parts among others.
Its entry into the auto parts business is seen as a direct rivalry to auto parts retailers that receive most of their business from residential do-it-yourself (DIY) customers. Amazon’s online Auto Parts store targets customers who prefer to fix their vehicles at home and as pointed out in several reports, this approach is also likely to affect listed auto part retailers like AutoZone Inc. (AZO), whose main revenues stream is DIY customers.
The company receives roughly 75% of its revenues from this group of customers and is likely to be the most affected. Its rivals Advance Auto Parts Inc. (AAP) and O’Reilly Automotive Inc. (ORLY), which have about 50% of their top lines coming from the same class of customers, are also affected by Amazon’s entry into the market but not to the same extent. However, when you look at the three companies’ performances over the last few years, it is quite clear that they have all suffered since Amazon announced its intent to disrupt the retail auto parts business.
AutoZone, Advance Auto Parts, and O’Reilly plunged last year but have since recovered
Stock prices of the three companies plunged last year to hit new multi-year lows but have since recovered. However, it remains to be seen how long these recoveries can last especially given the choppy behavior the three stocks have demonstrated in the stock market since the start of the year. In addition, this space is also being disrupted by several online-based startups that have opened e-commerce stores and provide several educative guides like this infographic published by AutoDoc. These addon resources could play a huge part in developing customer loyalty as they help residential DIY customers to cut auto part-related costs.