AASA Members: AASA Perspective is a periodic message from AASA President Bill Long and AASA Executive Vice President Paul McCarthy, offering their perspective on the aftermarket industry and its challenges and opportunities. AASA Perspective is designed to stimulate dialogue; we welcome you to participate in the discussion by emailing us at email@example.com and firstname.lastname@example.org.
The classic metaphor for optimism versus pessimism is the glass of water – is it half full or half empty? Using the glass of water as a metaphor, we want to share our perspective on the future of the aftermarket -- a positive point of view. The aftermarket glass is half full.
That said, there is anxiety about the future of our beloved industry.
On recent occasions, we have heard aftermarket leaders remark: “This is a great market … but I’m not sure it will be around for my kids.” Or, “I’m glad I’ll be retired before all this new technology really hits.”
Similarly, we also have heard industry millennials worrying about the future of the aftermarket. They have raised questions like, “Will our existing companies and famous brands be agile enough and take the right steps” to survive and to be the winners in what will be a changed aftermarket landscape?
These fears are understandable. Raising these fears is also healthy, productive and even positive.
It is worth reflecting that fear itself is not a bad thing. It is a natural human reaction and it can be helpful if it makes us react, take the right steps, look to the future and be prepared for it. It is helpful if it pushes us to recognize the growth opportunities already being presented in our market and be ahead of the curve. If fear makes us show the entrepreneurial spirit and inventiveness that has always made the aftermarket great, then in our view that fear will be good -- even productive.
In our view, the future of the aftermarket is bright … if we as suppliers and we as an industry make it so.
A Future of Greater Mobility
Why do we have that positivity? Here are a few things that caught our attention at the recent AASA Vision Conference.
We heard a futurist’s view of vehicle autonomy from Gary Silberg of KPMG, our highest-rated speaker at the conference. While there remains a lot of uncertainty about the timing of full and even situational autonomy, the big takeaway for the aftermarket is that autonomy -- whenever it arrives in force -- will mean more automobility. It will mean more miles driven as vehicle usage become more appealing (less effort to drive; time in the car freed up for entertainment, work or consumerism; more mobility for elderly and young drivers) and lower cost (shared mobility, greater safety).
And more miles driven is always good for the aftermarket.
We had a great debate at Vision among our “3 Dragons” -- a consultant, a Wall Street analyst and an aftermarket market forecaster -- about the aftermarket’s near- and long-term market prospects, the drivers of what determines whether we hit our business plans.
These speakers had great insights, though we couldn’t help but be reminded of the old saying “if you ask five economists, expect six different answers.” Though hitting growth targets always feels like a challenge, it was heartening to hear that sales are looking up from last year. It also was encouraging to hear a key element of consensus: positivity about future market prospects, seasoned with a warning that we need to be ready for changes in players and patterns of demand in an evolving marketplace.
Changing Distribution Model
We also heard at Vision about what may be the most transformative near-term trend: e-tailing, omnichannel and other changes in the distribution model.
It is only once every couple of generations that we have the development of a new or transformed channel in the aftermarket. Many of us lived through the transformation when the two-step retailers emerged as a force whose reverberations continue to this day.
In our view, an evolution of our channels like this is not a threat. It is an opportunity. Yes, change may separate some winners and losers -- that’s the nature of the free market and market shifts. But we believe there are opportunities for many players along the existing as well as the new value chain to adapt, innovate and win. In the end, anything that ultimately makes it more convenient or appealing for customers to buy aftermarket parts and technologies has to be good for aftermarket demand.
We certainly heard the industry dialogue about the need for access to data to preserve motorists’ freedom of choice. We heard the concern -- a justifiable fear -- that if we don’t win this, the aftermarket faces an existential crisis. We heard the need for a call to action.
But when it comes to access to data, we also shared the AASA point-of-view, one we believe is shared with the entire independent aftermarket ecosystem:
- We WILL win this.
- We MUST win this.
- If you believe in free markets, it is RIGHT for us to win this.
It will take a lot of work and struggle -- and partnerships and collaborations -- to win this battle. But we believe there will be an independent aftermarket in the future. And we are fighting on this topic to fulfill our mission to advance the aftermarket industry and the business interests of our supplier members. That is why -- though the fear is real and realistic -- we remain optimistic on this crucial challenge.
The Impact of New Vehicle Technologies: Electrified, Automated, Connected
We are optimistic when we think about the results of AASA’s new landmark study, conducted with PwC’s Strategy&, “Aftermarket 2025/2030: The Impact of New Vehicle Technologies on the Aftermarket.” It looks at the impact of emerging new vehicle technology -- electrified, connected and shared -- and the opportunities and threats this new technology creates for the aftermarket.
There is good news, in that we are the aftermarket. The undeniable truth is we have this huge, slow-changing vehicle parc we sell into. We have time to adjust. But we also can’t be ostriches and put our heads in the sand if we want to continue to grow and maintain this incredible market that we all play in. We have real opportunities and product growth that are emerging now, as well as real long-term shifts and threats, particularly with electrification and increasing vehicle sophistication.
In the end, the study talks about what suppliers need to do -- now -- to survive and thrive long into the future.
Conclusion: Half Full, not Half Empty
We are an industry facing a lot of change. It is sometimes a disconcerting amount of change as we look to the future. Dare we say a fearful amount of change?
In the face of this, it is worth remembering that change is good. In a future that looks as disruptive as this, we can find comfort in reminding ourselves of a key point from Economics 101: Without change, there is no profit. Competitive advantage -- the source of profits -- is “a disequilibrium phenomenon that is a consequence of change.” Profits “depend on firms’ ability to respond to change.”
We believe we can respond to this change and thrive. What helped us win in the past -- the assumptions and habits that grew our businesses -- may be different in tomorrow’s market. This will require us to look forward, to adapt, to innovate. We believe it will require a new entrepreneurial spirit from the aftermarket.
But scrappy entrepreneurialism is what has always made the aftermarket great. It is not coincidence that the independent aftermarket captures 70 percent of the market for vehicle maintenance and repair. Post-WWII, it was a set of innovators who got the right parts to the right place at the right time faster, better and with more consumer appeal than the automakers could. We then had generations of great leaders who built on that success and helped create our now $287 billion independent aftermarket.
We again need that leadership, that vision, that unmatched aftermarket entrepreneurial spirit to enable us to grow and thrive in our pending era of change and opportunity. We believe we have the people in the independent aftermarket who can achieve that.
And that is why we are positive about the future of the aftermarket.