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New York (CNN Business) - Amazon is gunning to sell more car parts. But it will run up against fierce resistance from a small army of firmly established companies already doing just that.
One of them is Advance Auto Parts. Advance has designed a vast logistics network to deliver parts to auto mechanics and do-it-yourself car owners right away. "Independent garages have got to get that car fixed as fast as possible, or you're not going to them again," said Charlie O'Shea, lead retail analyst at Moody's. "They measure delivery times in hours and minutes, not days." Speed isn't the only factor separating Advance (AAP), AutoZone (AZO) and O'Reilly (ORLY) from Amazon (AMZN). These companies have sharpened their focus on service, helping guide customers through repairs and the technical auto parts market. Wall Street believes in the companies' long-term durability: Advance and O'Reilly's stocks have outpaced Amazon's this year. Amazon's moves into car parts
But Amazon looms. The company started the Amazon Automotive store in 2006 and has been adding services ever since. "Amazon's auto-part retail business is becoming too big to ignore," MoffettNathanson analyst Greg Melich said in a report last month. It has recently accelerated efforts to sell car tires, batteries and accessories. The company struck a partnership with Sears that allows customers to buy Sears tires from Amazon and get them shipped to Sears Auto Centers around the country for installation. Amazon expanded a tie-up with Pep Boys earlier this month for a similar service at 1,000 of Pep Boys' stores. Amazon also has an agreement with Monro Muffler Brake. "We're pleased with the customer response to our Ship-To-Store offering," Amazon's director of automotive Adam Goetsch told CNN Business. Amazon is adding more brands to its website and trying to get customers familiar with buying parts online. During the Black Friday and Cyber Monday stretch Amazon promoted car battery jump starters and wiper blades for the first time. They're 30% off until December 1. Goetsch said the most popular automotive products among Amazon customers this holiday season included jump starters, wiper blades, cleanings kits, and RV accessories. That makes sense because more DIY customers are shopping online for components and accessories that they don't immediately need to repair their cars. Amazon may want to sell more hard parts, like engines, crankshafts and flywheels. Online sales of components like brakes and fuel systems grew 29% in the past year, according to data from NPD Group and Rakuten Intelligence. "These categories have historically been challenging for the typical consumer to shop online for, but this task is getting easier," NPD analyst Nathan Shipley said in a report. But those hard parts sales remain in Advance's wheelhouse. Lightning-fast delivery
Advance may seem like an unlikely company to thrive in the digital era, but the old-school car shop has taken steps to prepare for Amazon's encroachment. Advance has close to 6,400 stores — some of them under banners like Carquest and Worldpac — and 54 distribution centers that put them close enough to its customers to make same-day or next-day delivery a snap. It has also built larger "hub" stores in higher-traffic markets that keep more items in stock. The company makes around 58% of its sales to technicians at garages, service stations and auto dealers, who often don't know what parts they'll need until the day begins. Rapid delivery is critical. Advance Auto Parts has bult out a rapid logistics network to meet customers' parts needs. "There's a huge need for inventory availability and quick delivery out there," said Seth Basham, who covers the industry at Wedbush Securities. Although Amazon is looking to find retail partners, it would need to acquire an auto parts seller with similar distribution capabilities to be able to match Advance's same-day network. "You're not going to use Whole Foods to deliver auto parts to a garage. A brick-and-mortar presence is critical here," O'Shea said. Auto parts experts
Advance offers expert solutions in a complex auto parts market, something Amazon can't provide. Staffers consult with customers to find the right products, and Advance offers training classes and posts on YouTube to help DIYers with repair jobs. Amazon is known for its variety, but Advance sells a wider range of national brands, private-labels, and original equipment from manufacturers. "The garage owners love this model," O'Shea said. "You need somebody that has deep knowledge and knows the parts catalog backwards and forwards." Adding to its advantage, Advance has close relationships with auto parts suppliers. Many manufacturers are wary of selling through Amazon because they worry that it would help the company learn the business and one day take it over. Analysts say carrying hundreds of thousands of different parts is ill-suited to a company without deep experience in the field. Amazon might have trouble stocking and selling bulky physical components and batteries — new engines, brakes, and exhausts — which are specific to a car's make and model. On the other hand, selling car parts and batteries make up 65% of Advance's total sales. But the company will need to keep adjusting its prices to keep up with Amazon's relentless focus on providing value. A MoffettNathanson analysis found that Amazon's prices were 29% lower than traditional competitors on 30 top-selling items. Advance risks losing its edge with such a wide pricing gap. A new Walmart deal
But Advance should get a lift from its newest partner: Walmart (WMT). Advance struck a deal last month with the world's largest retailer for a specialty store page on Walmart's website. It believes the tie-up will allow it to increase its visibility online and reach more DIYers. Advance may see selling through Walmart as safer ground than Amazon. "I don't know that Walmart wants to start manufacturing auto parts," O'Shea said. The Walmart partnership is key because it will bring Advance into Walmart's 2,500 auto care centers around the country. Leveraging Walmart's store footprint will help Advance expand same-day delivery as competition intensifies and Amazon finds ways to speed up parts delivery. "The biggest challenge Advance faces is still the online channel. That's the concern investors have out there," Basham said. "How quickly do solutions by online players develop to become more material threats?" Source: https://www.cnn.com/2018/11/29/business/advance-auto-parts-oreilly-autozone/index.html
Attached is AutoZone's Black Friday ad for 2018. You'll find specials such as:
Duralast Socket set 50% off Roadproof Jump Starter 50% off Duralast Jump Starter 50% off Duralast 2 Ton Jack 50% off Duralast Jumper Cables 50% off and more! Check out the circular.
Advance Auto Parts CEO Tom Greco on Tuesday said the company plans to bring in outside help to compete against e-commerce giant Amazon.
“So when you talk about Amazon particularly, we’ve had to recruit some people into the company who can really help us compete vigorously against formidable competitors like Amazon,” he told FOX Business’ Liz Claman on “Countdown to the Closing Bell.”
The company is trying to engineer a business turnaround by using its savings from the tax reform bill and is taking steps to step up its e-commerce program.
“We’re investing in e-commerce and our technology programs because we know that’s going to be important,” Greco said. “We certainly made big investments in customer service because the experience that our customers have both online and in the stores is critical and then in our people.”
According to Greco, one of the biggest focuses of the plan is to incentivize its employees.
“Overall, we have a plan that is going to invest significantly back in our employees,” he said. “We have front-line employees all over the country who are really important for us. We want the very best parts people in the business working for Advance.”
After President Donald Trump signed the Tax Cuts and Jobs Act, which slashed the corporate tax rate to 21% from 35%, companies began giving incentives to their workers including salary hikes to $1,000 bonuses.
As a part of the auto parts retailer’s turnaround strategy, the company introduced a stock ownership program that provides its top-performing employees with stock options.
“We actually introduced a stock ownership program for them for our top performers so that they can earn stock in the company,” he said. “We feel that is a really good retention move for us, and it has dropped our turnover significantly.”
The online market for after-market car parts, by some estimates expected to top $10 billion in the next few years, represents an interesting opportunity both for established retailers that could grab market share as consumers move online—and companies like Amazon, that will look to grab those same shoppers.
Investors have been sensitive to the threat Amazon presents for a while now. Early last year, when news broke that the company was targeting the market, sector stocks took a tumble. Is it useless to resist the oncoming behemoth?
Perhaps not. In a Friday report, Raymond James analysts reviewed some of the major players’ sites, comparing those of Advance Auto Parts, AutoZone, O’Reilly Auto Parts, Amazon and privately-owned RockAuto. By their measures, Advance holds up best.
ILLUSTRATION: RAYMOND JAMES “Advance’s and O’Reilly’s websites offer a slightly more attractive alternative to Amazon’s,” the analysts wrote, “particularly for DIY customers that are either 1) looking for useful browsing features, 2) seeking information on parts, or 3) wanting to buy online and pick up in store.”
More generally, investors seem to like the business. Earlier this month, Credit Suisse predicted improved sales in 2018 and a boost from tax reform. And on Friday, JPMorgan called it “one of the best sectors in retail,” adding Advance to its “Focus List” with a $138 price target on the shares, about 12% above current levels.
So it seems that Amazon has switched most of their prime member orders to the USPS, probably to save costs. The issue is that the US Post Office does not make deliveries if you are on a private road, unless you have a mailman going outside the policy. I even spoke to the post master of the local office and he's getting complaints from residents who are not getting their packages and have to go pick up at the post office! The mailman is even dropping off a slip that says "Sorry we missed you" or "Delivery attempted" when in fact the package never leaves the post office and they just use that form. It's a joke and my taxes at work, can;t get any more packages from USPS and that includes the majority of them from Amazon.
With Amazon's main carrot being delivery and Prime within two days, that's going away for me and for others on private roads unless they switch back to UPS. There is no point if I have to go to the post office to pick it up, no convenience there. Amazon should have negotiated better with the USPS.