Auto Service World
News   January 13, 2023   by Adam Malik

Is it price or demand that is driving aftermarket bottom lines?

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Automotive aftermarket companies reported strong financials during and coming out of the COVID-19 pandemic. Deemed essential on both sides of the border, shops were kept busy and jobber stores couldn’t keep up with demand.

Bill Hanvey, president of the Auto Care Association, pointed to the financial reports of aftermarket companies as evidence of a strong industry during an episode of Auto Service World Conversations.

But as demand drops off, those strong financial numbers are showing up on the back of inflated prices, rather than demand from consumers, observed Nathan Shipley, executive director for The NPD Group’s automotive aftermarket practice.

Supply chain challenges dominated headlines at the beginning. “And so because of that, there was this mentality throughout COVID of ‘getting all you can,’” he said.

Consumers shifted to panic-buying. Businesses did the same so that they wouldn’t have empty shelves. But now demand is softening.

“And in some industries, it’s shifting to a story of oversupply. And it’s shifting to a [point where] we’re seeing a decline in demand and we’re seeing inventory numbers catch up,” Shipley said at AAPEX in November. “And those two combined is not a real pretty story if you’re dealing with that.”

What’s happening across the industry is a situation where those that ordered expensive product six months ago to meet demand at that time are now finally receiving those orders — but demand has fallen off. It’s now more in line with pre-pandemic levels.

“The unit sales story, it’s a bit of an opposite story,” Shipley explained during his presentation, Aftermarket Outlook 2023. “So demand is trending more in line with 2019. In fact, a lot of weeks throughout this year, we’ve seen demand lower than 2019.”

Now it becomes a price story, he continued. “You see dollars trending in line or up [from pre-pandemic levels] and we see units down, trending in line with several years ago.”

Simply put: People are buying less stuff this year.

“And we’re paying more money for it,” Shipley said. “When you look into the dollar sales trends that you hear different retailers talk about — how their business is performing — a lot of that tied to price, and it’s not tied necessarily to demand.”

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