Amazon ventured into apparel recently and is soon set to become the top apparel retailer in the United States. In similar fashion, the online retail giant has struck deals with leading parts manufacturers like Federal-Mogul, Cardone Industries and Robert Bosch to shake up the USD 50 billion DIY after-market auto parts business.
This could have a significant impact on retailers of auto parts in the United States like Advance Auto Parts, Auto Zone and Genuine Parts. They have been minting money in recent years due to the control they exercise over suppliers. With Amazon on the horizon, suppliers now have a feasible alternative.
Amazon is expecting its auto parts business which it set up last year, to increase by over 50 per cent this year to USD 5 billion. Amazon has lately struck deals with suppliers of name brand parts and is selling them at large discounts when compared to retail stores. Amazon also offers shoppers the benefit of same-day delivery for auto parts in as many as 40 major US cities, making online shopping an attractive option for knowledgeable customers.
There has been an increasing rift between manufacturers and retailers in recent years. Retailers have been chasing private-label parts from overseas while neglecting US based manufacturers. To add fuel to the fire, Amazon has been paying suppliers as much as 30 per cent more than the retailers for the parts. Hence, manufacturers and suppliers get higher margins when they sell to Amazon rather than the retailers.
Dorman was the first major parts manufacturer to reach an agreement with Amazon and has been joined by many other parts manufacturers. Now, many other parts manufacturers are selling directly to Amazon. This could totally change the auto parts retailing scene in the United States, and soon, in other markets where Amazon has a presence.
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