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Amazon wants to sell more car parts. Advance will make it difficult.



Advance Auto Parts is one of them. Advance has designed an extensive logistics network to supply parts to mechanics and all-in-one car owners.

"Independent garages must repair this car as quickly as possible, otherwise you will not find them anymore," said Charlie O. Shea, chief analyst at Moody's. "They measure delivery times in hours and minutes, not days."

Speed ​​is not the only factor separating the Advance (AAP), AutoZone (AZO) and O-Reilly (ORLY) and Amazon (AMZN) solutions. These companies have put more emphasis on service, helping customers cope with repairs and the technical market for auto parts.

Wall Street believes in the long-term sustainability of companies: Advance shares and O & # 39; Reilly have surpassed those of Amazon this year.

Amazon's movements in auto parts

But Amazon is looming. The company opened the Amazon Automotive store in 2006 and has been adding services ever since.

"Amazon's retail parts business is becoming too important to be ignored," said MoffettNathanson analyst Greg Melich in a report released last month.

He recently stepped up his efforts to sell tires, batteries and car accessories.

The company has a partnership with Sears that allows customers to purchase Sears tires from Amazon and ship them to Sears auto centers across the country.

Amazon expanded its partnership with Pep Boys earlier this month for a similar service in 1,000 Pep Boys stores. Amazon also has an agreement with Monro Muffler Brake.

"We are delighted with our customers' response to our" Ship-To-Store "offering, said Adam Goetsch, director of the automotive industry at Amazon, at CNN Business.

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Amazon is adding more and more brands to its website and is trying to familiarize its customers with buying parts online. During Black Friday and Cyber ​​Monday, Amazon has for the first time promoted starters and wiper blades for car batteries. They are 30% off until December 1st.

Goetsch said the most popular automotive products among Amazon's customers this holiday season included starters, wiper blades, cleaning kits and accessories for RVs. This makes sense as more and more independent customers purchase components and accessories online that they do not need immediately to repair their cars.

Amazon may want to sell more hard parts, such as engines, crankshafts and flywheels.

Online sales of components such as brakes and fuel systems have increased 29% over the past year, according to data from NPD Group and Rakuten Intelligence.

"These categories have always been a challenge for the typical consumer, but this task is getting easier," said NDP analyst Nathan Shipley in a report.

But these hard parts sales remain in Advance's wheelhouse.

Ultra-fast delivery

Advancement may seem like an unlikely venture to thrive in the digital age, but the old school car shop has taken steps to prepare for Amazon's encroachment.

Advance has nearly 6,400 stores – some under banners such as Carquest and Worldpac – and 54 distribution centers that place them close enough to its customers to facilitate same-day or next-day delivery. It has also built larger "hubs" in higher traffic markets, which allows more articles to be stored.

The company sells about 58% of its sales to garage technicians, service stations and car dealerships, who often do not know what parts they will need before the start of the day. Fast delivery is essential.

Advance Auto Parts has put in place a fast logistics network to meet the needs of its customers. the need for parts.

"There is a huge need for inventory availability and fast delivery," said Seth Basham, industry manager at Wedbush Securities.

Although Amazon is looking for retail partners, it would need a car parts vendor with the same distribution capabilities to match the Advance Day Network.

"You're not going to use Whole Foods to deliver auto parts to a garage." A brick and mortar presence is essential here, "said O. Shea.

Automotive Parts Experts

Advance offers expert solutions in a complex automotive parts market, which Amazon can not provide.

Staff members consult customers to find the right products and Advance offers training courses and publications on YouTube to help DIYers with repairs.

Amazon is known for its diversity, but Advance sells a wider range of national brands, private label and original equipment manufacturers.

"Garage owners love this model," said O. Shea. "You need someone who has deep knowledge and who knows the catalog of parts back and forth."

In addition to its advantages, Advance has close relationships with automotive parts suppliers. Many manufacturers are reluctant to sell through Amazon because they worry that it helps the company learn the trade and take control of it one day.

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Analysts say that carrying hundreds of thousands of different parts is poorly suited to a company without extensive experience in the field. Amazon may be struggling to stock and sell bulky components and batteries (new engines, brakes, and exhausts) specific to the make and model of the car. On the other hand, the sale of auto parts and batteries accounts for 65% of Advance's total sales.

However, the company will have to continue to adjust its prices to stay in line with Amazon's constant goal of providing value.

An analysis by MoffettNathanson revealed that Amazon's prices were 29% lower than its traditional competitors for the top 30 items. Advance may lose its advantage with such a price gap.

A new agreement with Walmart

But Advance should get help from its new partner, Walmart (WMT).

Last month, Advance reached an agreement with the world's largest retailer for a specialty store page on the Walmart website. He believes this partnership will increase his visibility online and reach more DIYers.

Advance may consider that selling through Walmart is safer ground than Amazon. "I do not know if Walmart wants to start making auto parts," said O. Shea.

The partnership with Walmart is critical as it will allow Advance to enter Walmart's 2,500 automotive processing centers across the country. Leveraging Walmart's store footprint will help Advance expand same-day delivery as competition intensifies and Amazon finds ways to accelerate parts delivery.

"The biggest challenge that Advance faces is the online channel, which is the concern of investors," Basham said. "How quickly do online player solutions become more material threats?"


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