The automotive aftermarket is the after-sales auto parts market driven by passion of automotive enthusiasts and car hobby. Face it, Covid19 disrupted the American Aftermarket Industry due to disruption in the supply chain and other production issues. “Two-step distribution” was the primary channel of distribution for aftermarket auto parts for decades. This distribution channel went from manufacturer, to warehouse distributor (WD), to the auto parts retailer/jobber, to the consumer.
1120 Distributing is a Two-step Distributor known for its Network of dealers, vendors catering to various markets. They also provide tools, resources and rely heavily on cross marketing to sell varieties of products to its dealers all over the United States. It simultaneously caters to Automotive, Powersports, and RV dealers and captured considerable market share from its competitors. Rise of e-commerce and ease of customer shopping experience increased the demand for aftermarket auto products in 2020 and it appears this trend will continue over the next year or so. The expected growth for automotive e-commerce in 2021 is more than 30%.
Keeping these numbers in mind, 1120 Distributing is pushing to innovate and continuously adapt to mitigate the challenges Amazon, Ebay and other marketplaces impose. The key to surviving as a WD in this competitive environment is by innovating and procuring new ideas to make the customers happy and successful. In terms of finances, the company seems to be sitting comfortably in the Fiscal year 2021 despite the motorcycle, towing and RV industry losing sales in 2020 due to issues in the supply chain.
In an interview, Mr.Tanvir Osman, the current CEO of 1120 Distributing, shares his plans for its future and his thoughts on the state of the US Aftermarket industry. When asked about his plans for the company in the year 2021, he said, “We are continuously challenged as a business to provide value to our customers even though our overall cost is rising. Our main problems are companies like Amazon, Walmart that are challenging the traditional two step distribution model (B2B). I believe that we need to invest in efficiency in order to make sure our pricing is competitive and gives our customers competitive advantage in the market they operate.
Mr. Osman also mentioned that the company’s future will depend on how it handles its growth. He also states, “It is important to make sure that every single one of our distribution centers offers value added services. Every single facility of ours has the ability to serve, ship and provide service to our dealers. We have created a customer centric mentality here that we are going to provide the services our customers need in order to be successful. For this, we never stop looking at the operation of the business. We are always driving for additional process improvement. We keep asking ourselves, what can we do to make it better? Our goal is to reduce our cost and pass on the cost savings to our customers for our growth.”
In today’s world, everything has to move very fast, and because of various providers products can be sent to the most remote parts of the US/ Therefore, growth depends on how smoothly you act on these sectors. It is important to track how the distributors maintain their Vendor relationships and how it views its products and current customers with added growth. So far, 1120 Distributing has tremendous organic growth and acquisitions of couple Companies within their Industry gave 1120 Distributing the confidence in the business model they have been implementing.
Mr. Osman emphasizes the fact that, “we pride ourselves on being good partners to our manufacturer partners. We pride ourselves on creating a win-win strategy and a win-win solution for our customers because at the end of the day when our customers are successful, we are too.” For dealers, understanding the needs of the key consumers can help you better serve your customers. This approach works equally well on the automotive and powersports dealer level and with cross marketing it allows them to sell variety of products to its existing customers. Expansion opportunities may exist with customers you haven’t previously targeted. For instance, by recognizing the similar needs and interests of UTV dealers, you may be able to tailor existing services to prospective crossover segment.
Looking at the industry numbers, personal consumption of aftermarket auto parts in October 2020 increased 8% from October 2019. The US light duty auto parts aftermarket market size is $290 billion in 2021. Ease of business online and multiple channels of distribution in the auto parts market are one of the few reasons that contributed for the growth as the internet has opened new channels of distribution and consumer buying. Many Internet retailers take orders for parts and accessories, send orders to warehouse distributors (WDs), who then drop ship orders directly to consumers. In addition to that, manufacturers are increasingly selling direct to consumer (DTC) on the internet, bypassing all other traditional distribution channels. As a matter of fact, Amazon auto parts sales is approximately $10.6 billion in 2020. The automotive aftermarket is historically recession resistant and so far, the effect of Covid19 and recession of 2008 has been similar. COVID-19 concerns are driving more people online and the way 1120 Distributing handled their operation in this pandemic made it possible for their exponential growth. Cars need parts and auto enthusiasts want parts and accessories. A garage or driveway is a great place for a DIYer to practice social distancing. This is good news for all the players involved in the American retail, distribution and wholesale of aftermarket parts and accessories.