![]() ![]() ![]() The service offer includes an exceedingly difficult to replicate (certainly by on-line competitors) customer technical assistance and support approach. Protecting US margins through a combination of improved sourcing and an enhanced in-store service offering.The rate of store growth has been reasonably consistent at around 3% for the last 10 years. Growing its US DIY market share by expanding its store count.It has used a combination of new technology (data mining IT which has enabled better inventory management and dynamic pricing) and traditional market positioning approaches such as: AutoZone’s StrategyĪutoZone has adopted a multipronged strategy which has specific elements to grow revenues and defend margins in its key markets. Over the last few years, the Commercial market has become the competitive battleground as it has provided the greatest opportunity for the major companies (including AutoZone) to grow market share. The customer requirements for this segment are less price sensitive and more sharply focused on the range, availability and quality of the products. The segment comprises the commercial repair shops, car dealers, etc. This segment was estimated to be about $US 85B in size before the impact of the pandemic. The on-line component of this segment is significant but reasonably contained due to its complex customer service requirements (a combination of price, availability and technical support is often required by customers). The market is dominated by retailers who sell primarily to individuals. This segment was estimated to be about $US 65B in size before the impact of the pandemic. The Auto Aftermarket can be segmented into two main elements: Each company has similar market shares with a total combined market share of just over 30%. The major companies in this market include: AutoZone, Genuine Parts Company ( GPC), Advanced Auto Parts and O’Reilly Automotive ( ORLY). Source: Genuine Parts Company, Investor Day Presentation 2019. The market is very fragmented with no one company having a dominate market share. The generally accepted view is that the sector’s revenues will grow between 2% to 4% per year for the next 5 years once conditions return to normal. Industry participants expect that post COVID-19 the market will resume its growth trajectory. This is expected to continue given the challenging economic conditions. The data is indicating that the average age of the US car fleet is growing older each year. ![]() In the most recent year there was a 13.2% decline in the total miles traveled. Prior to the impact of COVID-19, the underlying total miles travelled had been growing at close to 1% per year. Both indicators have had favorable tailwinds (excepting for the recent short-term impact of COVID-19): The industry participants believe that demand is influenced by the total number of vehicle miles driven and the average age of the car fleet. The US market has seen reasonable growth over many years. Source: Advanced Auto Parts: Investor Presentation April 2021. I have settled on the numbers presented by Advanced Auto Parts ( AAP) because of their close agreement with the estimates published by its competitors. I have seen estimates as high as $US 281B from to as low as $US 78B from GrandView Research. There is reasonable conjecture about the size of the US car parts aftermarket. The company does not provide any break-down of its revenues by market segment or by region. The company listed on the NYSE in 1991.Īt the time of writing this report AutoZone had a market capitalization of $US 3,400 M which makes it the 230th largest company on the S&P 500. The company opened its first store under the Auto Shack brand in 1979 and changed its name to AutoZone in 1987. Industry commentators estimate that AutoZone’s private label brands may represent almost 50% of total sales. It sells both directly to consumers through a chain of over 6,500 company owned stores throughout the Americas (including Mexico and Brazil) and it also distributes parts to the automotive industry trade (repair garages, car dealers, service stations, etc).ĪutoZone retails products sourced from the leading industry branded suppliers and markets its own branded products (private label) sourced directly from low-cost Asian suppliers. Jetcityimage/iStock Editorial via Getty Images Company DescriptionĪutoZone Inc ( NYSE: AZO) is a US based company which operates in the automotive replacement parts and accessories sector. ![]()
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