Getting Involved In the Aftermarket Parts Industry
Prospective small business owners looking for thriving industries to join should know that the aftermarket parts industry is promising. People interested in getting involved with the sale or distribution of aftermarket parts may be able to succeed in the current environment.
Research firm Aberdeen Group estimates the sale of spare parts and after-sales services in the U.S. at 8% of the annual gross domestic product. Before diving in, you have to decide whether you will offer general or specialized parts. Moreover, you should be aware of the challenges to expect and the history and present state of the industry.
Specializing or Generalizing in the Industry
The first choice to make is whether to offer general or specialized parts. Some businesses in the auto parts industry may decide to specialize in distributing specific products, like Audi A4 aftermarket parts or parts from other brands. Others may decide to distribute a broad range of different aftermarket parts.
There are positives and negatives to both approaches. It may be easier to get established in a niche than it is in a broader field. However, people within a niche are aiming at a narrower target than generalists. Generalists may find it easier to sell the parts from a sufficiently diverse inventory. Entrepreneurs are going to have to decide for themselves which option they prefer.
However, if you choose to go with Audi parts you have a good chance of success since Audi is so popular among racing fans. The Alm Racing Team even uses one as a drift car!
Challenges of an Aftermarket Parts Business
The aftermarket parts business offers some unique challenges for entrepreneurs looking to break into the industry. For example, the initial purchase of parts without guarantee of sale is a significant risk. It’s also a rather pricey initial investment. In addition, you will also need plenty of space to house your parts inventory, and renting a large warehouse space doesn’t come cheap. Also, the Harvard Business Review informs us that forecasts for spare parts are hard to predict because of unexpected breakdowns and other factors. In this case the forecasts have to be made to reduce risk to the business, instead of determining demand.
The Past and Present State of the Aftermarket Parts Industry
From approximately 2007, when the recession hit, until approximately 2011, the aftermarket parts industry had been seeing declines or stagnation. The aftermarket parts industry started to recover in 2011, and it has been growing ever since. Tire Business reports, “the aftermarket will notice a shrinking “sweet spot” — vehicles due for maintenance and repairs. Vehicles 6-11 years old will decline 22 percent by 2018 while vehicles new to 5 years old will grow 41 percent; vehicles 12-plus years old will increase nearly 12 percent.”
This means that there are more vehicles than ever that need maintenance and repairs. However, since the economy has recovered from the recession and started buying new vehicles again, that sweet spot may only last a couple of years. But, you can expect that 2015 will be a great year for individuals interested in profiting from the aftermarket parts industry.
The aftermarket parts industry is a good one to get involved with at this point. Some business owners may choose to get involved with a niche within the industry, such as Audi A4 parts, while others may decide to be generalists. It’s not without challenges, but there is certainly money to be made in the aftermarket parts industry.