E-Commerce - Automaker Portals

Parts Buyer - Sourcing Motivation

What’s important to automotive spare parts buyers in parts sourcing decisions? Once buyers have found a site or application for ordering replacement parts online, what factors determine if they use it and how long and how consistently they continue to use it? In what ways does this vary by parts buyer type? Fortunately, these questions have and continue to be well studied.

The key, common factors driving sourcing decisions: time, cost, convenience, trust and transaction terms. For individual OE service parts buyers a blend of several of these motivations drive supplier selection.
Integration.

Time.

Buyers’ choice of suppliers for OE service parts are impacted by time in two distinct ways. First, buyers will often prefer a supplier that can deliver the part quickly (or by a specific deadline). Second, buyers will prefer suppliers that quickly (and conveniently) commit and confirm target delivery times. Even buyers without a need that parts be delivered immediately, will not appreciate a delay or extra effort on their own part to determine if/when the part will be delivered.

Parts e-commerce assists buyers to identify suppliers that (apparently) can deliver immediately. Some E-Commerce solutions can automatically communicate that specific part numbers are “available immediately”. (Availability may be defined several ways: in-stock at the dealership, in-stock at an affiliated or allied dealership/distributor or available via the automaker in a day or two. False claims of availability will lead to lower trust and hits to customer satisfaction.)

Buyers expect digital confirmation of orders including the date the part(s) can be picked up (or will be shipped/delivered) – buyers expect order confirmations should be sent soon after the order is submitted – preferably within minutes. Many buyers also expect a communication on how to track order status.

Industry observers view AM suppliers as being ahead of automakers and their dealer networks in terms of time-related buyer preferences.

Net Cost.

Many buyers turn to the Internet for pricing transparency and discounts. Online sellers have a reputation for discounted prices. OE part buyers often turn to e-commerce to compare prices and find the best deal.

Frequent and higher-volume buyers account for the bulk of OE service part purchases and these buyers rarely hunt online for bargains. These buyers – typically – have purchase agreements in place with franchised dealerships for OE parts orders. These agreements provide buyers with substantial “trade” or “wholesale” discounts. Also, professional repairers do not have the available staff to search the web for better bargains on parts for each repair; and even if they did, professional repairers often need to return customers’ vehicles by end of day. For a professional repairer, the potential savings to be gained on some parts by aggressively hunting for bargains is outweighed by the risk that the IRF’s repair schedule with be disrupted by late parts deliveries (and the costs of administering more parts suppliers and searching for deals). Pursuit of discounts is a minor factor in e-commerce orders placed by repair shops.

Costs are a factor in online parts purchases by professional repairers in three scenarios:

Sellers may offer their trade customers incremental discounts exclusive to orders placed via e-commerce (more common for AM than OE parts sellers). Discounts are offered to migrate buyers away from phone and fax orders and thus to lower the seller’s costs for order-taking and initial order processing. (The potential cost savings are larger for AM parts orders – which the seller does not typically need to manually verify – than for OE parts orders – that the dealership will verify by re-specifying the parts list using a professional OE EPC)
Some automakers have promotional or incentive parts pricing – and, increasingly, these special pricing programs rely on e-commerce ordering to lower administrative/reporting costs and improve the ability to audit transactions. One type of automaker pricing program is known as “National Pricing” and provides regional or national fleets and repairer chains with special, highly-discounted prices on some or all parts and which are honored by participating dealers. Another type of pricing program allows a (typically) wider range of buyers discounts which make select OE parts price-competitive with AM parts (sometimes the OE part is lowered to match the price of an AM part). Again, automakers may require these discounted parts purchases to be submitted online.
Time is not as significant a driver for replenishment stock orders – as the parts will initially be placed in inventory rather than on a vehicle waiting in a service bay. And while most professional repairers stock few parts if any, those repairers that do can make parts cost the primary driver for stock orders. New OE parts are heavily-discounted by dealers when parts cannot be returned to the automaker and those parts have become idle (no sale for many months). Other dealers will compare their preliminary stock orders (or list of parts commonly replenished) to the available heavily-discounted parts list – ordering (or, at least, searching/researching) online for worthwhile discounts. WDs (local and international) and some fleets may also purchase these heavily-discounted new OE parts to add to their own inventory.

For DIY’ers (Do It Yourself) such consumers, enthusiasts and semi-professional buyers price is often important and the time/cost trade-off is more flexible. For maintenance, restoration and other projects that can wait a few days (or a week) buyers will often search the web or their preferred e-commerce suppliers for the best value.

Convenience

For OE parts purchases, e-commerce can be more or less convenient that placing an order by phone (or by fax or in person). Whether the convenience factor favors e-commerce and by how much will vary with the buyer and each e-commerce systems’ attributes. Some buyers will prefer to use a parts catalog to select parts rather than provide a description of each part and respond to questions from the dealer’s parts staff – others will find using an EPC daunting and unwelcome. Catalog quality and ease of use can be determinative. E-commerce appeals to buyers that appreciate the ability place orders and check order/delivery status 24 x 7. Providing buyers with additional online tools and information access tied to parts e-commerce (for example, an archive of invoices available online) may increase some buyers preference for e-commerce.

E-Commerce ordering has the potential to save parts buyers the time of calling in an order (including waiting on hold and walking through the order from providing the VIN through describing the parts as the counterman looks up the part numbers, prices and availability) as well as (on occasion) avoiding the aggravation of dealing with incompetent or unpleasant staff. Follow-up calls potentially are also avoided. However, if e-commerce does not provide buyers with immediate, credible delivery timing and accurate pricing or the parts catalog is too difficult, buyers may find e-commerce less convenient – limiting usage.

Convenience is a critical factor in e-commerce use for professional repairers, consumers and semi-professional repairers.

Trust

Trust is critical to buyers’ selection and retention of suppliers. In the case of parts e-commerce, the buyer must also trust that orders are accurately and immediately delivered to the dealer – and, that every order will be filled on a timely basis (or, in the rare exception, the buyer will be quickly notified of any issues). If the supplier is trusted but online ordering does not provide credible pricing and/or delivery times, buyers will be reluctant to depend on it.

Trust is important to professional repairers and consumer/semi-professional buyers – though the impact may differ. Professional repairers will typically be more focused on the accuracy and certainty of delivery times and timely notification of issues/delays.

Transaction Terms

Transaction terms important to e-commerce parts buyers include: (i) shipping options; (ii) payment options; (iv) return policies and restocking fees.

Other

E-commerce ordering has a social consideration. Buyers may value the social interaction of placing an order by phone – or may prefer at times to avoid a conversation. The new impact will vary by buyer.

Last Updated: January 20, 2012