When you’re starting a new business of any kind, there are dozens, if not hundreds of factors to consider – who your target customers are, what your niche is, what your business model is, how you will develop your marketing strategy and more. The ultimate guide to your online auto parts business will help you get a jumpstart on your future career as an online auto parts seller.
The automotive aftermarket industry is unstoppable. It is expected to grow up to $513.1 billion by 2027. McKinsey predicts that its growth rate will be about 3% every year until 2030. It is one of the world’s largest industries, right beside the real estate and oil and gas industries. Simultaneously, there is a dramatic shift towards online aftermarket sales, especially with the still-ongoing global pandemic. The automotive eCommerce revenue in the aftermarket section in the United States is up by 30% compared to 2019.
All of this data means that there is no time like the present to start your online auto parts business.
However, an aspiring online retailer cannot merely jump headfirst into the business and hope for the best.
Our guide will start with an overview of how consumers search for car parts online and what that means for your future organization.
Searching for the Right Aftermarket Parts
Consumers want to buy spare vehicle parts on their own because they (rightly) believe that they will pay less than if they go through a repair shop or a mechanic. Instead of spending time walking around local stores and junkyards, potential buyers now go online to search for the automobile parts they need.
To help them find the component that will fit the make and model of their car, they need to know several things:
- Car manufacturer and model
- Manufacture year and series
- Engine Type
Another useful piece of information would be the VIN or the Vehicle Identification Number. This is a series of 17 characters, numbers, and capital letters that can be found in different places, depending on the car: in the trunk, on the engine, the underside of the hood, on the floor next to the passenger seat, inside the passenger or the driver’s door on a factory sticker, in the corner of the dashboard, and similar.
These help narrow down the search and allow the buyer to purchase the part that will perfectly fit their car. You need to keep in mind information of this kind when describing the products you want to sell.
Car Part Types
The basic two categories of vehicle parts are the new parts category and the used parts category. But there is so much more to car parts than that.
- OE vs. OEM Car Parts
The first significant distinction is between genuine (OE) and replacement (OEM) parts.
OE means Original Equipment. These parts are original, meaning they came with a car built in the original factory. Genuine (OE) parts are typically expensive, but they are also one of the best choices because they came directly from your vehicle’s manufacturer.
On the other side of the same coin are the OEM parts. OEM means Original Equipment Manufacturer. OEM parts didn’t come from the exact factory that made your car, but rather one approved by the car’s brand for use in their vehicles. Replacement parts such as these are high in quality and yet less expensive than OE parts. Still, they’re produced according to procedures approved by the original factory, and for specific makes and models. They won’t harm the integrity of the car in any way. Most buyers can’t tell the difference between OE and OEM parts, apart from the price.
- Reconditioned, Remanufactured, and Salvaged Parts
An online auto store might also offer any of these: remanufactured, reconditioned, or salvaged parts.
Remanufactured parts are large, complicated vehicle parts such as the engine or the gearbox. If a component breaks down in such a sizable part, then the entire unit gets stripped down. The broken component is replaced and the unit is reassembled and tested.
Reconditioned parts are similar in that they are also parts made of several components where one or more of these components has stopped working. However, in the case of reconditioned parts, the broken component isn’t replaced by a new one but by a used one. Reconditioned engines and other parts are therefore less expensive than remanufactured ones. It’s often difficult to tell how long reconditioned parts will last.
Lastly, salvaged parts are the cheapest in the group and of the lowest quality. They are parts harvested from scrapped cars. The apparent downside to salvaged parts is that it’s nearly impossible to say how much mileage they have or what condition they were in when salvaged.
How to Start an Online Auto Parts Business
Now that you’re familiar with different car part types, you will have an easier time understanding exactly what it is you want to sell and how to communicate that to your potential customer.
Starting a vehicle parts business can be a challenge. Here are the first steps you need to take to lay down a solid foundation:
- Find your niche
- Construct a business plan
- Register your business
- Choose an eCommerce solution
- Develop a marketing strategy
Finding Your Niche
Niche is defined as a specialized market segment for a particular product or service. The automotive aftermarket industry is unbelievably vast. Not every auto parts seller can offer every single spare part, nor should they.
Like with any other business type, you have to find your niche. What type of spare parts do you want to sell? Are they OEM parts? Or only genuine parts? Are they performance parts? Internal parts, such as cylinders, transmissions, spark plugs, fuel pumps? Or external parts such as grills, bumpers, hubcaps, and the like?
Maybe you only want to sell used parts or only new parts.
The trick here is to find a gap between customer demand and supply. Do a little research: check out your competition. What are they selling? Is there too much of some parts, but not enough of others? If so, that would be your ideal place to start. Find the type of parts customers want, but not many vendors can provide.
Constructing a Business Plan
Are you interested in selling directly to customers? This process is called B2C and means that you will sell your products directly to the people who want to improve or repair their vehicles. You could also become a B2B business, meaning business to business. B2B would make you a wholesaler, selling automobile parts to small vendors who then sell them to car owners.
An important factor you must not overlook is your supply chain. Your business will only be as strong as its supply chain. Get in touch with vendors and suppliers you might want to collaborate with and see if you can come to an agreement. Remember that these are people you will likely work with for a long time to come, so they must fit your business plans and goals.
When it comes to delivery, you have two options: storing your products or dropshipping.
Storing your products will require you to have a warehouse or storage space (keep in mind that vehicle parts can be quite large). You will have to handle packaging and shipping as well as inventory management.
Dropshipping, in contrast, is a little less challenging to manage. Beginner sellers usually opt for this because dropshipping means that the product is shipped directly from the supplier to the customer, without making a stop at your warehouse. You won’t be the one to deal with packaging and storage prices, and you’ll still retain all the profit margins you’ve set for your business.
However, you cannot guarantee delivery times with dropshipping because they won’t depend on you but on your supplier.
Registering Your Business
Once you’ve created an acceptable business model and know who your customers are and what your plan of action will be, it’s time to register your business. Consider the following:
- Obtaining a Tax ID Number: Without a tax ID number, you won’t be able to pay taxes, and your business won’t be legitimate. To get a federal tax ID, go to the Internal Revenue Service website and fill in a free application. It’ll take a couple of business days for your application to be processed.
- Registering with Local Authorities: This step depends on where you’re planning to operate. Different states and counties have various regulations, so make sure you check your obligations before you start working. You will probably have to register your automobile spare parts business with some form of local government.
Choosing an eCommerce Solution
Because you’re focusing on online sales, it stands to reason that you need an eCommerce platform of some sort. This can be an already existing platform, such as Amazon or eBay, or you can make your own via a website.
Here is a breakdown of all of these options:
A major advantage of Amazon is that it provides access to an enormous customer base. Statistics say that approximately 2 billion people visit Amazon worldwide every single month. It’s a type of crowd anyone would dream to market to.
However, there are also quite a few negative aspects to selling on Amazon.
Firstly, the platform is highly competitive. Unless you manage to stand out in some way (through your niche or marketing strategy), you will be just a drop in a sea of similar auto part businesses. The key to success on this eCommerce site is a stable supply chain and competitive prices.
Secondly, selling auto parts on Amazon is not free. You need to be on their Professional selling plan, which costs approximately $40 a month. You will also be charged with a number of fees depending on the type of part you’re listing.
Amazon also has a variety of strict regulations because their Automotive & Powersports category is restricted. You won’t be able to sell used car parts on this platform, as well as safety parts (airbags and seat belts) or used tires. All products must come with a manufacturer or remanufacturer warranty. You might have to meet additional requirements depending on the state you live in.
While Amazon is huge, eBay isn’t falling too far behind. According to their own statistics, an automotive part or accessory is sold every 3 seconds on eBay. If you decide to open an eBay seller account, you will be marketing to a customer pool that is only slightly smaller than that on Amazon. eBay has so much interest in automotive parts that it opened an entirely separate channel just for these businesses – eBay Motors.
Unlike on Amazon, you don’t need a monthly subscription to sell on eBay. However, you will be charged a fee for each listing and a final value fee for every purchase. This final value fee can range from 2 – 10% of the total sale, depending on the product type you sold. There is also a limit to how many listings you can upload each month – 50.
A significant benefit for eBay Motor sellers is that they can also trade in used car parts. If you’re interested in that segment of the market, eBay is a better option for you than Amazon.
- Your Website
We’ve mentioned how the most significant advantage of selling on Amazon or eBay is that these platforms already have established customer bases.
An alternative that you should consider is building your own website with an auto parts catalog that you manage yourself. That may sound like a lot of work – and it is – but it also comes with a set of unique perks that you won’t get on other sites.
The first of these perks is that your website will allow you to build your brand and develop your brand voice. You will have a logo, a color scheme, and a specific way of addressing your customers that will be different from all the sellers on eBay and Amazon. You will have more flexibility in your communication and develop deeper relationships with your regular customers. This will increase brand loyalty and lead to more repeat purchases.
Another benefit is that, by using eCommerce software independent of any other site, you can set up your prices and profit margins however you like. You won’t have to pay for any subscriptions or fees, which might prove useful down the line.
If you’re planning on expanding your business, having a professional website is a must.
Of course, no one says that you can’t combine any of these three (or more) sales channels. You can easily start on one platform (say, on eBay) and then expand to Amazon and design your website if you feel like it’s the right time for that.
Developing a Marketing Strategy
Regardless of where you set up your online auto parts store, you need to invest some time and possibly money into a marketing strategy. To ensure that consumers hear about you and click to see what you’re offering, several ways can boost your visibility:
- PPC Advertising: PPC stands for Pay Per Click. This advertising type can cost a pretty penny, but it usually guarantees an instant increase in traffic to your store. Be careful with this, because you won’t have an endless amount of money to spend on ads.
- SEO: SEO means Search Engine Optimization. It is a way of driving organic traffic to your shop without the use of paid ads. For good optimization, you can hire an SEO expert, or you can learn the basics yourself.
- Social Media: Even though social media platforms are becoming more and more saturated, it is still a good idea to be active on the most important sites such as Facebook, Twitter, and Instagram. When potential customers search for your online shop, they like to see a business that is regularly posting online.
Starting an online auto parts business requires planning, organizing, and research. You need to understand your customers, what their needs are, and how you will meet those needs. Attract them with products they cannot find in many other places and competitive prices. Find your niche, the type of parts you’re going to specialize in.
Your business model has to be viable, and it also has to start bringing in profit sooner rather than later. Don’t overlook the importance of a supply chain and maybe spend some time considering dropshipping.
When you’re ready to start, register your new business with the local authorities and acquire a tax number. Set up your shop on Amazon, eBay, Walmart, or perhaps construct your own website with an eCommerce section.
Lastly, don’t forget marketing as a crucial step of obtaining new customers. If you’d like an auto parts catalog that is easy to update and maintain, contact us at Illumaware for additional information. We’d be more than happy to help you set up a business that will flourish in record time!