What do you get when you mix COVID-19–induced restrictions on communal travel (e.g., public transportation, vacations by air), limited supply on a wide range of technical and mechanical parts, and a consumer market looking to keep their cars longer? If you’re an auto parts retailer, like Advance Auto Parts or O’Reilly Automotive, you get a remarkable opportunity for growth. Consumers who could no longer ride the train or preferred to avoid crowded busses, but also did not want to invest in a new car, began taking more interest in repair efforts. Thus auto parts retailers attracted a new cohort of consumers, without having to change much in their marketing efforts. At the same time, supply chain issues meant that many parts were difficult to procure. Increased demand and limited supply led, naturally, to higher prices. Although the retailers were paying higher wholesale prices, they could relatively easily pass on those costs to consumers, who were desperate for the parts they needed. Supply chain issues also limited consumers’ ready access to new vehicles, so their demand for items that could help them keep their existing car running for longer increased as well. In this perfect storm, not only did sales increase for the various auto parts retailers, but so did their margins.
SOURCE: Jinjoo Lee, “Auto-Parts Growth Story Still Adds Up,” The Wall Street Journal, February, 15 2022