There’s nothing like a market move by Amazon.com Inc. to sound the alarm among companies whose turf the web giant is preparing to blanket. Take the auto parts market.
Amazon’s reported push into the auto parts retail market spooked investors on Monday, sending shares of several auto retailers down, but analysts say the market might be overestimating the threat.
The 20-member BI North America Automotive Retail Competitive Peers Index fell to its lowest since Jan. 3 after the New York Post reported Amazon has signed contracts with auto parts makers in recent months. AutoZone Inc. declined as much as 5.1%, O’Reilly Automotive Inc. dropped 4% and Genuine Parts Co. fell 4.1%. EBay Inc. shares also slipped on concerns that its online auto parts business will see more competition.
Amazon is a “highly dangerous competitor,” though its latest move will likely have limited impact on retailers like AutoZone, Genuine Parts, Advance Auto Parts Inc. and O’Reilly, as it will be narrow in scope and focused on “heavy DIY customers,” RBC analyst Scot Ciccarelli wrote in a note to clients.
“Most casual DIY customers likely don’t have the information and skill sets needed to comfortably order parts on their own, but heavy users may know exactly what parts that they want/need and could save money in doing so,” Ciccarelli wrote. “Amazon’s distribution network just isn’t designed to serve most commercial customers, given the typical 20-30 minute delivery windows required,” he added.
And even though Amazon has been aggressively building out its network of distribution centers to increase its ability to handle fast—and more often, same-day—shipping, it still doesn’t provide the kind of high-end service and depth of inventory that commercial repair shops need, analysts say.
Chains such as AutoZone offer “high-touch service, substantial product selection and immediate availability,” which may help insulate the company and peers from the threat of Amazon, Oppenheimer analyst Brian Nagel wrote in a note to clients earlier.
Auto suppliers such as Delphi Automotive PLC and BorgWarner Inc., on the other hand, stand to gain as teaming up with Amazon would allow them to sell directly to retail DIY customers. The e-commerce behemoth provides a one-stop-shop retail distribution opportunity to the manufacturers for the first time, Bloomberg Intelligence analyst Kevin Tynan explains.
Advance Auto Parts is No. 116 in the B2B E-Commerce 300; Amazon Business is No. 104.
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